Seanad Éireann debate -
Wednesday, 11 Dec 1991

Vol. 130 No. 15

Milk (Regulation of Supply) (No. 2) Bill, 1991: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Agriculture and Food (Mr. Walsh)

The purpose of the Bill is to provide for the dissolution of the Dublin and Cork District Milk Boards and for their replacement by a new National Milk Agency. Before discussing the Bill I would like to set out in general terms the process which has now culminated in the Bill being placed before the House.

The Dublin and Cork District Milk Boards were established in 1936 and 1937, respectively, under the Milk (Regulation of Supply and Price) Act, 1936, in order to ensure an adequate supply of liquid milk all the year round in the country's two big urban centres of population while guaranteeing a minimum price to producers and an acceptable price to consumers. Prior to 1936, producer milk prices had fallen below cost of production, causing a shortage of milk during the winter months. The milk boards system provides for a production district from which farmers supply milk and a sales district where processors and distibutors have to have a registered premises from which to supply milk to the consumer.

In the case of Cork, the production and sales districts are the same, comprising the area within a four mile radius of Cork city centre. In Dublin, the sale district is the county of Dublin plus the urban centre of Bray, while the production district comprises most of the province of Leinster.

Under the milk boards legislation, milk for liquid consumption in the Dublin and Cork sale areas had to be supplied under contract between the producer and purchaser and could be obtained only from milk producers registered with the District Milk Board and producing milk within the production district. The boards did, however, have power to licence registered processors and distributors to bring milk into a sale area from outside the production area during time of scarcity. The legislation also enabled the Minister for Agriculture and Food, with Government approval, to make statutory orders setting out the minimum producer price which must be paid to registered suppliers in Dublin and Cork by the registered wholesalers and retailers in the sale areas.

While the board system formally applied only to the Cork and Dublin areas, it constituted a model for the arrangements which applied in other areas. The system worked well over the years and, despite the exaggerated seasonality pattern which obtains in Ireland, it ensured an adequate supply of good quality milk for the liquid market throughout the year. It was generally regarded as having been a major contributory factor in Ireland's high level of milk consumption.

However, following complaints made by some dairies outside the board areas——

Mrs. Doyle

Nicely put.

Mr. Walsh

I must declare an interest here. In 1985, I operated a dairy in West Cork and considered it quite unfair that I was outside the paid district milk board area. In the nature of things, I made representations to the Department of Agriculture to have this anomaly resolved and they looked into it and have been looking into it ever since.

Mrs. Doyle

So this is the Minister's Bill.

Mr. Walsh

I am very pleased that, six years later, having gone to Europe and back with this matter, I am now introducing this legislation to create a degree of fairness for milk producers and processors and, I hope, a more reasonable price for consumers. Producers in any part of Ireland can now be registered and supply milk to dairies and consumers in any part of Ireland.

Mrs. Honan

That is what any good Minister would do.

Mr. Walsh

Thank you, Senator Honan. However, following complaints made by some dairies outside the board areas, the Commission of the European Communities formally notified the Department of Agriculture and Food that the boards were contrary to Community law and would have to be wound up. The Commission indicated that by maintaining an arrangement confining free access to the Cork and Dublin liquid milk market to registered producers processors and distributors located in the regions concerned, by subjecting the marketing of liquid milk of other origin to a board licensing scheme and by maintaining an arrangement imposing a minimum producer price for liquid milk, Ireland had failed to comply with obligations incumbent upon it under the common organisation of the market in milk and milk products and Article 30 of the Treaty of Rome.

On the basis of advice from the Attorney General, it was clear that the outcome of this case, if the Commission were to bring Ireland to the European Court of Justice, would be unlikely to be favourable. At the same time, it is crucially important that the liquid milk market in Ireland should not be left without some regulatory system because of the risk that, with the seasonality pattern which exists here, a free-for-all system could leave the market short of liquid milk in the winter months as had happened previously in some areas outside Cork and Dublin. Therefore, I instructed my Department to consult with the EC Commission with a view to arriving at alternative arrangements which would provide for the orderly arrangement of the liquid milk market in the interests of both producers and consumers and which would be in accordance with EC law. The central provision of the Bill now before the House is the result of this lengthy process of consultations with the Commission.

Both the central provisions of the Bill and the more detailed provisions have also been the subject of consultation with the various sides of the liquid milk industry. All sides of the industry are committed to the establishment of the agency and I am satisfied that the agency, which will be financed entirely by the industry itself through a statutory levy on milk sales, will ensure the orderly development of the liquid milk market in Ireland.

The production, processing, marketing and distribution of milk for direct human consumption is vital to the continuance of a strong and healthy dairying sector in Ireland. The liquid milk industry provides a stable outlet for about 10 per cent of our total milk production with high employment levels and good returns for producers. There are at present 4,300 milk suppliers supplying 42 liquid plants with milk with a retail value of some £260 million per year. There are about 5,000 workers employed in collection, processing, packaging and distribution. Unlike most of Europe, liquid milk continues to be an essential part of the diet in Ireland. While per capita consumption has declined from a peak of 211 litres in 1984 to its present level of 176 litres per annum, Ireland still remains one of the largest milk drinking countries in the world, ranking third to Finland and Iceland.

The existing milk boards in addition to their statutory functions of regulating the supply and price of milk in the Dublin and Cork districts also operate a number of ancillary services to encourage the production and quality of milk in their areas. The Cork board has a total of nine permanent full-time staff carrying out its regulatory function and providing artificial insemination and milk recording services throughout its area. The Dublin board in addition to its regulatory function operates a broader range of ancillary services, namely, a cattle progeny testing service, milk quality and mastitis control services, etc., in addition to A.I. and milk recording services, and has a total of 117 permanent full-time staff.

The boards ancillary businesses have declined over the last few years and, consequently, their financial position is deteriorating. If the boards ancillary services are to remain viable — under whatever future arrangements may apply — a rationalisation programme will be needed. It is my intention that the maximum number of jobs will be maintained and the best means of ensuring this has been under consideration for some time. Representatives of the Department of Agriculture and Food and the Department of Finance have been discussing this matter with trade union officials and staff. These discussions are ongoing and a further meeting with the trade unions and staff will be held shortly. A package designed to achieve 50 redundancies on a voluntary basis is under preparation and will shortly be presented.

Senators will note that section 3 of the Bill provides that the orders dissolving the boards shall come into effect on the date of establishment of the new agency. Senators will also note under section 2 of the Bill that the agency will not be established until such time as the Minister makes an order to that effect. It is my expectation that the position regarding future employment for the board's staff will be settled before the establishment of the agency. I realise that this is the most contentious part of the Bill. Discussions and negotiations are ongoing and further meetings will be held in order to resolve this matter.

Section 1 is the standard definitions section and requires no specific comment.

Section 2 provides for the establishment by order of the Minister for Agriculture and Food of the National Milk Agency to regulate the supply of Milk for liquid consumption. The agency is to be composed of persons nominated by producer, processor, distributor, retail and consumer interests and a chairman, who will be independent of these interests, will be appointed by the Minister for Agriculture and Food.

The basic purpose of the new agency is to ensure the making available to the consumer at a reasonable price of a quality product on an all-year-round basis and, in the process, to ensure the continued high level of consumption per capita in this country to the benefit of the farmer, the dairies and the trade. It will be necessary to have representatives of all these interests on the board of the agency in order to achieve this aim.

Section 3 provides for the dissolution of the Dublin and Cork District Milk Boards by order of the Minister for Agriculture and Food and for matters consequential on the making of the dissolution orders. The consequential matters will include aspects relating to the ending of supply and price regulation of milk in the districts of Dublin and Cork.

Section 4 prohibits the sale and purchase in the State of milk for liquid consumption except where the milk has been purchased from a registered producer under a registered contract or from a registered processor who has, in turn, purchased the milk from a registered producer under the registered contract and which has been heat treated by a registered processor in accordance with the Milk and Dairies Acts. The section provides for penalties for contravention of the provisions. The section also provides for certain exemptions from the prohibition.

The purpose of section 4 is to bring all milk of Irish origin destined for the consumer under the registration system to be operated by the new agency. The freedom of registered processors (dairies) to dispose of their milk for human consumption in any part of the State, provided they meet certain conditions, is implicit in this provision. It is necessary, however, to make an exception to these requirements in certain instances — where the Minister for Health by order authorises the sale of such milk in special circumstances, for example, the authorisation of the sale of raw milk in a remote or island part of the country; where in times of shortage the Minister for Agriculture and Food allows a creamery supply milk to the liquid market or where milk is used by the producer for home consumption. No restrictions under this legislation apply to milk legally imported into the State.

Section 5 deals with the conditions for the registration of contracts by the agency. The section provides that the contract period must be for a minimum of 12 months; that the contract specifies that the untreated milk supplied by the producer will meet the quality standards set down by the agency; that the contract provides for all year round supply by the producer of untreated milk with a specified minimum percentage of the producer's production being supplied during the winter months or for supply during the winter months only; that the contract, in the opinion of the agency, provides adequate compensation to the producer for untreated milk supplied under the contract throughout the year, in particular for milk supplied in the winter months. The section also provides for the continued registration of the contract to be dependent on the submission annually of a supplement to the contract which must satisfy the agency that adequate compensation will be offered to the producer for the supply of milk during the winter months.

