Dáil Éireann díospóireacht -
Tuesday, 24 Nov 1981

Vol. 331 No. 1

Private Members' Business. - Common Agricultural Policy: Motion.

Mr. MacSharry

I move:

That Dáil Éireann calls on the Government toi ensure that the fundamental principles of the common agricultural policy are fully protected in the discussions on the 30th May Mandate on the EEC Budget and to take whatever steps are necessary from national and EEC resources to halt the decline in farmers' incomes and to restore confidence in the agricultural sector.

I note that the Government have, and obviously had to, put down an amendment to this motion and I shall be interested to hear what efforts they are making, have made or intend to make over the next number of weeks, especially at the Summit Meeting at the weekend in regard to this important question. I shall have more to say in relation to their request that we endorse the steps being taken by them to improve farmers' incomes and reduce the downward trend. The measures we are being asked to support have escaped my notice.

I want to mention briefly the fundamental principles of the common agricultural policy. There are three points, a single market, community preference and financial solidarity which, in anybody's language and especially in EEC terms, means that the Community will fund and pay for all common measures. I also want to mention the objectives under the Treaty of Rome of the common agricultural policy. Article 39 states the objectives which are:

(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour; (b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; (c) to stabilise markets; (d) to assure the availability of supplies and (e) to ensure that supplies reach consumers ar reasonable prices.

Part 2 of Article 9 states:

In working out the common agricultural policy and the special methods for its application, account shall be taken of: (a) the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions; (b) the need to effect the appropriate adjustments by degrees; (c) the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole.

That applies more to Ireland than to any other country in the EEC.

Far from any curtailment of existing supports or in any way undermining the existing supports and the basic objectives of the common agricultural policy, we can see from what I have read in relation to the principles and objectives that we have not come too far on this road. They should be expanded to reach the objectives as laid down in the Treaty. The Commission have reported on the mandate of 30 May 1980. They deal with the operation and funding of Community policies and a number of far-reaching reforms have been suggested. The Commission states that there can be no development of Community activities as long as the Community budget remains artificially limited by the current ceiling on its resources. If they did something about that we might make some progress. The CAP and more specifically the contribution by the UK to the Community budget has been singled out for special mention in that report. The main common agricultural policy proposals are aimed at reducing the rate of increase in agricultural spending so that it will grow less rapidly than the budget by adopting a number of actions. The Commission also proposes to solve the UK budget problem by granting payments to the UK for a limited period to be financed through the budget. However—and this is the important bit—should this be impracticable either by delay in increasing the Community's own resources by lifting the 1 per cent VAT ceiling or by current trends in budgetary expenditure, then the suggestion would be to consider financing these refunds to the UK through abatements of the amounts paid to other member states from the FEOGA Guarantee Fund, the level of such abatements to be moderated for Ireland, Italy and Greece.

One has to be very careful about how one approaches that idea in the Commission's proposal. We can clearly say it is perhaps the most dangerous single element of the report. If it were to come about, no exemption for Ireland would be sufficient compensation for the dangers to the CAP which such a precedent would cause. It would be a clear breach of the basic principle of financial solidarity. It must be opposed in whatever way is necessary to ensure that such a suggestion does not become part of the EEC or the CAP policies.

The Commission also goes on to say in the terms of the mandate that the three inter-related principles on which the common agricultural policy is based remain essential. It is neither possible nor desirable to jettison the mechanism of the common agricultural policy but on the other hand, adjustments are both possible and necessary. We must be very careful that the so-called adjustments they are suggesting are not in any way undermining the principles. Another serious aspect of the report is that the Commission have, accordingly, come to the conclusion that farm income considerations, important though they may be, cannot be the sole point of reference for fixing guaranteed prices and it is neither economically sensible nor financially possible to give producers a full guarantee for products in structural surplus. In relation to the adjustments they are considering and the fact that they are not in any way interfering with the fundamental principles, I think one contradicts the other. The proposal under discussion in the EEC at present is in breach of the principle of financial solidarity. Any proposal to transfer in whole or in part the financing of the common agricultural policy from the Community to member states would be a retrograde step and could easily lead to the collapse of a basic Community policy, which would be unacceptable to us.

