I apologise for keeping Members waiting for five minutes. We had to deal with something in the Department. I thank Members for the opportunity to say a few words about the complete picture in terms of the reform of the Common Agricultural Policy, Pillar 1 and the rural development programme. Last week, we announced a funding package of about €12.5 billion for agrifood and farming for the next seven years. This is a very strong package. We also announced the detail of the rural development programme that will spend about €4 billion of that over that period.
We have been involved for the past two years in trying to shape the CAP at European and now Irish levels. The process has essentially involved finding agreement during the Irish Presidency on an overall CAP deal across 28 member states. We then built enough flexibility into that agreement to allow countries to design a CAP that would suit their own ambitions, farming structures, land use, crop types and so on. Our plan for the agrifood sector is very clear. It is called Food Harvest 2020 and was put in place by the previous Government in terms of setting the ambition. It is certainly being implemented and built upon by this Government. It was in that context that we approached the CAP reform process. We wanted to essentially deliver smart green growth for Irish agriculture. This is about implementing technology and innovation and helping people to improve their productivity, which is about real and measurable sustainability in terms of how we produce food. Ireland has now become a world leader in this area. It is also about delivering growth. We want to increase the volume of output from our agrifood sector by one-third between now and 2020 and to increase the value of that output by about 40%. We have a series of other targets.
The CAP package that was originally proposed by the Commission would have posed real problems but the final agreement with the Commission, the European Parliament and other member states is a good package from an Irish perspective. We as a Government have delivered everything we promised to deliver during that process in terms of a fair and reasonable redistribution of direct payments, some of the other strategic things we wanted to do like extra supports for young farmers and having a real green element to the CAP in terms of undertaking new and expansive things relating to environmental controls and sustainability. We have the flexibility we need to ensure that Cyprus, Sweden and every other country in between can shape a CAP for their own purposes.
I will speak on some of the details and then take questions and comments from Members.
It is clear that agrifood is the most important indigenous industry in the Irish economy. Including the services and food retail side, the food and drinks sector in its entirety employs approximately 200,000 people. It has seen dramatic growth even in the very difficult economic period of the past four years. In that time there has been a 40% growth in the value of food and drinks exports. Some of the companies and brands delivering that growth will continue to grow and expand for the next five to ten years. We need to ensure that these industries and processors are supported by food producers which will provide quality, safe, sustainable products and that they are provided with innovative and sustainable supports.
The Government has agreed funding of €12.5 billion in CAP and Exchequer funding to agriculture up to 2020. A total of €8.5 billion - Pillar 1 moneys - will be in direct payment to farmers. We had a number of priorities for direct payments such as a fair redistribution of that money. There had been a significant disparity between the levels of payment per hectare paid to farmers with some farmers getting €1,300 or €1,400 per hectare while other farmers received €20 or €40 per hectare. In some cases they were living down the road from each other. This happened because up to now the single farm payment and headage payments and so on, were linked to past productivity. It has been decided to move everyone towards an average payment. However, everyone would not be forced onto the same payment because in my view that would have been devastating for Irish agriculture. It would have been a statement that all farmers had the same capacity to produce food. This is not the case as it depends on the individual farm structure, the location and soil type, whether a farmer is part time or full time and other considerations. The capacity to produce food differs between farm holdings. There is a correlation between past and current productivity. While we agree there needs to be some level of redistribution, that needs to happen over time and gradually over seven years. It needs to prioritise, where possible, full-time farmers and farmers who are as productive as they can be, given their land.
In order to achieve fairness we have introduced a minimum guaranteed payment for everyone which will be 60% of the average payment. Every farmer will receive approximately €150 per hectare. Farmers who would have been getting €30 or €40 per hectare in the past will be brought up to a guaranteed minimum payment over the seven-year period. The highest payments will be brought down to a ceiling payment of a maximum of €700 per hectare. Any farmer who was being paid €800 to €1,200 per hectare will receive a reduced payment per hectare of a maximum of €700 per hectare. The number of farmers earning more than €1,000 per hectare is very small. The approximation model, designed by Ireland, will be used to achieve a fair redistribution process to move everyone towards an average payment. Everyone is moved by one third towards 90% of the average national payment. This is paid for by farmers with above average payments. In other words, everyone is squeezed towards the middle without forcing everyone to an average payment. We had many debates on that issue in this House and in the other House. The vast majority of farmers in Ireland agree with this approach.