The three substantial concerns of the contract — milk of appropriate quality, all year round supply and adequate compensation for the producer — are interlinked. Given the grass-based, summer intensive pattern of Irish milk production, the quality and continuity of supply especially during the winter months cannot be guaranteed except under a regulatory system offering security of demand and adequacy of compensation to the producer for the extra costs involved in winter milk production.

The inclusion of a provision in the legislation setting down a minimum compensatory price as such to the producer has been ruled out by the EC Commission. The agency will, however, be empowered to refuse to register contracts which do not involve price levels sufficient in its view to compensate producers for all year period production, in particular to compensate for the extra costs of winter milk production. The mechanism is a level of compensation to the producer below which the agency will refuse to register the contract. Also the continued registration of the contract will be dependent on the submission annually of a supplement to the contract which must satisfy the agency that adequate compensation will be offered to the producer for the supply of milk during the winter months.

Section 6 provides that the agency shall maintain a register of contracts, a register of producers and a register of processors and requires no specific comment.

Section 7 provides for the payment of a levy by milk processors to the agency. The section provides that the rate of levy and the accounting period will be set down by order of the Minister for Agriculture and Food. The section also provides for future adjustments in the rate of levy. In the event of non-payment of the levy the section provides for the issue of certificates of indebtedness in the matter, and for the cancellation of the registration of any processor who fails to make, or falsifies, a return connected with the requirements of this section and for necessary penalties for such failure or falsification. This levy will be the means of financing the agency.

Sections 8 and 9 provide for the keeping of records by registered producers and processors, their obligation to produce these records to the inspector and the making of returns to the agency. The maintenance of correct records by registered producers and registered processors and effective access to these on the part of the agency with a view to verifying that all milk reaching the consumer has validly come through the registered producer/processor contract system and that the producer has been properly compensated, will be crucial to the success of the new regulatory system.

Section 10 provides for the publication of contents of registers and other matters. Section 11 makes provision for a change of registration on death or transfer of business. Section 12 provides for the alteration or cancellation of registration by the agency and the reason for so doing. Section 13 deals with provisions in relation to the use of registers in evidence. Section 14 specifies the powers of inspection and examination available to persons authorised by the agency to carry out such functions. Section 15 prohibits the disclosure of information by members and officers of the Agency and provides for penalties for such disclosure. Section 16 provides that the agency shall keep, maintain and manage a fund into which all moneys received by the agency under this Bill shall be paid and from which all payments arising under the Bill shall be made. This section also provides the agency with borrowing powers.

Section 17 provides that the agency keep appropriate accounts, books and records and submit an annual audited statement of accounts and an annual report of its proceedings and the report is to be laid by the Minister before each House of the Oireachtas. These requirements and the requirement to provide the Minister with such information, statistics and returns as he may request will allow appropriate supervision of the agency's activities.

Section 18 provides that any producer or processor may appeal any decision of the agency acting in discharge of its functions under this legislation to an officer of the Minister in the first instance and to the courts in the second instance.

Section 19 allows the Minister to make regulations in relation to matters covered by the Bill and requires that such requirements are laid before each House of the Oireachtas. Such regulations may be annulled by a resolution passed by either House within a period of 21 sitting days after the regulations are laid before it. This is a standard section.

Section 20 provides for the repeal of the Milk (Regulation of Supply and Price) Acts, 1936 to 1967. These repeals will take effect on the date of establishment of the National Milk Agency. It is of course desirable that the date of the dissolution of the milk boards and the setting up of the agency be concurrent, so that the functions of the agency would take effect simultaneously with the cessation of the functions of the milk boards.

Section 21 is a standard provision relating to the expenses of the Minister for Agriculture and Food under the Act. Section 22 contains the Short Title.

Paragraph 1 of the Schedule provides for matters governing the position of the part-time chairman of the agency, his appointment, allowances, expenses and the temporary incapacity. As already indicated the chairman will be independent of the interests represented on the agency and will be appointed by the Minister for Agriculture and Food.

Paragraphs 2 to 10 of the Schedule provide for matters relating to the ordinary members of the agency. Representatives of liquid milk producers have expressed a strong preference for the appointment of producer members by an election process. Members representing other interests on the agency board will be appointed by the Minister for Agriculture and Food on the nomination of the appropriate industry and trade bodies. Accordingly, while all ordinary members will hold office for three years, the producer members will be elected every three years and the other ordinary members will be appointed every three years by the Minister on the nomination of the respective interests. However, the first set of ordinary members — of whichever category — will be appointed by the Minister on the nomination of all the respective groups. These paragraphs also provide for the method of election, term of office, resignation and disqualification, filling of casual vacancies, temporary substitution and allowances for expenses.

Paragraph 11 of the Schedule provides that the agency shall appoint a chief executive and such other staff as the agency considers necessary for the due performance of its functions. Such officers shall be employed on such terms and conditions and shall perform such duties as the agency directs. The staff shall be paid such remuneration and allowances as the Minister for Agriculture and Food, in consultation with the Minister for Finance, appoints. The section also provides that the agency may purchase, lease or otherwise acquire such offices as it considers necessary for the performance of its functions and may sell, lease or otherwise dispose of part or all of such office or premises.

Paragraph 12 of the Schedule provides for the preparation and submission to the Minister for Agriculture and Food of a superannuation scheme or schemes for the permanent whole-time staff of the agency which will fix the time and condition of retirement for such persons; it also provides that the agency may submit an amending scheme or schemes; that any scheme submitted is subject to the approval of the Ministers for Agriculture and Food and Finance; that, if any dispute arises as to the claim of any person to, or the amount of, any allowance payable under this provision, this claim will be submitted to the Minister for Agriculture and Food, who shall refer it to the Minister for Finance whose decision shall be final.

Paragraph 13 of the Schedule provides for the procedure governing the activities and meetings of the agency. Paragraph 14 of the schedule requires the agency to provide itself with a seal and sets down certain procedures regarding such seal.

Senators will understand that I have had to speak at some length on the Bill. It was necessary to explain the background and need for changes in some detail. I am sure Senators will respond in a positive manner. I will deal with any specific points raised in my reply to the debate. I would like to thank the Government Chief Whip, the Cathaoirleach and all Members of the House for taking this legislation in the Seanad. It was originally ordered for the Dáil but as their agenda was crowded before the Christmas recess, I requested that it be taken in the Seanad. I believe it is good to introduce legislation in the Seanad where I have found thorough examination and good, objective public debate. I am glad this legislation was introduced in the Seanad and I commend the Bill to the House.

Professor Raftery

I thank the Minister for coming here and for initiating this Bill in this House. It is appropriate, as Senator Doyle said, that the Minister Deputy Walsh, should introduce this Bill. In his private capacity he was probably the main individual to precipitate the disbandment of the Dublin and Cork Milk Boards. I do not regret the disbandment of these boards; it was a move in the right direction and I welcome this Bill to set up a new milk agency. I am pleased to note that special consideration will be given to existing services provided by the Dublin and Cork District Milk Boards — such as cattle breeding services — and to their staff. I hope a satisfactory resolution will be arrived at and that staff will be provided for.

I note that producers and processors will have to be registered which is right. I suggest that retailers should also be registered since they are part of the chain between production and the consumer. In order to achieve comprehensive coverage and protection for the consumer, it would have been a step in the right direction to have retailers registered. I am puzzled to know in the event of a challenge to the agency to establish an appropriate price to ensure continued supply for the consumer how the agency will decide on an appropriate price. We now know that existing milk producers can have a variation of as much as 30 pence per gallon in their production costs. I could foresee a challenge where someone would try to prove that he or she could produce milk at less than the price ordained by the agency in order to get a chance to produce milk all year round. This would be more lucrative than seasonal milk production.

I am glad also to note that this Bill gets the general approval of all farming organisations and processors. I am not sure to what extent retailers expressed approval or disapproval of the Bill. The Minister outlined the background to it. We had legislation going back as far as 1936 to regulate the supply and price of liquid milk on the home market. The Milk (Regulation of Supply and Price) Act, 1936, ensured year round supply of liquid milk as the Minister said. In recent years, because of European Community legislation, it became apparent that existing milk boards would have to go. This legislation is the outcome.

The main features of the new National Milk Agency will be, first, that all dairies and liquid milk producers must be registered with the agency. I would like to see retailers also registered. Secondly, registration with the agency will require producers to meet specified technical standards and to have a written contract with a registered dairy guaranteeing all-year round supply. In addition, all such contracts will have to be registered with the agency.

Thirdly, the agency will be empowered to monitor the terms of the contracts to ensure that they do not contain provisions which jeopardise the all-year round supply of liquid milk. In particular, the agency will be empowered to refuse to register contracts which do not include a milk price sufficient to meet the costs of winter milk production. I feel we will have some disputes about this issue in years ahead. Lastly, the agency will be, rightly, empowered to withdraw registration from producers or dairies who do not observe the terms of the contracts.

The liquid milk market in the public is worth about £260 million per annum. Ireland has the highest level of milk consumption in the European Community and the second highest in Europe — with Finland significantly higher. I want to say something about that later. Annual per capita consumption was put at 170 litres but if we make allowances for visitors, etc. it is probably nearer to 150 litres.

Total liquid milk sales in 1990 amounted to 490 million litres. Sales reached their peak in 1984 and have declined consistently since then. While factors such as an ageing population and so on may have something to do with it, I feel there may be other factors involved. It would be a pity if our levels of consumption dropped to those of some European countries, for instance, Italy or Spain. That would be bad for the consumers, the processors and the retailers but especially for the producers.