We must approach it in that way. I do not intend in any way to be destructive but I should like to hear what either the Minister or the Minister of State has to say in relation to how this matter has been handled since June of this year because it is very difficult for those of us who are not involved in the day-to-day negotiations to know what progress may have been made on what I consider to be very important suggestions from the Commission. We must be clear what exactly is being done. It is my duty on behalf of this party to assure the Government that they have our full support in regard to the steps they are taking, provided that we know what those steps are.

A very important statement was made by Commissioner O'Kennedy to the European Parliament on 17 November. The view he expressed would seem to be in conflict with some of the suggestions that have emanated from the Commission. However, I hope the Commissioner is right. Part of his suggestion was that the Commission reject firmly the notion that an artificial ceiling can be placed on CAP expenditure and he posed the question of how the principles of the CAP policy could be respected, as the European Council have directed, within an arbitrary budgetary ceiling. We must support that call from the Commissioner who, presumably, was speaking to the Parliament on behalf of the Commission. The only way to overcome this major financial problem of the EEC in terms of their budget is by facing the reality of an increase in the 1 per cent VAT rate. This must be done immediately, because if we continue on the road we have been travelling in the past couple of years whereby various interests have been attacking expenditure on the CAP, and with some success in so far as some member states and a number of the Commissioners are concerned, that is a dangerous situation for a Community as a whole. We must remember that Europe hangs together on what is its only developed policy, that is, the CAP. Therefore, this policy should be adequately financed.

It is ridiculous to suggest that the CAP can be cut, thereby enabling some funds to be used for the development of other policies whether these be social, regional or any other. We should not be asked to solve the British budgetary problems by way of contributions from other member states, particularly by way of the CAP or by way of a return of justifiable FEOGA receipts under the CAP. It is important, too, to note the percentage cost of the CAP in terms of the over-all budget. In 1979 the figure was 74 per cent. In 1981 it was 64 per cent and in 1982 it is expected to be about 61 per cent. This is taking everything into account that can in any way be related to agriculture, but in reality the cost of the CAP budget is less than 50 per cent of total expenditure. The CAP represents only 0.4 per cent of EEC gross domestic product. These are the figures that we who are concerned particularly about the CAP must put forward. We must ensure that the other member states realise fully what is happening and what some member states are trying to bring about. What they are trying to do cannot be tolerated under any circumstances. I take this opportunity of urging the Taoiseach who will be representing us at the Heads of State meeting this week to make these points crystal clear to the other member states. I am confident that he will have support in this regard from many other member states. I urge the Minister and his representatives to ensure at the Agricultural Council that the fundamental principles of the CAP are not affected in any way. The Irish Government cannot accept the approach as outlined in that part of the Commission's proposals which are being discussed now at the Council. Instead, we must seek ways and means of ensuring that more and not less money is made available from the EEC through the CAP or through special measures to which I shall refer shortly.

I should like to turn now to the second part of the motion in which we urge the Government to take whatever steps are necessary in terms of national and EEC resources to halt the decline in farm incomes and to restore confidence to the agricultural sector. The word "confidence" in this context is of paramount importance. If there is no confidence in the future of agriculture within the terms of the CAP we shall not have the great development for which we have the potential within our agricultural industry. One might ask why we need additional measures here at home and supplementary measures in the EEC in addition to normal price fixing. The first factor is one for which there is not too much sympathy in Europe. This is our level of inflation. Consistently the level of our market prices is much lower than the levels which apply in the other member states. There is the question, too, of the level of our production compared with the situation in the other member states and in addition there is the factor of our distance from the main markets and the fact that 70 to 80 per cent of our produce must be exported. All of these factors are very relevant and in addition there is the question of the importance of Irish agriculture to over-all economy. During my time in office I found that factor to have significant results with other member states, none of which is in the same position.

Regarding inflation, the problem is that, even leaving this factor aside for the moment, we should be in a position to have presented to the EEC by now a series of measures for consideration by them. I am not referring to some of the measures that were announced by me as Minister and which have not been concluded by the present Minister. I am talking about measures additional to those and which should be put forward for special consideration between now and the price-fixing date. Calls are being made by various organisations for the Taoiseach to embark on a tour of European capitals.