The sheep grassland scheme has been in place for a number of years. This is an important scheme in the west of Ireland in particular and for sheep farmers generally. It has varied in value between €13 million to €15 million. We have decided that instead of introducing a form of coupled payment for sheep which would have distorted market forces, that payment will be decoupled and included in a sheep farmer's single farm payment. It is similar to the decoupling of cattle headage payments for inclusion in the single farm payment. The sheep sector will benefit from that value of €13 million or €14 million in the single farm payments. The sheep sector is doing very well out of this reform. Most sheep farmers in the country will gain from this redistribution and from the decoupled additional payment to the single farm payment linked to the sheep grassland scheme. This is a positive result for sheep farmers under Pillar 1.
We have decided to take strategic action with regard to protein crops. We import a lot of protein for animal feed and I would like to see an increase in the amount of protein being grown here. We are requiring arable farmers to have crop diversity and we want to encourage them to grow peas and beans or other similar protein crops. We will give a protein crop payment which is the only coupled payment. It will be a very small payment in actual terms but it will be a strategic incentive for arable farmers to consider growing protein crops because we need more protein crops.
A total of 30% of a farmer's single farm payment will be held back until he or she can demonstrate that basic environmental benchmarks have been met in the production of food. This is an initiative in the Common Agricultural Policy because it introduces a requirement for sustainability as part of a single farm payment, apart from cross-compliance issues. The greening initiative will require farmers to protect permanent pasture within reason - there is some flexibility in this regard. It will require them to have crop diversity, with at least two crops up to a certain threshold and three crops thereafter. They will be required to plan for having an ecological focus area on their farms which will represent initially 5% and moving up to 7% of the holding. They will be permitted to grow certain qualifying crops in that ecological focus area. This is not a set-aside as farmers would have seen it in the past; it is an area of the farm which will add to the biodiversity on the farm and make a positive contribution towards encouraging wildlife.
The new aspects of Pillar 1 are a greening initiative and the decoupling of the sheep grassland scheme. We are taking strategic action with regard to generational change and using CAP funding to do it. We do not have enough young farmers in Ireland. Only 6% of young farmers in Ireland are under the age of 35. That is no basis for taking this industry forward to match our level of ambition for growth, expansion, sustainability and scientific auditing of how food is produced. It has been agreed that every country will be mandated to positively discriminate in favour of young farmers as part of Pillar 1 payments. This means that in Ireland a young farmer under the age of 40 who has come to farming in the past three years will get a top-up of 25% on his or her single farm payment. This will be 25% of the national average single farm payment. As an example, I refer to a young farmer taking over a farm who is fortunate to take over a high single farm payment per hectare compared to a neighbour who is taking over a farm with a much lower single farm payment per hectare.
We think it would be unfair to make the top-up 25% of the payment. Instead, we want every young farmer to get the same extra lump sum. For some farmers, who live in parts of the country with a low average single farm payment, the young farmer's payment may be higher than the single farm payment, but it will allow young farmers to invest in their farms in the way we need them to.
In Ireland, in terms of a figure for the maximum amount young farmers may be getting, a lot of people expected us to limit the young farmer's top-up to the average farm size. That means they would receive it for the first 32 hectares and nothing after that, but we have raised it to the first 50 hectares. Therefore, a farmer who takes over a farm of 50 hectares will receive a payment of €16,000 over five years. That is a sizeable amount of money in terms of a top-up payment for young farmers. It will force a conversation to take place in families, between parents and their sons and daughters, on handing over the farm and the decision-making that goes with it, which is exactly what we need. A very strategic policy is being delivered through Pillar 1 and it will involve up to 2% of the total Pillar 1 money of €1.21 billion.
As people will probably know, a national reserve of 3% will be taken from the Pillar 1 money in the first year for new entrants to farming who do not have any entitlements but who need to be given them as part of coming into farming. That is a very strong support for young farmers. I am confident that Pillar 1 has been designed in a way that suits Ireland and Irish farming.
In terms of the greening of the Common Agricultural Policy, 80% of Irish farmers will automatically qualify. If more than 75% of one's land is in permanent pasture, one will automatically qualify under what is called the green by definition rule, as long as one does not have more than 30 hectares of arable land on one's farm, which most mixed farms would not have. The vast majority of Irish farmers will automatically qualify for the greening payment. On top of that, the young farmer's payment is very much designed with Ireland in mind given the dramatic increases we have seen in the number of young farmers going to agricultural college and to university to study agriculture.
We pushed hard for an overall cap. I have had conversations with Deputy Martin Ferris on the issue. He suggested to me that we should have an overall cap of €100,000 and that nobody should receive a single farm payment of more than €100,000. I agreed with his suggestion in principle, but we have not been able to deliver on it in full. We had a vote with the Parliament and other member states where many member states fought hard for no cap because some countries have much larger farms. We secured a compromise whereby countries would be allowed to introduce a cap at or above €150,000 and we will introduce a cap at that rate. However, we were not allowed to make it any lower. If we could have secured a lower figure, I probably would have considered a figure of €100,000. The lowest we can go is €150,000, and we will introduce the cap at that rate unless I hear some compelling reasons not to do so. We are in the final consultation process at this stage.