Whole milk, natural or standardised fat level sales account for approximately 90 per cent of total Irish liquid milk sales. This is out of line with sales in other countries. In the Netherlands low fat or skimmed milk consumption now amounts to over two-thirds of the liquid market. Taking the European Community liquid market as a unit, the low fat milk consumption figure is now higher than the consumption figure for whole milk. Implications arise out of that development for butter fat; we already have huge EC surpluses of butter fat and it now seems that consumers of liquid milk are showing a preference for low fat milk thereby sending more butter fat on to the market.

Based on the CSO Household Budget Survey the average milk bill is about 9 per cent of total expenditure on food. I was surprised it was so high but that is what the CSO figure shows. For the average household of 3.5 persons the estimated weekly cost of milk was £6 which is, incidentally, double the amount paid for bread. With regard to distribution, we have had some fun in that area recently and I will be surprised if we do not have more in the near future. The real objective of the multiples — particularly Dunnes Stores — was to gain market share and we are probably now witnessing the beginning of an inevitable and determined campaign by supermarkets to capture a much higher share. If the producers and bottlers are disappointed with this development they have only themselves to blame — particularly the processors.

The history of the situation is that processors gave a discount of at least 30 per cent to the multiples in order to gain market share. Then, having been making what I would describe as exorbitant profits, Dunnes Stores in their wisdom decided to drop the price of liquid milk by nine pence per litre. The immediate reaction of the processors was to deny liquid milk to Dunnes Stores. In effect, they were foolishly trying to force Dunnes Stores to continue making exorbitant profits.

The consumer was surely entitled to milk at a reasonable price. Why should milk processors give a 30 per cent discount plus three months credit plus cold cabinets in the supermarkets to the big retailers? Why should they give those terms to multiples and not to poor people who were getting up at 5 a.m. to do door-to-door milk deliveries or to small shopkeepers? The producers' actions enabled multiples to continue making exorbitant profits which, on the basis of my calculations, must have been of the order of £20 million per year.

It is inevitable that milk retailing will expand in supermarkets and shops, with fewer door-to-door deliveries. Certain people say that the trend will reduce milk consumption but I am not sure of this. I have conflicting figures here from the National Prices Commission Report 1979, AFT Report 1984 and Market Research Sources. Some of these figures indicate that the percentage of door-to-door deliveries is down as low as 41 per cent. There are other findings of 51 per cent and 55 per cent for door-to-door delivery percentages but the trend in this and in every other country is for an increasing quantity of liquid milk to be distributed by the retail trade.

It is usually contended that a doorstep delivery network is essential to keep up consumption levels, particularly for high milk consumption countries such as Ireland, Britain and some others. I have difficulty reconciling that argument with the figure I gave earlier of Finland having the highest level of milk consumption in Europe. The Finns have had no milk delivery service for quite a long time. It is 31 years since I first observed that in Helsinki. Nevertheless, their level of consumption is significantly higher than ours. In the US, where over 95 per cent of sales are through retail outlets, milk consumption has increased in recent times. The overall decline in consumption per head in Denmark over the past seven years has been about the same as for Ireland despite the switch in Denmark to an exclusive retail system. I cannot therefore, accept that reducing the proportion of milk delivered to the door will result in a decline in milk consumption. There is a feeling that it will do so but there is no evidence.

The big retailers can get credit terms and do not really have to handle the milk at all. The processor delivers it and fills the cold cabinets. The customer picks it up, takes it to the check-out and pays for it on the nail. The retailer pays for it three months later. As I see it, the trend will be for more of the milk to go through the retail outlets and less in door-to-door deliveries. However, there will be some people who, for one reason or another will want to buy milk in the small corner shop or have it delivered to their door. These people must be catered for as they may be old or infirm.

The Minister who is involved may be uneasy about my conclusions in relation to the price of milk. The margin between what the consumer pays and what the producer gets is difficult to explain. It is difficult to calculate what the producer gets because of variation at different times of the year and different quantities but I estimate an average of £1.05 per gallon. It is a very simple process, as the Minister knows, to pasteurise milk, put it into containers and deliver it to the shop. The consumer pays roughly £2.50 per gallon. I find it difficult to see how pasteurisation and retailing can command £1.50 per gallon whereas production by the farmer commands only £1.05 per gallon.

The retail price of milk in Ireland was decontrolled with effect from 1 December 1988, four years after the UK Government had deregulated milk prices. At present the only price regulation is at producer level, which will continue under the new agency. There have been price changes between 1985 and 1991. The price per litre of milk in Ireland has gone up from 40p to 52.8p and a little higher in some places; in other words a 32 per cent increase.

One might draw a number of conclusions from these price changes. First the combined mark-up by dairies, distributors and retailers has increased by 8.5p a litre since 1985. Part of this increase can be justifiably attributed to the abolition of the consumer subsidy which was paid directly to pasteurisers. However, no more than 4p a litre can be justified to cover the loss of subsidy receipts, which leaves an increased mark-up of 4.5p a litre at present. The figures show that the increased mark-up, after allowing for the subsidy withdrawal in 1990, was 8p a litre on average over the 1985 level.

Secondly increased cost of processing and distribution during the period would require an increased mark-up of 4p a litre, assuming the mark-up of 20p a litre in 1985 was justified. Thirdly, distribution costs associated with doorstep deliveries are much higher and probably amount to 20 per cent of the retail price. The price difference in England between doorstep deliveries and supermarkets is up to 11p sterling per litre. Therefore, it could be argued that in Ireland, an excess margin of 10p a litre is being taken by retailers, amounting to over £20 million nationally for a full year. I believe that needs to be examined because some of them — including the gentleman who tried to drop the price of milk and got rapped on the knuckles — are making an exhorbitant profit.

I welcome the Bill. It is long overdue. I am grateful to the Minister for playing his part, in his private capacity, in undermining the existing legislation. I am delighted that producers in any part of the country will be eligible now, provided they meet the criteria, to supply milk to processors for the liquid milk trade. I believe more of the milk will be sold through retail outlets and the cost of a delivering to the door will increase. The price difference between the retail outlet and door-to-door delivery will increase. It is an inevitable process that will hurt some people but it would be against all logic and the laws of economics to force the sector who can operate more cheaply to charge more and thereby penalise the consumers. On the basis of the evidence I have seen from elsewhere, I do not and cannot accept that getting rid of or cutting down the amount of door-to-door deliveries will result in the tragedy of a huge drop in consumption as the processors suggest. There is no evidence to support their view. The country with the highest consumption of milk in the world is Finland where they have not had a door-to-door delivery for a long time. Although 95 per cent of the milk in the United States is sold through big multiple retail outlets, they are increasing their consumption of milk. Denmark has ceased to have door-to-door deliveries and their decline in consumption is no greater than ours. The processors behaved very foolishly when they decided to withdraw supplies to a retailer who, in his generosity, decided to give good value for money to the consumer.

Mr. Hussey

I welcome this Bill to the House, congratulate the Minister, Deputy Walsh, on ploughing a lone furrow at times, initiating this Bill in the good old days and bringing it before the House today. It is very important that he is introducing this Bill in the Seanad because, more than anybody else, he knows what is involved having been connected with the industry even before he went into politics.

I understand that the provisions of the Bill have been the subject of consultations between the various bodies involved in the liquid milk industry and that there has been agreement from all sides and also with the EC Commission. It was obvious that something like this would have to happen once the continuation of the Dublin and Cork Milk Boards was found to be in contravention of the Treaty of Rome.

It is important that agreement has been reached between the various sides involved in the liquid milk industry. What they are doing is for the betterment of the industry. It is important that suppliers, processors and the other people involved, should be registered. I agree with Senator Raftery that retailers should also be registered. It is important that the whole chain should be registered to ensure we have a better agency and a better industry for the benefit of everybody involved.

While there is general agreement in the industry, the one area of contention involves the employees of the now defunct board. I hope that before the new board is established the employees' future will be taken care of. I understand their concern when no provision is being made for their jobs or futures. Fifty or 100 people cannot be thrown on the scrap heap; they must be looked after. A solution would be to include a provision in this Bill to transfer all the staff of the Dublin and Cork Boards to employment with the new milk agency, and to second them to the private company. Alternatively, they could be offered voluntary redundancy or redeployment in the public service. That could be done because a precedent was set in the case of An Foras Forbartha in 1988. That is the only area of contention. I would like the Minister to devote some time to resolving that problem with the existing staff. If he does, he can start this new agency on a sound footing.

Over the years the liquid milk industry has developed. Even in remote rural areas, there is daily delivery to householders one would not have imagined to be interested in buying liquid milk. They are now getting their milk delivered every day. It is important that we have good quality milk. That can be ensured by means of a proper register, which is the task of this new agency. I hope it will provide better quality milk and that the industry will develop and prosper over the years. In that way it will be better for all of us.

Mr. Hourigan

I welcome the Minister to the House and I also welcome his initiative in putting this legislation before us. It is a necessary measure as the Dublin and Cork District Milk Boards were governed by legislation which is no longer acceptable within the EC framework. However, that does not take from the very acceptable and comprehensive way in which the Bill deals with this subject because in the past only Cork and Dublin were governed but now the entire country is covered. The establishment of the milk agency on a national basis as distinct from having two boards is a forward move. Dublin and Cork District Milk Boards were run cohesively but, at the same time, they were separate entities.