All the heads of state will be together this week. Will the Irish be putting the case for special treatment to offset the proposals which are being discussed in this mandate? That is the time to start presenting those proposals and to make the position quite clear to the heads of Government that we need over and above what will result from the price fixing in the months ahead. It is important that the Taoiseach make this quite clear at the meeting of the heads of state.

When we concluded the price fixing for 1981 last April we had a special package of measures in addition to the 14 per cent increase, and we also had a commitment from the Council to present a further package of measures before 15 July, which were concluded since then, perhaps not on the lines which were intended last March. There is another element which leaves the door open for the Minister and the Government, a wording which was prepared on the night of the fixing of the prices early last April by the President of the Commission, Mr. Thorn, to enable us to accept what was being offered that night. He said that the commission had undertaken to study other methods of assisting in social and other problems resulting from a fall in incomes in the agricultural sector, which is of particular importance to the Irish economy. They are not my words. They are the words of the President of the Commission written out by him and accepted by me in addition to others which we added ourselves.

What action has been taken on those since last April? If no action has been taken, now is the time to present this case once again with substantial proposals for special consideration by the Commission. Those words of the President of the Commission were accepted by the Commission and by the Council. The Minister must look for ways of giving special assistance to Ireland because of distance of markets and market prices generally.

There are a number of ways to do this. We had already put some of those suggestions forward. The Minister can say we did not make much progress on them. I am the first to accept that we did not make as much progress as we would have liked. Some of them were agreed but others which can have a substantial impact on the incomes of farmers were presented this time last year to the EEC Commission by me.

An example is an extension of the disadvantaged areas scheme, which will cost a lot of money but is a way to use the existing mechanisms within the EEC to assist the farming income situation here. The whole country would be designated as a disadvantaged area. Consideration should also be given, because of the distance we are from the main markets, to a transport subsidy. We should also look for exemptions of the various levies, the co-responsibility levy, particularly, on milk production.

I am rather amused to find that the Commission still come forward with a proposal for a super levy on milk which was defeated successfully on two occasions by us in 1980 and 1981. It was virtually wiped out altogether this year, but they have come back with it. I do not believe there is any possibility of acceptance of a super levy within the Community. An Irish Government can never accept that. There is also the suggestion which we put forward which is now part of the Commission proposals about farm incomes generally, that is, that in certain circumstances direct income supplements should be considered.

There are numerous ways in which the Minister and the Government should assist the farming community at EEC level. Inflation is one of our biggest problems. The Government in the July budget increased the inflation rate by 5 per cent by the measures introduced then. The proposals they are considering at the moment for presentation in the January budget will add a further 5 to 8 per cent to the rate of inflation. The Minister is now smiling. Does he not agree with the Minister for Finance?

Mr. Dukes

The rate goes up every five minutes.

Mr. MacSharry

It is the same as we said last week. There is too much disagreement on the Government side about what it is. Whatever the figure is it is taking hundreds of millions of pounds from farmers' incomes. An increase of 1 per cent in the rate of inflation takes £15 million out of farming incomes. If we give the Government 5 per cent in July and 5 per cent in January that is £150 million, but no statement has been made by the Minister or any other Minister, notwithstanding the fact that many of them are running around the country talking about new measures that will be introduced for Irish agriculture about which we have not heard yet from the Minister for Agriculture. The Minister last Thursday night said he was not prepared to talk about particular proposals on a television programme I had the honour to be on with him. The following day a Minister of State, who was not connected in any way with the Department of Agriculture, came forward and announced the scheme.

Mr. Smith

The West Cork brigade.

Mr. MacSharry

Does the Minister know what is happening? Is he being told what is the Government's view on agricultural support measures? I want to refer to additional resources to overcome the serious financial difficulties of a number of farmers. The Minister for Agriculture is on record as saying we knew of this problem and we did not take any action. We not only took action, we got the 5 per cent interest subsidy from the EEC and we gave a commitment for the 5 per cent national scheme for interest subsidies for the other categories. It has not been introduced yet by the present Minister for Agriculture. The Minister of State sitting beside him on the day the budget was introduced said he wanted this introduced the first week in September or earlier if possible. He said he had completed discussions and negotiations with the Banks and he hoped to announce it the first week in September or earlier if possible. That has not been announced yet.