That covers Pillar 1, which involves a huge chunk of money which will be more fairly redistributed than before. It guarantees a basic standard of environmental protections and it positively discriminates in favour of young farmers. It gives top-ups to sheep farmers and we are taking a national reserve for new entrants. Each year 1% will be taken for a crisis reserve fund in case there is a dramatic collapse in any one of the markets to which we contribute at a European level whereby we can invoke a crisis response from the Commission. If the money is not spent, it will be given back to farmers the next year. In other words, this money does not disappear into a pot and we will never see it again if it is not used.
Pillar 2 was a complex process. First, we had to decide how much money we had to spend. I pay tribute to my colleague, Deputy Brendan Howlin, on this issue. He has a difficult job to do to manage Government expenditure in a very difficult period. My Department negotiated with the Department of Public Expenditure and Reform in trying to maximise the amount of co-funding that Ireland would provide as a Government and country to match EU funds contributed towards the rural development programme. Many people predicted that the Irish Government would spend the bare minimum to draw down the full EU funds available. That was not the approach and was never the approach. Instead, we have designed an ambitious and proactive rural development programme to try to achieve the strategic things we want to achieve between now and 2020 to fulfil the potential of Food Harvest 2020. To do that, we need a certain amount of money.
I am delighted to say that the result is we will spend as much money in the next seven years as we have spent in the past seven years on rural development. That represents a significant achievement when one considers the EU's contribution has reduced by about 13%. The average spend by my Department, excluding the Leader programme, which is part of rural development, will be about €563 million a year over the next seven years. Considering that this year my Department will spend €405 million, we are talking about the average figure being €160 million more than we will spend this year on rural development, increasing year on year for the next seven years. That is a very positive story.
We have committed to providing 46% and the EU providing 54% of the rural development programme. We could have agreed a figure of about 35% or maybe even less and still being able to draw down the full amount of EU money. However, it is a signal of real commitment towards this sector and a signal that we believe in investing public money in agrifood and agriculture because we think this is a sector that can perform, grow and create jobs, wealth and stimulus in parts of the country that badly need it. The negotiations have been very successful. Both parties in Government have shown a real commitment to rural Ireland. Both I and the Minister, Deputy Brendan Howlin, worked hard on that with the same objectives in mind.
In terms of how we will spend that €4 billion, first, we have announced that we will have a new environmental scheme to replace the rural environment protection scheme and the agri-environment options scheme over a period. It will be called GLAS, which is the green low carbon agri-environment scheme. In essence it will build on previous schemes, but it will be more focused and targeted, and it will deliver better results. We have worked hard with stakeholders who are interested in this area to get it right. Perhaps Members might have questions on the scheme later.
The basic GLAS scheme will provide a maximum payment of €5,000 for up to 50,000 farmers, which is what we have budgeted for. It will target specific environmental challenges and will focus on biodiversity, water quality, climate change issues and emissions, and it will require specific actions by farmers in these areas. It will also, for the first time, certainly in my lifetime as a Minister, give to farmers who farm in Natura areas and special areas of conservation, SACs, and who are required to do certain things on their land to protect water courses, biodiversity and so on, payments for what they are currently required to do but are not being paid for in some cases. Again that is a positive development.
There will also be what is called a GLAS+ programme.
Farmers will be able to top up that €5,000 with an additional €2,000, thereby getting a €7,000 maximum payment. This will be a demanding scheme for farmers. A farmer wishing to farm in a manner that is focused on the promotion of bio-diversity and the development of an environmentally friendly farming system which goes above and beyond what is demanded by the basic green low-carbon agri-environment scheme, GLAS, will have the option of doing so and to be paid extra for doing it. I suspect most farmers will not be in this category. This scheme is currently being designed.
In regard to the disadvantaged area scheme, DAS, payments, the new term will be areas of natural constraint, ANCs. The level of funding provided in the past for this programme is being maintained. In this regard, €195 million is allocated in the Estimates for this year, which €195 million will remain in tact for the lifetime of the next rural development programme, RDP. In other words, even though farmers in disadvantaged areas will, by and large, be gaining from the redistribution process in Pillar 1, many will also be gaining because they will be entering a new GLAS scheme and some of them will also be gaining in terms of their sheep payments becoming permanent. They will also maintain their full DAS supports, although I recognise that those payments have decreased in recent years. The €195 million allocation is factored into the numbers and will not change.