We would be failing in our duty if we did not acknowledge the great service the Dublin and Cork Milk Boards provided for the people they served. In the Leinster area, the Dublin Milk Board and, in the Southern area, the Cork Milk Board, served the people very well. Not alone did they guarantee milk supplies for the cities but they did great work providing an artificial insemination service, keeping milk records, and so on. We must pay tribute to those who have acted on the boards, their chairmen and chief executives. The present chairman-cum-chief executive has performed very well in the last ten or 15 years when he was appointed to that office. This Bill stipulates that, in future, there will be a separate chairman and chief executive. This new approach has much to commend it. The chairman will henceforth work on a part-time basis. Up to now, one person held the post of chairman and chief executive in a full-time capacity. I would like to pay tribute to the excellent input of the present incumbent, for the giant role he has played in recent years. This Bill provides an opportunity for liquid milk producers throughout the country from Donegal to Wexford, from Monaghan to Kerry and in the areas in between to have a guaranteed milk price all year round. This is very important.

While 44 years of excellent work by the Dublin and Cork Milk Boards have passed, we are now in a new era and we must make certain we develop along the right lines. We have a very high consumption per capita of milk, the third highest in Europe, after Finland and Norway. Another important factor is that we have more livestock than people in this country, which shows how agriculturally based we are and how important is this industry. Any aspect of it, be it liquid milk or whatever, requires and deserves attention.

Various assets have been built up arising from the 1936 legislation which set up the Dublin and Cork District Milk Boards. These are now matters for disposal or for placing to the best advantage by the Minister, the new chairman and the new board. The Minister has indicated that the directors representing the producers will be elected by the producers; but I gather from the Minister's remarks that in the first instance the board will be exclusively appointed by the Minister from persons nominated from the various organisations. Am I right in that?

Mr. Walsh

Yes.

Mr. Hourigan

This is a good way to go about it because, having elections when the machinery is not in place, might not be the best thing to do. This is a forward move to get the new board off the ground. The various interests at producer, processor, retail and consumer levels will all put forward nominations to the Minister for consideration and these people will be appointed to the board and it is right and proper that the Minister should have the final say in their ratification.

There are many ancillary matters in relation to liquid milk which I believe are very important. One that has been very effectively carried out by the present Dublin and Cork District Milk Boards is that of milk recording. Now that quality is more important than quantity, it is vital that we have milk recording and research in this area that will enable farmers to produce precisely what the market wants. We are severely restricted through quotas, in the amount we can produce for a market, but in the context of quality, I believe we have a long road to go before we produce fat and protein levels up to the standard of our competitors.

I would like to pay tribute to the magnificent work that has been done in the milk recording service area. There is no point producing massive supplies of a product that is not required.

I would like to dwell for a moment on consumer taste and interests as they apply to milk and milk products because the presentation of liquid milk is a very important factor. It will dictate the level of consumption. We must carry out research into what the housewife and the consumer want, whether in Dublin, Limerick, Cork or Sligo, and, in the case of the agricultural products we export, what is wanted in the markets of London, Berlin or elsewhere. In other words, we must find out precisely what the consumer's taste is, what the consumer is looking for and we must produce to that taste and to that requirement. Too often in the past we have produced vast amounts of products, but, with very effective selling mechanisms at home and abroad, we have forcibly disposed of our products through very ingenious marketing techniques. Frankly, this is not the way to operate on an ongoing basis. We must go out first and discover what is required.

This would not be a major point in the context of liquid milk in this island but it would be a factor, in principle, because the presentation of the product and its capacity to hold its quality is very important. I got cartons of milk delivered to the door which were found wanting. Surprisingly, this product can go off in a very short time. Emphasis must be placed on quality and making sure that we produce only the very best. We must start by producing good milk with a high protein content and all the other vital and desirable ingredients, and then have it correctly processed and marketed.

I agree totally with the way the board is to be made up. I am also glad to know that this organisation will be self-financing by means of a levy which will be imposed on the producers. For that reason very little Exchequer help will be required and I understand it will be a nominal amount. That is a very healthy situation. It shows that the business can stand on its own. It is a good headline showing that businesses do become viable in their own right and that agencies of this sort do not need to be propped up.

There is also employment involved in this area. This is very welcome because every additional job is important to us nowadays. As we proceed, hopefully more and more jobs will emanate from this arena. I would like to think that this new National Milk Agency will diversify in the future and look at other areas where they could have an input. Lack of diversification and alternatives has been one of our biggest failures in recent years. We have tended to stay on one path and not deviate from it. That has been a retrograde move and has not enhanced our position.

It is very expensive to produce milk for liquid consumption at a certain time of the year, especially when we consider that our winter lasts for at least four months. For that reason it is only fair that farmers should be adequately compensated to produce a sufficient supply of high quality milk. I could go on about the various aspects of the Bill but I do not propose to do so because it is unnecessary to repeat what has already been said.

I welcome the Bill and congratulate the Minister and all concerned with its introduction. However, I would like an indication from the Minister that at some time in the future the National Milk Agency might be used as a vehicle to deal with other matters; we should keep an open mind on that.

Mr. Dardis

First, I welcome the Minister of State to the House. I acknowledge that this legislation is close to his heart and is something in which he has a personal interest.

I welcome the legislation and realise it is necessary. To some extent it has been imposed on us by decisions made in the European Community. In that context it underlines one matter which is worth referring to. During the past week there has been much talk about sovereignty and the fact that national parliaments would become virtually redundant if many powers were devolved to the European Parliament, the Commission and the Council in Brussels. This legislation underlines the fact that the national Parliament has a very important function within the European context. I am very much in favour of the famous "F" word —not the one Mr. Mitterrand used—but the concept of federalism within Europe, that even within the context of greater unity and greater federalism there will still be an important role for the Oireachtas.

We must accept that a commodity so necessary to every day living must have a degree of regulation and control. Of course, it is the extent of the control and regulation which is in question.

The Minister outlined the purpose of the Bill and I agree wholeheartedly with his sentiments that the basic purpose of the agency is to ensure making available to the consumer at a reasonable price a quality product all year round and, in the process, to ensure the continued high level of consumption, per capita, to the benefit of the farmer, the dairies and the trade. He also said it will be necessary to have representatives of all these interests on the board of the agency in order to achieve this aim. That is a concise and accurate summary of what this legislation attempts to achieve. However, I have grave concerns about the security of the employees in the milk boards and I will deal with that later.

The original legislation has served us well. It provided us with a degree of stability, quality and supply necessary to keep the urban population supplied with milk. However, as we are aware, under Community law it was found to be invalid and in 1988 the Commission informed us that a new national milk agency was required. The time taken to introduce this legislation could be criticised, but I welcome the fact that this Bill has been initiated in the Seanad. This is the second piece of legislation in my time to have been initiated in this House, the other being the Environmental Protection Agency Bill.

Society owes a debt to liquid milk producers. I come from a constituency where there are a substantial number of liquid milk producers. Over the years they have set a headline for other farmers to provide the product quality to which the consumer is entitled. There is a great deal of talk nowadays about providing quality goods which will sell in Europe and about providing food of a high standard that will sell on the domestic and European markets. At a time when there was very little talk about quality, our liquid milk was of a consistently high standard with which the consumer could be happy. They set an important headline for producers of other agricultural commodities —they were prepared to accept the substantial discipline involved in producing this quality product.

It is certainly not easy to milk cows in the middle of the winter and those who can remember 20 years ago will recall the hardship faced by farmers when milking cows. We must pay tribute to them for their resilience and commitment over so many years and as far as I am aware, there was never any major hiccup in terms of milk supply, even when the weather was very inclement. People who provide that type of service and produce a high quality product should be rewarded.

Our liquid milk consumption which has been put at 143 litres per head of population per annum is the highest in the Community and, as Senator Raftery said, only Finland, which is outside the Community, has a higher consumption. Of course, there are historical reasons for our high consumption but it is also because over the years liquid milk producers consistently supplied a high quality product and we should record our gratitude to them.

It is also important that there be competition within the industry on the processing and supply sides to ensure that the consumer gets an adequate product at the right price while securing a year round supply; it is important that supply be secured on a year round basis. There have been some difficulties in that regard in recent years. Some figures I have seen indicate there was a 9 per cent fall in the supply of milk over the past ten months. Frequently, in debates on agriculture in this House we have highlighted the problem of seasonality in the supply of milk and beef, which is becoming more and more serious. The fact that in the past we relied so heavily on intervention has been a contributory factor.

The seasonality aspect may be dealt with to some extent under the Common Agricultural Policy reform proposals but, obviously, much more serious side-effects to the Common Agricultural Policy reform proposals with which we have dealt in this House. We should be more aware of the seasonality problem. Again, this underlines the need to adequately reward those who produce winter milk to ensure that the supply is regular and that over the winter months the consumer gets adequate milk supplies. I welcome the fact that the Bill states a specified minimum percentage of the producers production must be supplied during winter months and that the contract must satisfy the agency that adequate compensation will be offered to the producer for supply of milk during this time. One could argue that, by inference, there is no additional benefit to those who supply milk during the summer months compared to those supplying milk used in the manufacturing process. It is a much more onerous task to produce milk of a high quality for the liquid market than for manufacturing. Therefore, it could be argued that those who supply liquid milk over the summer months might get additional payment over and above that given to those who supply manufacturing milk. At one time farmers who supplied liquid milk were considered the elite and possibly had the highest incomes but they deserved them. However, the gap between them and those supplying milk for manufacturing purposes has closed considerably in recent years.