The Minister and his Minister of State have criticised us for not taking steps in this regard. The Deputy sitting beside me, Deputy Smith, who was Minister of State, had already met the banking and financial institutions regarding this particular question. I am sure those who subsequently continued those discussions had all the information from those meetings. They were able to find some documents on other matters which they thought helped their case but they conveniently did not allow us the credit for having set the scene for something we hoped would have been introduced last June or July at the latest. We are now at the end of November but nothing has come forward on that particular measure.

Another item mentioned in May was the calf heifer scheme which is fundamental to a very serious problem in the agricultural sector at present, that is, the drop in stock numbers, particularly in the breeding herd. It is now the end of November but that scheme has not been introduced. A full year has been lost. We negotiated regarding expenditure for the pre-movement test as part of the EEC package but that has not been introduced.

One can see what the Government were about in the summer months and until the autumn. They had made up their minds that, contrary to what they had been saying in the election campaign, they would not give any support to the agricultural sector. After the meeting in October of the Taoiseach and the Minister for Finance with the farming organisations, they said quite clearly they did not have any money, that they would have to respect the policy of the Government to reduce inflation and protect the common agricultural policy before they would provide any additional resources for the agricultural community. That confirmed what the Minister said in September when he said the Government would not be in a position to compensate farmers for the drop in income.

This is what has led to anger in the farming community. They knew that very serious matters had to be dealt with in Europe regarding the EEC mandate and the CAP. They knew that actions taken by the Government in July had increased inflation and reduced their incomes. They heard the statement of the Minister for Agriculture and the Government after the meeting with the farming organisations which said, in effect, "Sorry, we know you have a problem but we can do nothing about it". That caused tremendous anger in the farming community and led them to a protest on which no farmer was anxious to embark. However, they had no alternative when they considered the statements of the Government.

It is important that we realise the difficulties of Irish farmers. It is vital that we give them the confidence they need to overcome these dreadful difficulties. They have to be reassured that there is a Minister and a Government willing to help them in the difficult times they have to face, not just a Government who are increasing the rate of inflation for farmers without any compensation from here or Brussels and thus reducing their incomes.

I have heard the Minister on numerous occasions refer to the extra £70 million he and his Government have put into agriculture since they took office. We have had one Supplementary Estimate in July and there is another Supplementary Estimate pending in the next few days. I will give an example of what was contained in the first Supplementary Estimate of £35 million. This Government had absolutely nothing to do with that. It was to pay for a winter fodder scheme, for aid for the seed potato industry which the Minister does not particularly like, it covers subsidies on milk and dairy produce amounting to £11 million, as well as a programme of special measures covering the AI subsidy, winter schemes and so on. It also covered the discontinuance of the levy on bovine disease eradication. This Government did not introduce any of those measures.

In reply to a question last week, the Minister for Finance gave details of the cuts in expenditure the Government have proposed in various Departments. In respect of agriculture the saving amounts to £7.96 million. The main heads under which this saving will be made are staff cuts, intervention expenses and the disadvantaged areas scheme. I do not know what all of this means because we still have not been told how it will operate, with the exception of the disadvantaged areas scheme. In the budget in July the Minister told us he was making available an additional £8 million for agriculture —a sum of £6 million to finance the national 5 per cent interest subsidy, which has not been introduced as yet, and £2,500,000 for the increase in sheep headage payments.

What the Minister did not tell the Dáil, and what is now becoming apparent, is that the restrictions they imposed on the limit of headage grants a person may receive, and the calculation that combines sheep and cattle headage payments, comprises part of the £8 million being saved in the Department of Agriculture. The fact is that in July the Government, in an attempt to show that they were trying to help agriculture and the farming community, gave £8,500,000, but at the same time they had obviously decided that they would cut back expenditure in respect of staff costs, intervention expenses and the disadvantaged areas scheme to the tune of £8 million. In view of the serious problems existing in Irish agriculture today, does the Minister really expect us to accept that £500,000 is of any help to the farming community? It is a disgrace.