In regard to on-farm capital investment, this is an important issue, particularly for the dairy industry. We are planning for pretty dramatic growth following the abolition in April 2015 of dairy quotas. As such, we need an incentive for farmers to invest, to plan for growth and expansion, to put in place proper infrastructure in terms of their farmyards and to manage everything from water to slurry to increased storage for milk volumes and so on. A strong TAMS programme is being put in place, targeted specifically around dairy for the first couple of years but also involving other sectors.
In regard to young farmers, a special capital investment support programme will positively discriminate in favour of young farmers. In other words, while a farmer applying for capital grant aid under the normal TAM scheme will receive 40% of the cost of doing the works, a young farmer under the age of 40 years will receive 60% of the cost. As the capital expense of some of the investment needed is considerable, this represents a significant capital support for young farmers. We are giving young farmers a top-up under Pillar 1 to encourage them to invest and we are also giving them a significant increase in terms of grant aid support for that investment when they decide to make it. This applies not only to the dairy sector, but to other sectors also. We could have introduced an installation aid-type scheme for young farmers but I did not believe that would be good value for money spend. The problem with the installation aid scheme, even though it was hugely popular among young farmers, was that there was no requirement on a young farmer in terms of how the money was spent. While young farmers were given a lump sum to help them start up as farmers, they were permitted to spend that money on anything they wanted, including outside of agriculture. We no longer have that luxury. We are providing now that where a young farmer wants to invest in his or her farm, which we are encouraging them to do, the State will help them do so by giving them a very significant capital support in terms of infrastructure and build but not stock.
On knowledge transfer and innovation, we remain strongly committed to the discussion groups model, which has worked really well. It has worked really well for the dairy sector and is working well for the beef and sheep sectors. Farmers like it. It is a reason for them to come together to discuss their businesses and to talk about how to do things better and in a more efficient way than in the past. It is about sharing knowledge and information that helps farmers to become better business people as well as more sustainable food producers and so on. We propose to take the best of that discussion group model and build on it. We have committed approximately €22 million per annum to the knowledge transfer and innovation programme, which again in my view is an important initiative.
On beef, I wanted to do something particularly targeted in this area, particularly around suckler beef. The problem in Ireland in regard to suckler beef is that many suckler beef farmers are not profitable in terms of what they make in the marketplace. They rely heavily on schemes and supports and so on because suckler beef is a tough industry in which to make money. We want to do two things in this area. First, we want to support the income of farmers producing good quality, sustainable beef in suckler herds. Second, in introducing a support scheme we want to encourage farmers to change their behaviour and to become more efficient in terms of how they produce beef, their breeding programmes and so on. We are building on the beef genomics scheme and the beef technology adoption programme and introducing a new beef data and genomics measure-scheme whereby we will be requiring farmers farming suckler beef to provide DNA samples from their calves and to provide data in regard to how their animals are performing. Issues on which information will be required include ease of calving, confirmation, pace of growth and all the other measures in place in terms of the measurement of the performance of animals in terms of how they behave and respond. This will allow us to build up a national database through ICPF not only of the location of animals in terms of traceability, but of their DNA and how they perform linked to that DNA. This means that in the future - we will be the first country to be able to do this - we will be take the DNA of a calf and predict accurately how it will perform and grow on the basis of what we know about that DNA. We will also be able to give farmers much more accurate and informed information in terms of breeding programmes and the types of bulls they should be using because we will know what DNA crosses well with other DNA to produce better results and so on.
Essentially, we propose to introduce a scheme that will pay farmers approximately €80 per calf in return for which they will have to supply us with DNA samples and other information. We are budgeting on the basis of 650,000 participating calved cows at €80 per animal. This estimate is based on the number of farmers who wanted to get involved in the suckler cow welfare scheme when introduced. In other words, beef farmers who are interested in getting involved in progressive programmes will be interested in this new beef genomics scheme. That is a reasonable estimate given the numbers that entered the previous scheme.
We are also introducing supports for collaborative and quality focused measures. For example, we will give capital grant aid of up to €2,500 to assist in the setting up of a partnership or a small artisan food business and so on. We are also maintaining and building on supports for the organic farming sector. We have a problem in Ireland in that only 1.5% of our land is dedicated to organic farming while the average across Europe is approximately 5%. We would like to see an increase on that 1.5% and have put in place supports in this regard.
I know that some Senators represent coastal and island communities. I propose to do something specific to support people who are farming on the islands, particularly those who continued to do so during the past couple of weeks. Keeping animals, be they suckler cows or sheep, on the islands is a tough business. It is an area from which it is also difficult to make money. I am looking at putting in place a generous scheme that recognises the difficulty of farming on islands. This will ensure that stock is maintained on the islands and that people there remain active in farming.
That is the package, which I believe is a reasonably good package. I look forward to hearing Senators' questions so that I can provide some clarity.