That brings me to a point I wish to make about Teagasc. Now more than ever, we must realise the necessity for an adequate research and advisory back-up service so that farmers can provide the quality, not just in liquid milk, but in other products that will enable them to survive, especially in the light of the rough days ahead as a result of the Common Agricultural Policy reform. Therefore, I appeal to the Minister to ensure that the research and back-up service required by liquid milk producers and other farmers is maintained so that they can face the future with some confidence.

On the Order of Business I referred to the research centre in Grange. In my view, the cost of that research centre has been recovered many times in the value of the products of Irish farms. There may be a perception abroad that that money is not money well spent but I would reject that perception; it is some of the best spent money in the country. Over the years it has been of immense benefit not just to farmers but nationally and it would be an appalling reflection on our lack of vision if research stations of the recognised international stature of Grange were to close.

The Bill refers to the acquisition of assets and in that regard I am concerned about the station at Enfield. As far as I am aware, there are more than 100 bulls there and a large number of animals undergoing performance tests. I have heard it said by visitors to the station it is one of the best in Europe and I have no reason to question that. Some alarm bells rang for me when the Minister said that the ancillary businesses have declined over the past few years and, consequentally, their financial position is deteriorating. If the board's ancillary services are to remain viable under whatever future arrangements may apply a rationalisation programme will be needed. However, the Minister said it is his intention that the maximum number of jobs will be maintained. It is important that facilities of that type, which provide such an essential back-up service to the whole milk board enterprise should be retained. They can be operated commercially. However, I have some reservations about the private foreign suppliers of bovine semen. Unless there is competition to keep them under control we might have some early Holstein Friesians coming into the system.

Dr. Upton

Do not tell me that the Senator is getting a left wing——

Mr. Dardis

In some respects I might surprise Senator Upton as to whether I am left or right.

Disease regulations and what will happen to milk from herds which have been infected by tuberculosis does not come within the scope of the Bill, but nevertheless it is a worry. The Bill will not only regulate the supply of milk around Dublin and Cork but will also regulate it in other areas where liquid milk is being supplied and that is welcome. In the past there has possibly been a tendency to take milk out of the manufacturing pool and divert it into liquid production and farmers have not been rewarded for that.

The Bill does not deal with the importation of milk from Northern Ireland and I would like to hear the Minister's views on that. To what extent can that be regulated, or is it within the scope of the Bill to regulate it? We have already discussed the matter of the premium which will be decided by the agency and whether suppliers of summer milk to the liquid market should get some premium over suppliers of milk for manufacturing purposes.

The Dunnes Stores matter has already been referred to by at least one speaker and I do not intend to go into it in any detail other than to say it is important there is competition in the market. That is not to say Mr. Dunne should have a free hand. The implication of that would have been that the door-to-door supply, which is part of our traditional supply system, would have disappeared and further down the line the competition, which was represented as being present, might not have been there at the end of the day when all the others had folded up their tents and gone away.

In relation to staff, which is one of my main worries about the Bill, the Minister said he expected the position regarding the future employment of the board staff to be settled before the establishment of the agency. I hope that will be the case because there are 140 employees involved. What is the position in regard to these people who have served the board so well over such a long number of years? Senator Hourigan referred to the excellent work of the chairman and board members but the people who are really the heroes in all this are the staff of the Dublin and Cork boards and it is essential that their employment prospects are protected. Their present status, as Members will be aware, is that of State employees, as determined by the Industrial Relations Act, 1946, amended in 1969. There is an incentive for everybody to be part of the State service, to have the security of employment which that entails and those people are within their rights to expect that an arrangement will be made to secure those rights which they had when they entered the service and which they expected would continue. I have been told that the agency testers have been informed there will be no jobs for them from 1 January. I do not know how that can happen as the agency will not be in place by 1 January, at least I do not see any prospect of that. Even if the agency is in place by then it is unacceptable that they should be told that.

What will be the position in relation to pension entitlements? It is essential that we protect those people who have served the boards so well for many years and have shown commitment to the industry, to farming and to the country generally. Their position should be protected. Certain solutions have been put forward by way of amendment but I will have to see the details of the amendment before deciding how I will vote on it.

Mrs. Doyle

That shows a promise of some independence on the part of the Senator.

Mr. Dardis

Senator Doyle can always be assured of our independence, as the Cathaoirleach well knows.

An Cathaoirleach

Very well.

Mr. Dardis

There is talk of voluntary redundancies and so on. However, the welfare of public servants and their families should be considered.

I have no preference as to who should be represented on the board although it is important that the broad spectrum of consumer, processor and producer be represented. In relation to the levy and how much that will be, section 7 provides for payment of the levy by the milk processors. In the nature of things, if processors have a charge against them they tend to find a way of passing it on to the producers. Will the Minister say what that levy might be? That may be difficult to answer but perhaps he could give us some idea. However, my main reservation is about the staff members.

I welcome the Bill. It is necessary and I hope it has a speedy passage through both Houses so that we can establish the agency and proceed from there.

Dr. Upton

It is always a pleasure to see the Minister, Deputy Walsh, in the House. As I have said on a number of occasions, he is one of the few people who knows a great deal about agriculture and the dairy industry. For that reason it is very pleasant to see him here again.

As was said at the outset, this Bill was introduced as a result of a decision by the European Court which made some of the functions of the Dublin and Cork milk supply boards illegal in the context of European legislation. Those boards have been in existence for many years; they date back to the thirties. At present there are approximately 130 people employed in the two organisations.

The proposals before us deal specifically with the functions of those boards in regard to the regulation of milk supplies. Of course, the boards' functions — particularly those of the Dublin Milk Board — are much wider than that. They provide a range of services including progeny testing, an AI service, a mastitis control service and so on.

I understand that in 1990 the Dublin Milk Supply Board had a shortfall of £100,000 and it is predicted it will lose a considerable amount of money again this year. I also understand the boards collect a levy of approximately £300,000. It appears the supply regulation function of the board is sufficient to employ five to seven people. That, of course, means that the positions of approximately 120 people are not covered under the Bill. What will happen to them? What will happen to those who provide an AI service, a milk recording service, a progeny testing service or to those involved in mastitis prevention and control? In addition, what will happen to the property of the board? I understand they have premises in Bluebell worth £600,000 and a 450 acre farm in Enfield on which there are a number of stud bulls and where a number of people are employed.

Broadly speaking, the Bill is silent in relation to the welfare of those people who have served the board very well, as Senator Dardis said and who have built up a valuable service for the farming community. I worry in particular about their future and welfare having regard to some of the possibilities contained in this legislation. There are a number of unstated possibilities in the Bill; a number of things can happen but are not specified. The Bill is silent on the rights of those workers. For example, there is no mention in the Bill of an automatic transfer for them to any position in the State service. The Government seem to ignore the rights of the 120 people who will not figure in the functioning of the new agency; in other words, those who have provided this valuable ancillary service over the last number of years.

I was alarmed to hear the Minister mention out of the blue that a package designed to achieve 50 redundancies on a voluntary basis is being prepared and will be presented shortly. I am glad the Minister has come clean in this regard and that, at least, we got that information today. I have a letter dated 13 November in response to representations from SIPTU on behalf of those people which states that no formal response was ever made to this document but that following numerous inquiries by officers of the ICTU it was established that a decision had been made not to continue those negotiations. I am glad that voluntary redundancy is being offered and I hope that "voluntary" means "voluntary". When one discovers that discussions are breaking down in a unilateral fashion one certainly begins to wonder about the potential interpretations of "voluntary". There are other letters in this regard but we cannot get any written proposals from the Department of what they have in mind for our members who are, understandably, worried. I am not surprised they are worried and concerned.

I am worried about the implications of this type of behaviour for the Programme for Economic and Social Progress. I will remind the House of one or two paragraphs in that document. It states that there will be no privatisation in the public service but matters which are excluded from this Bill leave open the possibility of privatisation. It also states there will be no compulsory redundancy in the public service. That is encouraging and I sincerely hope that those provisions will hold, given the talk which is now widespread about renegotiation and restructuring of the Programme for Economic and Social Progress. These matters are of grave concern to me and to my party and the Programme for Economic and Social Progress and, I have no doubt, to the 120 people and their families who have given a tremendous service to the farming industry over the years.

I would like to raise a number of points. The first relates to information which is contained in a letter which talks in terms of a proposed buyer with a link to "a top American breeding organisation" who is somehow going to be involved in this business and in the restructuring of these jobs. I would like more information on this matter, if the Minister has it. What is involved here? Terms such as "top" irritate me. What do they mean? In the name of goodness, what would a top American breeding company be doing coming into this type of situation? One begins to wonder about the meaning of language and whether terms such as "top" have lost all meaning. Indeed, one also begins to wonder about terms such as "voluntary" and whether they, too, are beginning to lose their meaning.

I want to refer to the explanatory memorandum and specifically that part of it which deals with section 3. This states:

Section 3 provides for the dissolution of the Dublin and Cork District Milk Boards by order of the Minister for Agriculture and Food and for matters consequential on the making of the dissolution orders.

Whoever wrote that would seem to me to have mastered the art of the understatement. It certainly seems to be someone with a capacity to be tremendously economical with facts and with information. It seems to me that the consequences of making the dissolution order will be to put quite a number of people on the dole. That is a possibility which now exists and it is something that greatly worries me. People who are now in that position, who are at risk and are worried, deserve a bit better than statements such as "matters consequential on the making of the dissolution orders".