I urge the Minister to be more realistic in his approach to this serious problem. When he took office there was a halt in the decline of farming incomes. We had created the atmosphere for a 5 per cent to 7 per cent real increase in incomes this year, but the July budget and subsequent measures taken by the Government have totally reversed the situation. The Minister must act now in the introduction of new measures, not just another announcement of steps we had taken to help farmers, and he must also prepare a solid case for the European Community. This should be presented by the Taoiseach to the meeting of heads of state this week to ensure that Ireland gets the special treatment it deserves at the price fixing in the weeks and months ahead. If the Minister and the Government accept that they must do this, the farming community will respond. They will regain the confidence they need to increase output and productivity, and particularly increase the livestock numbers. If we do not succeed in doing that in the very near future, agriculture will continue downhill on the slippery slope. It is the duty of the Minister and the responsibility of the Government to ensure that actions they take will not effect the long-term interests of farmers. All the statements we have heard from the Minister and the Government have not been of any help. Were it not for the pressure exerted on the Minister by this side of the House in the last few months to set about doing his job, probably he would not have bothered to introduce any measure or take any steps in the EEC. So far we still have to see evidence of action through national and budgetary measures or a special case being made to the EEC for special treatment because of the serious state of agriculture and its importance to the economy.

I urge the Government to accept this motion. In the first part it gives them full support in relation to the protection of the fundamental principles of the common agricultural policy. There is no way the Government can accept any dilution of these fundamental principals. I urge the Minister and the Government to take whatever steps are necessary now so that the farmers' income situation is reversed and confidence is restored to the agricultural sector.

Minister for Agriculture (Mr. Dukes)

I tabled an amendment to the Deputy's motion and if one reads it one will find out why I tabled it.

An Ceann Comhairle

The Minister should move the amendment.

Mr. Dukes

I will come to that. The implication in this motion is that the Government are not ensuring the things in relation to EEC policy which Deputy MacSharry recommends to us and that the Government have not been taking the steps necessary at national level to deal with the situation. I listened to the Deputy and in view of the approach he has taken, particularly in relation to the EEC mandate discussion, and that we are in a week when the European Council meeting takes place, I withdraw my amendment. I want to make the point, underlined by the Deputy, that we want to show very clearly to our partners in the European Community that our opinion is in line and united on the fact that there are some proposals which have been put forward by the European Community which we cannot and will not accept. In the interests of showing that unanimity of view I withdraw the amendment.

An Ceann Comhairle

The Minister does not have to withdraw it but simply not move it.

Mr. Dukes

I wanted to make that point because it is two days before this meeting takes place. The Deputy may think it gratuitous on my part but I welcome the opportunity this evening and tomorrow evening to debate this issue because the matters to be discussed at the European Council meeting are so important that it is appropriate that this House has a chance to make its views known clearly not only to the people here but to our Community partners.

I assure the House that the Government are taking a very vigorous line in relation to defending fundamental principles of the CAP. Those principles were one of the main reasons why we joined the EEC in the first place. They are principles which suit our position well as an agricultural exporting country and a country which for many years suffered from the fact that it was tied to a cheap food market. We do not want to see those principles diluted in any way. That was the main issue pursued by the Minister for Foreign Affairs and myself and one which will be pursued by the Taoiseach at the European Council meeting at the end of this week.

A discussion on the May 30 mandate started basically from a consideration of the UK budget contribution, a problem as perceived in the UK of the level of its net contribution to the Community budget. In 1979 and 1980 the discussion which began then afforded an opportunity for some member states to begin another campaign and talk about restraining growth in Community expenditure on the common agricultural policy. In May last year a settlement was arrived at to deal with the UK contributions problem for 1980-81. It was decided that the problem would be resolved in the context of the 1982 budget by bringing about certain structural changes in the Community budget. At that time there was much talk about the need to avoid the recurrence or emergence of unacceptable situations for member states. It is important that we appreciate that because we are concerned to ensure that we do not approach what would seem to be an unacceptable situation for one member state by creating an unacceptable situation for another member state, in this case Ireland. The basis of the argument has changed since the mandate document was written last year. There has been a substantial change as far as the UK net budgetary contribution is concerned. There has also been a substantial change in relation to the proportion of the Community budget spent on the agricultural section. The changes have not been brought about by any fundamental change in the way the CAP is operating but by tighter management of the CAP policy and the kind of measures which can continue to be operated and give satisfactory results not only in terms of the way the policy operates and the benefits we could get from it but also in terms of restraining growth in total spending, if that is seen to be a legitimate objective.