The least that would be expected is that those responsible would come clean, particularly when you have to bear in mind that all this happens in a context where the union cannot get a formal statement of position from the Department of Agriculture and Food and where shortly after this letter was written the relevant legislation was published. These are matters which — I repeat — are of great concern and certainly I would like to see the Minister and the Department of Agriculture and Food being a good deal more frank about the possibilities and about what is in mind in relation to this situation.

Moving on to some of the details of the Bill itself and leaving aside the concerns in relation to the welfare of these 120 people, most of the other matters in the Bill are fairly straightforward and I do not have any great criticisms of them. I am happy enough to see that producers, processors, consumers and distributors will be represented on the board. I am also pleased that there will be a registration process in relation to milk produced. I think that is desirable and can only help to maintain standards.

I am pleased to see that the Bill has a capacity and a facility for the setting of standards. That is desirable in relation to the attempts to improve milk quality and so on. I do not have any problem about producers having to pay a levy for the service. That is acceptable enough. It is part of what is happening anyway in the agricultural world these days. These type of services sooner or later provide a valuable contribution to the welfare of the whole agricultural industry and that, of course, is ultimately to the benefit of the farming community.

In relation to the appointment of the chairman, I notice that it is at the pleasure of the Minister, and it would be useful to know what pleases the Minister and when he becomes displeased and decides to get rid of the chairman. The Bill talks in terms of appropriate numbers, which to me could mean anything from one to 1,001.

Some speakers, particularly Senator Raftery, referred to milk consumption and the effects that the abandonment of a door to door delivery service would have on the consumption of milk. Senator Raftery discussed the matter at length. I am not an expert on the role and significance of door to door milk deliveries in relation to the amount of milk which is consumed. What I can say is that quite a number of people in this city make their living from selling milk door to door and they provide a valuable service. I would not like to see that service abandoned. I would be quite worried that it may be abandoned and, indeed, destroyed if the market is let rip allowing agencies such as Dunnes Stores to come in, look for market share, reduce the price, blow these people out of the water and then come back and sort things out when they have got rid of them.

A number of people saw fit to talk about the role of milk in the diet. This topic is close to my heart. In one of my earlier existences I used to be calculating these kinds of things. It was great fun, but of little significance. One of the things I discovered at that time was that milk is a very good source of nutrients. Indeed, if you look at the cost of the nutrients which are supplied in milk — if you cost it out per milligram of calcium and so on — it works out cheaply when compared to most other sources of nutrients in differing foods. Milk has a lot to commend it. It plays a very central role in the diet. I would be concerned at the idea of a sudden reduction in consumption of milk. That would create some nutritional risks and problems which would be very undesirable. There are problems in relation to total amounts of fat and so on, but that is for another day.

I repeat my concern about what is going to become of the workers, the people who are involved in the provision of the AI, progeny testing and various other ancillary services. Section 2 of the Bill says:

There shall be a body known as the National Milk Agency to regulate the supply of milk for liquid consumption in accordance with the provisions of this Act.

That would seem to me to exclude the new agency from providing these ancillary services, which again raises the question of what is going to become of the workers and why the Department of Agriculture and Food refuse to come clean in relation to this matter. There have been a whole series of people who have been concerned about the rights of the workers. Indeed, Minister O'Kennedy has been writing to Minister O'Rourke in response to representations. I presume she wrote to him, although that does not necessarily follow. I would like to see provision made to protect the people who work in this organisation in the same way as provision was made by an earlier Government to protect the people who worked in the predecessor of Telecom Éireann and An Post. The rights and welfare of those workers was very carefully and very well protected when the companies moved from being State organisations to being commercial organisations. I would hope that would be done and I would earnestly request the Minister to consider that possibility and to take action to see that that happens.

I wonder why it has taken from the judgment of 1988 until now to introduce this Bill. I wonder also why there is this swift move, apparently out of nowhere, coinciding with the abandonment of negotiations. I wonder if it is some kind of negotiating ploy which is being used by the Department of Agriculture and Food to frighten the people who work in that organisation. I would be very concerned at the statements made by Senator Dardis when he spoke in terms of some of the people who are working in Enfield being given to understand that there would be no work for them on 2 January when they resume after Christmas. I would be very concerned about and opposed to that type of attitude being used as a negotiating ploy.

I wish to make a final point about the role of the former Minister for Agriculture and Food in relation to this matter. All the key decisions in relation to this were taken by the former Minister for Agriculture and Food. That Minister is now the Minister for Labour. Certainly, if the position, policies and attitudes he adopted in relation to this matter, his refusal to come clean and to spell out what he intended for the workers, is going to be his attitude, I would think that his appointment as Minister for Labour should give the trade union movement the shivers.

Mr. Fallon

I would like to comment briefly on this important legislation. I take this opportunity to thank the Minister of State at the Department of Agriculture and Food, Deputy Joe Walsh, for initiating the Bill in this House. As Senators are aware, it was initially prepared in Dáil form and we certainly appreciate the fact that it is now with us for Second and subsequent Stages.

This Bill provides for the dissolution of the milk board system and the establishment of the National Milk Agency. The Minister in his contribution this evening outlined the historical background to the foundation of the Dublin and Cork District Milk Boards and went on to explain to us the problems the Government encountered with the Commission of the European Communities, who notified the Department that the boards were contrary to Community law and would have to wound up. The Commission indicated that Ireland had failed to comply with obligations incumbent on it under the common organisation of the market in milk and milk products in Article 30 of the Treaty of Rome. I do not want to go into the substance of the legislation in great detail; other Senators are doing so. However, it is a very welcome and necessary Bill. The bone of contention, obviously, is the staff and I would like to make some observations on that.

We have had similar legislation in this House in the past where we had amalgamations, takeovers and staff transferred to the new companies in different ways and staff were rightly worried about their status and so on. The same applies here. In the past we have had the rights of staff preserved in different forms, through redeployment or whatever. At the moment the employees in question enjoy semi-State status. They feel that the services provided by the milk boards should become the responsibility of the new National Milk Agency and that their status, pension rights, job security and so on, would be guaranteed in any new legislation.

I am somewhat heartened by the Minister's speech. He makes the point that it is his intention that the maximum number of jobs will be maintained. He further points out that discussions are ongoing and that meetings with trade unions and staff will be held again. He talks about the 50 redundancies on a voluntary basis; I am not sure that that is totally new. I may be wrong but I did understand that that had been mentioned in the past. I have faith in the Minister that the worries of the staff will be removed before the new agency is set up. I calculate that that will be in mid-February or early March. That is my message to the Minister arising from this important legislation. I hope that when he responds at the conclusion of Second Stage he will be able to tell us that the interests of the staff will be considered in a very positive way.

Mrs. Doyle

May I start at the point Senator Upton almost finished by expressing my concern about this debate being pre-emptive and not helpful from the point of view of the negotiations between the Minister and his Department and the SIPTU representatives of the employees? I would have thought the outstanding matters as to the fate of the 110 or 115 employees who would be considered, I think the expression is surplus to requirements, should have been resolved before a debate in either House on this Bill.

I extend a personal welcome to the Minister to the House. It is appropriate that it should be he who deals with this legislation; my crib is only with the timing of its introduction. I note that the Minister and other Senators welcomed the initiation of the Bill in the Seanad. At the risk of being accused of being somewhat Machiavellian, might I suggest that there might be a hidden agenda why it came in here as opposed to the Dáil first. It is my understanding that the SIPTU representatives of the employees were given assurances that this Bill would not be introduced to the Dáil until the negotiations were complete. I suppose, perversely, we can argue that it has not been introduced to the Dáil as the negotiations are not complete. I hope that it would be an honour to the Seanad that this important if limited legislation is with us before the Dáil but I am inclined to think it is to stand, albeit technically, on the right side of assurances given to SIPTU representives regarding the future of employees of the two district milk boards. I hope that it will not be seen as being pre-emptive and cause difficulties for the 120 or so employees who will not be catered for in the new agency.

I would like the Minister to explain in detail his plans for the entire staff of the two milk boards following dissolution. This is the only area with which Members of this House have difficulty. That difficulty extends across parties, including the Minister's own party in this House. Members on the Fianna Fáil side have expressed their concern and I can only hope that they will support our amendment which will be put down on Committee Stage to protect the employees.

I think I am right in saying — though I stand to be corrected on this — that provisions are normally made when a State or semi-State body is being wound up for either voluntary redundancy or full redeployment of the employees. That is an accepted position at this time and is in accordance with the Programme for Economic and Social Progress. We can look to recent examples. During the debate on the Environmental Protection Agency in this House we had a new section inserted in the second draft of the Bill which I somewhat facetiously referred to as “Joe Rea's panacea”. That was the section which ensured that, when Johnstown Castle and/or any other sections that now belong to Teagasc or any other State or semi-State body were to be transferred to the Environmental Protection Agency, not only would plant, machinery, buildings and equipment be transferred but also that almost overnight that staff find themselves working for the Environmental Protection Agency. We discussed at length pension rights, seniority, etc., that would be transferred from one body to the other. There was no difficulty with that.

I wonder why we do not continue that practice in relation to the agency we are now establishing and ensure that redeployment will be offered within the public service to those civil servants who will be surplus to the requirements of the new agency. The Customs and Excise officials who are now being deemed to be surplus to requirements — I love that euphemistic expression — given 1993, the Single Market, removal of all physical barriers., etc, will be offered redeployment either within the areas or to other Government Departments. All of us can give examples in different areas. Could I assume that there is a reason for the different treatment of these civil servants who have provided an excellent service over the years on these two boards? Could the Minister explain to us why there has been no resolution of the problem as to what future there will be for the employees concerned? It will be accepted, given the stringent guidelines today on productivity and efficiency that in certain areas there is probably over-staffing relative to what might be needed. I would assume that sufficient voluntary redundancies would be found to take up the slack in any area that may be over-staffed. I would like to know the Minister's views on how the balance of the staff will be catered for. I would like assurances from him that in initiating this Bill in the Seanad as distinct from the Dáil there is no hidden agenda and that he will not go back and say to SIPTU: "we only promised not to introduce it to the Dáil before the arrangements are made. We did not; it is in the Seanad"— that he hopes by bringing it in here, as other speakers said, they would push negotiations to the point that, hopefully, there will be resolution. Who knows what is in it?

Could the Minister also refer in his concluding speech how his proposals in relation to terms and conditions for the employees who will find themselves surplus to requirements meet with the conditions of the Programme for Economic and Social Progress regarding public service employees? There is a circle to be squared there, and it does not seem to fit very comfortably. Certainly, that would be the opinion of those representing the employees concerned.

Apart from the lack of resolution to the problem of the employees, I think there is a general welcome for the proposals in this Bill and we have no major criticism of the overall thrust of what we have before us. If I may take a few points from the Minister's own speech and give them back to him. He refers to the board's ancillary businesses having declined over the last few years. Could I suggest that they were run down, deliberately perhaps, over the last few years with a view to accommodating the point we are now about to arrive at? There would be a precedent for that. Since 1988 the Commission indicated that we were out of order and had to put our House in order legislatively in relation to liquid milk. Could it be that for different reasons some of the ancillary services were let decline, that the normal interest in ongoing investment, research and technology, and even replacement of plant and equipment, if that was an issue, did not happen? I fail to believe that it was a lack of demand for the services provided by the ancillary businesses that caused the decline. I put it to the Minister, in the absence of an explanation, that this insidious decline was allowed to happen by the Department to justify some of the decisions that may now be made. I hope I am reading the situation incorrectly, but I have seen it happen before in other State and semi-State sectors where situations have been allowed to evolve and then justify the closing of certain sectors on the basis of a decline.

The Minister also referred to the price. I have some difficulty, as did my colleague, Senator Raftery, understanding how a fair price might be arrived at and what justification one would have for defending that in the interest of a challenge from a certain producer, who could not produce economically, perhaps at the price that will be arrived at.

I also note with interest the change in the name of this Bill. This is the Milk (Regulation of Supply) (No. 2) Bill as distinct from the Bill we are now scrapping — the Milk (Regulation of Supply and Price) Bill. I know why the Minister had to drop "Price"; it would not sit comfortably with our EC colleagues, particularly in the Commission, but effectively we will be controlling the price for producers — and with some justification, as the Minister explained. I wonder if by just dropping the word "Price" he will stay on the right side of the Commission. Effectively, he is still controlling the price, albeit with some justification in terms of production costs, but what agreements, under the table or otherwise, or what hidden agenda have there been in these discussions with his European colleagues to allow him to effectively continue to control the price, which would seem totally at variance with the marketing philosophy in Europe at the moment? Deregulation, not only at the retail end but also the production end, would appear to be the wish across the board in terms of the Community market in general.

I would not like to see the lack of control at the production end, and I accept what the Minister said as having a sound foundation. But I am not sure how we will get away with it unless he has a word in the ear of some of his colleagues in Brussels or elsewhere, saying we are all right. We are not calling it price control, but effectively it will be price control. Could the Minister explain how this has come about and how we will not be open to challenge perhaps by some other farmers who do not agree with the price level per gallon that will be fixed for the producers? As has been said by other speakers, there is up to 30p variance in the production costs of a gallon of milk at the moment. The smaller milk producers will not be as economic as the large producers. I know that over the years liquid milk suppliers tend to be the larger end of the milk suppliers, and they have good supplies of milk at this stage. Indeed, my father and grandfather were suppliers of liquid milk to the Dublin District Board. I will not say I have much knowledge of this, because I have forgotten anything I did know — it is going back a few years — but I have an interest and I acknowledge the tremendous work done——

Mr. Dardis

The Senator is not that old.

Mrs. Doyle

——by both the Dublin and Cork boards. I would like to put that on record.

Questions have been asked, and we await with interest the Minister's reply, as to the present status of what has been referred to as a super breeding project. This project apparently was planned between American breed services and progressive genetics. It was earmarked for the Enfield AI station, but where will it end up? I presume in the private sector. Can the Minister give us an indication where it will end up? It was earmarked for Enfield but we are told by press reports that it has since been transferred to Denmark because of the delay in resolving the future of the milk board and the establisment of this agency. Maybe the Minister could enlighten us: at exactly what stage are negotiations in relation to that project? What are the implications for the assets and the transfer of assets to the new agency? If we are told that the redundancy costs — which were included as liabilities of the milk boards — exceed assets, is that a true assessment? What exactly will be the balance sheet at the end of the day?

There is also an interesting expression in the Bill, section 3, which states:

...specified assets of the abolished board shall stand transferred to the Agency or to a person specified in the order as being engaged in providing services to farmers either in a former production district or otherwise;

I have no ideological objection to privatisation, which effectively is what the Minister is suggesting may happen, but let us call it that. Let us be up front about what the Minister's plans are and let him tell us exactly which parts of the ancillary services should be privatised. Which parts would stand on their own? Which parts would be better privatised, if any? Let us come clean. I understand there are several parties interested in the Enfield AI station at the moment. At what stage are negotiations in that area? We need to know and the employees need to know. Is it likely to be transferred or purchased by the private sector as a going concern? Will the employees be transferred with it? The same question could be put in regard to all the other ancillary services. Are there negotiations going on at present in relation to any of the other operations of the boards that could, will or might end up in the private sector? Would that be in their best interests and in the best interest of the farmers from the point of view of receiving a good, efficient and competitive service?

Any hidden agenda should be put on the table now and we should discuss it very frankly because, apart from the importance to farmers of the structures we are discussing here and the importance to the consumer in terms of having a regular 12 months of the year quality supply of milk, we also have the employees to consider. We have the consumer, the farmer and the employees and we need all the cards on the table. At the moment this is not happening.

Teagasc has been mentioned. Where are the dairy farmers, particularly our good commercial dairy farmers of the future going if we do not have a proper research and development team backing up the work? Even the Agricultural Commissioner, Ray MacSharry, when he addressed the Oireachtas Joint Committee on the Secondary Legislation of the European Communities last Friday pointed to the importance of agricultural research as the basis of Irish agriculture in years to come. Perhaps the Minister would have a word in the ear of Joe Rea and ask him what he is at. Is it all a ploy to put political pressure on the Minister for Agriculture and Food to give him more money? I suggest it might be histrionics. Joe Rea expects to get a response in the form of extra funding.

The Minister for Agriculture and Food is an agricultural scientist. He is a Doctor of Horticulture and I would expect him to be sensitive in dealing with the area of scientific research in agriculture. I appeal to him to look at the ploy and threat to close a centre such as Grange, and centres throughout the country, such as Belclare and even in Clonroche in my own county of Wexford. I consider it a ploy to extract more money from the Minister and to use sensitive constituencies to extract that money. That is not acceptable as far as I am concerned. I would like the Minister to bring that message from us here today.

Agricultural research and scientific research for the dairy farmer of the future is essential if we are to be at the head of the posse rather than piggy-backing on research and development in other countries. We should be leading in this area as we have always managed to do. I hope nothing will be done to change that.

How will reform of the Common Agricultural Policy and further restriction in production affect the seasonality issue which has dogged us in the industry for years? I know it has been an even bigger difficulty for the manufacture of milk. Right through, it has been a problem to have an adequate even supply of quality milk for 12 months of the year. If the choice is between winter milk and grass-based milk, with the restricted quotas in many areas farmers will go for the grass-based. Why should they put themselves to the extra difficulty, with little advantage, of producing milk in the winter months if their quota can be completed by using the grass-based season?

In relation to the employees, as they are civil servants they only pay PRSI at the Civil Service rate which does not entitle them to unemployment benefit. If we do not resolve the matter either by having sufficient voluntary redundancies or redeploy those who are surplus to requirements, there will be major problems for those who are "let go". That matter should also be recognised. I should have mentioned it when I was referring to the employees earlier on. I want to put it firmly on the record that their position is not like anyone else who has full PRSI payments and full social insurance cover. They are not entitled to unemployment benefit and they would have no future and no regular income if they were not absorbed into the public service in another area.

The health debate has affected the consumption of milk. It has nearly gone the full circle at this stage in that the value of milk as an all round food is coming to the fore again. For a long time, the animal fat debate curbed the consumption of milk even though we still, as my colleagues have said, have the second highest consumption of milk in the Community. If we could get away from analysing milk on the basis of the yellow fat content and turn completely towards the protein content, it would be an excellent day's work. Some progress has been made in this area. Maybe the Minister could indicate to the House whether that will become a reality in the future. It would take the emphasis away from a fat basis to a protein basis.

In Wexford, even though we are rather removed from Cork and Dublin, we have many suppliers to the Dublin District Board and an excellent quality product. We also have suppliers to Snowcream in Waterford. They closed Snowcream in Wexford amid furore some months ago. I was to the fore in criticising Waterford Foods for the closure of a viable, efficient operation in Wexford town. We have a new milk on our shop shelves in Wexford, Wexford Creamery milk, which is carving out a very nice niche in the market in Wexford. We have an excellent product from a small dairy, Slaneyside Dairies, a couple of miles from where I live.

The point I am trying to make is that we need rationalisation in terms of milk collection and supply to the different outlets, whether it is liquid milk or manufactured milk. There are lorries from certain co-ops and creameries passing lorries going in the other direction to other creameries. There are lorries going to the Dublin District Milk Board passing milk lorries that are going down to Waterford with milk. This adds enormously to costs. At the end of the day, the consumer or the housewife has to bear the extra costs involved.

I would be interested to know whether the Minister has any plans or whether it would be worth trying to rationalise this area of milk production and delivery which is making no sense at all economically. We need competition. We have about four kinds of milk on the shelves in Wexford and I welcome that. Ultimately, the housewife will make the decision as to what is the best quality product. Interestingly — and I suppose we cannot get into it at the moment — accusations of price fixing in terms of the litre on the supermarket and shop shelves are being dealt with effectively. Given the enormous difference in the price to the producer, particularly liquid milk at approximately £1 a gallon, which becomes £2.50 per gallon on a per litre basis, about 53 pence per litre to the consumer we need an explanation as to how there can be a 150 per cent increase in the value at the time the poor beleaguered housewife has to purchase her few litres of milk per day. That seems to make no sense particularly as the mark-up seems to have increased by over 8 per cent in the past few years. I know there are various expensive processes in between, but I cannot accept that the £1 or £1.05 per gallon the liquid milk producer gets could become £2.50 for the consumer. I cannot accept that the cost of the intermediary process justifies that mark-up. I would like to know the Minister's views on that and whether he feels that is a reasonable mark-up or if there is price fixing and the housewife is not getting the benefit she should, given the importance of the price of milk in her weekly household budget.

I have no particular difficulties with the Bill. I welcome it. It will bring an even greater order to the liquid milk system. Having dropped the word "price" from the Title of this Bill I should like to hear how the Minister can be so confident that we will be able to effectively fix the price to the producer. The Minister will put it in nicer language than that and term it more delicately but, effectively, we will be fixing the price to the producer as was the case heretofore. How can he square that with the Community view? I support the need for that but I would be worried lest it be open to a challenge because of the different costs of production from the different farmers depending on their input.

I thank the Minister for coming here today. I would like an assurance that we are not being pre-emptive or causing problems in relation to the ongoing negotiations with SIPTU in relation to the future of the employees. Is that the reason the Bill was brought to the Seanad rather than to the Dáil? Could we have an assurance that the problems of the employees will be resolved before the enactment of this Bill?

Mr. Lanigan

I do not propose to spend much time speaking on this Bill. When this Bill was introduced I was very surprised to hear people from Leinster discussing it; I had not heard very much about it. The AI service in Kilkenny is covered from Munster which is unusual because Tipperary organises the AI service in Kilkenny and Kilkenny is the only county in Leinster not under the aegis of the ancillary board of Dublin and Cork Milk Boards.

The Minister is the epitome of the poacher turned gamekeeper. The first time I knew there was a monopoly in the supply of liquid milk to Cork city was when the dairy in West Cork with which the Minister was involved tried to supply liquid milk to Cork city. That fight was seen as an attempt to break a monopoly and was welcomed by many. This Bill would not be before us if the Minister had not started that fight.

I never knew there was a difference between liquid milk and any other milk until lately. I am not too sure why the word "liquid" is used in the legislation because all milk is liquid. Consumer milk is milk in bottles as distinct from milk that is used for the production of cheese, casein or whatever. Milk is liquid so the word "liquid" should be deleted. Commercial milk or consumer milk may be a better way of describing it.

The purpose of this Bill is to change the 1936 Bill. There was a problem in the cities in those days because people could not get a supply of milk at a specific time. Things have changed dramatically in this area. The production of milk has changed. What happened here in 1936 and 1937 is happening in Russia today. In Russia an enormous level of milk is produced but they do not have the capacity to deliver it to the centres of population. In Ireland in 1936-37 the problem was not with the production of milk but with distribution.

I was on a farm outside Moscow not too long ago and there were 700 people looking after 900 cows. This farm was 24 miles from Moscow and they still could not get that milk into Moscow because they were unable to refrigerate it.

The biggest competitive area is the dairy sector and it is also an area of major profit. There is more profit to be made from packaging and selling milk in liquid form than there is producing casein or cheese, too much of which is produced. I have no doubt that without any legislation there is not a single housewife who could not be supplied with milk at a competitive price because there are so many people competing for the various markets.

This Bill is the result of EC legislation on competition but it must take into account the staff of the various bodies involved. In this instance, the Government created the monopoly and now they have to get rid of it and produce market based sales in the supply of liquid milk. Unfortuntely, there is no mention in the Bill of what will happen to the staff. There is a suggestion that six of the staff would be re-employed and that there would be voluntary redundancies, otherwise they are not mentioned. These people have been working as State employees for a number of years and now it is suggested that there should be voluntary redundancies and some of the others might be employed by the new National Milk Agency. This is not good enough. People who have given loyal service for many years should be given the opportunity to take redundancy or be redeployed within the Civil Service. There is no doubt but that there should be areas within the agricultural commercial sector where they could be employed.

Not alone are the employees of the milk boards involved but so are those who work in ancillary sectors. About 140 people have been working in AI stations, the cattle progeny testing service, milk quality and mastitis control services, and milk recording services and, according to the Minister, 117 full-time staff. What concerns me about the ancillary workers is that the majority of them have over 30 years service. Who will protect their pension rights or their position in the Civil Service? Why can they not be deployed in the Civil Service? In the Irish Farmers Journal— I presume this was thrown in by the progressive genetics groups who, as far as I know, are a group of former directors or members of the Dublin Milk Board who want to take over the AI services but if these services were not profitable they would have no interest in them — they said there was a planned breeding project between ABS in the United States and progressive genetics and that it was earmarked for Enfield. That project has now gone to Sweden.

Mrs. Doyle

Denmark.

Mr. Lanigan

I think it was planted by those who want to take over the administration of the AI service. Anybody who is worried about this should ask who are the directors who are the people who want to set up progressive genetics service because I suggest they may be very closely involved with those who were on the Dublin Milk Board and farmers who have a direct connection with the board that is being disbanded.

The Minister stated that the ancillary businesses have declined over the last few years. I wonder about the AI and cattle progeny testing services. How could there be a decline in this business over the past number of years? It is a viable business; therefore, why should they not be retained? The Minister said a rationalisation programme will be needed. That may be so, but when we are talking of people with a minimum of 30 or 40 years' service in the Civil Service we must accept that there are not a huge number of jobs involved nor will there be a huge debt to the State if they are redeployed. We should consider their position very carefully before this Bill goes through both Houses.

Section 3 provides that the order dissolving the board shall come into effect on the date of the establishment of the new agency. I hope that the date will be deferred for as long as possible; there is no need to rush into setting up this agency because the EC said we have to do so. We accept this has to be done. In some EC regulations there are derogations up to ten years and the Minister should not bring in the order until the ancillary staffs position is carefully worked out and they get their dues for the service they have given to the agricultural industry over the past 30 years.

The Bill is necessary. It was nonsense to think there was control of the supply of liquid milk by two boards in Dublin and Cork. In future, anybody who can guarantee that their source of supply is up to standard in terms of quality and their ability to supply on a 12 months basis, will be able to supply in these two areas. This might open up avenues for people who were not able to supply before. There was a dichotomy between the operation of the cartel in Dublin and Cork, what the consumer wanted and what is necessary within the Community.

Offering voluntary redundancy will not solve the problems for the employees. They are covered by the Programme for Economic and Social Progress as they are in the public service. In the Programme for Economic and Social Progress there is a provision that there should be no compulsory redundancies. Suppose somebody does not want to take voluntary redundancy under the new Bill, what will happen? Will they be sacked? Will they be transferred to a private company? That cannot happen. The national agency is different from the old agencies. There has to be continuity of employment for those working on these boards and on the ancillary boards. If they want to take voluntary redundancy that is all right but we must ensure that their pensions are covered. There should be no suggestion that because of EC regulations State employees should be thrown out without getting what they are entitled to.

The Bill will create an atmosphere of better competition in Dublin and Cork but the staff of both the Dublin and Cork Milk Boards and the ancillary units involved will have to be looked after when the Bill is passed.

Mr. B. Ryan

The phrase "progressive genetics" used by Senator Lanigan is of no significance but has a sinister ring to it. Even though it applies to cows, it gives me the creeps. The implications are far from pleasant; it is not a very pleasant phrase.

I welcome the Minister. I must take issue with Senator Doyle. Even at my most paranoid — all of us in politics have a touch of it — I do not think there was a Machiavellian intent in moving the Bill from the Dáil to here. I am certain that, for a variety of reasons, it was moved here because the Minister was a Member of this House and has considerable sympathy with the view that both Houses of the Oireachtas should be used to the maximum extent to ensure the most efficient debate and passage of legislation.

I am glad to speak on this Bill for a number of reasons. First, it is always a surprise to hear people with a large urban base talk about agriculture. The reverse is that the farm organisations have always felt free to preach and expound at length about the virtues or otherwise of organised workers, the trade union movement and the public service generally. Some form of a dialogue would help us.

I will leave it to the experts to debate the ins and outs of the dairy industry. The first thing to remind ourselves of is that this arose out of what amounted to price fixing by a limited number of suppliers.

Debate adjourned.

Sitting suspended at 6 p.m. and resumed at 6.30 p.m.