The central point is that we must not look at this in an upside down way. We must approach the problem of Community expenditure in a justifiable way from a budgetary point of view. Given the fact that the European Community budget is so small relative to the total gross domestic product of the Community, it is the Government's contention that we must first of all make sure we get the various common policies right, in particular the CAP, and then expenditure must be what is necessary in order to ensure the policies can work. The idea to which we are most vigorously opposed is the one that there is any case for saying that there should be an independent limitation on the amount of money spent on the CAP. We do not accept that there is any case for saying that the growth in agricultural expenditure in the Community should be limited or that the total amount of spending on agriculture should not exceed a given proportion of the Community budget. We do not believe that is the proper way of going about it. We must get the policy right in terms of the Community's own need and the budgetary consequences must be the ones that flow from that policy. That is the line we have consistently defended and will be defending at the EEC meeting this week.

In relation to individual product sectors, the proposals before us are ones which do not commend themselves to us. In the case of the cereal sector there is a proposal that prices should be aligned with those of the USA. I have made the point that perhaps this principle is one that is being applied very selectively. We would like to see Community milk prices aligned with those of the US which at the moment happen to be 15 per cent above ours in the Community. We would even like to see Community beef prices aligned with those of Japan which at the moment are over 20 per cent above those in the Community. The Community as a community of ten member states is entitled to run its own agricultural policy autonomously without undue regard for the interests of countries outside that community. I am afraid that these proposals give excessive weight to the interests of countries outside the Community. We must run our agricultural policy to suit our own conditions within the Community and we must then decide how that fits in with the trading requirements of other countries, but we must get our own policies right for our own needs. Therefore, I reject the proposal that we should in any way decide to align our prices with what happen to be price levels in any other producing area of the world.

As far as the dairy sector is concerned, the proposals are equally restrictive in the way they have been put. For example, it is proposed that we would continue to have co-responsibility as we know it today and in addition to that a super levy would apply to increase in milk production over a certain rate of increase per annum. Furthermore, there is a proposal that there should be a special levy on intensive milk production. I reject the idea of a super levy. It is inappropriate to the needs of this country. Our milk yields are at about 75 per cent of the Community average and about 60 per cent of the average achieved in the best milk-producing areas of the Community. We still have a great deal of progress to make in terms of milk production; therefore we must resist any policy which would have the effect of putting a brake on our ability to expand our milk production. That is why a super levy is unaccepeable as far as we are concerned.

On the other hand, the intensive levy proposal is a different kind of proposal to which we should give very strong consideration. The essential intention of that proposal is to act against or reduce the incentive for producing milk from cheap imported cereal substitutes, products not manufactured within the Community which are used in very intensive operations to produce milk in a limited number of areas in the Community. That is not the kind of agriculture that the EEC wish to defend, nor do we wish to defend it. It is the kind of activity which boosts milk production artificially in some areas of the Community to the detriment of areas where milk production is essential to the economy. In this respect our dairy sector taken all together represents something like the equivalent of 8 per cent of our GNP. In no other country of the Community does it exceed the equivalent of about 1.5 per cent of GNP. Therefore, the impact of those proposals would be much greater for us than for any other area of the Community. We are very conscious of that and we are determined to resist proposals that would put limitations on us in this or any other sector.

It has been suggested in a general way that we should in the Community set production targets or objectives of one kind or another. In my view this amounts to the same kind of thinking as would produce quotas on a national basis. Again, this is the kind of procedure that we could not accept because it is opposed fundamentally to the interests of countries where gains have still to be made in agricultural productivity and where, above all, we need to increase the total value of our agricultural production for the sake of our farming population and those people who would be employed in an expanding food processing industry. The idea of providing for compensatory payments to the UK from FEOGA expenditure or of abating FEOGA expenditure in various member states is totally repugnant to our approach to the CAP whether this is done directly at our expense or not. If we once allow the principle to be established, God knows where it will end. It goes back to what I said a few moments ago, that we must get our own agricultural policy right and we must agree at Community level that we will finance that policy as it requires and as the needs of the Community dictate.

In the discussions that have taken place so far, on every occasion in the mandate proposals and in the draft conclusions being prepared for the European Council when reference was made to the kind of development or policy in the agricultural sector that we could accept, immediately it was qualified by a reference to budgetary constraints, whereas when references were made to the kinds of policies which we do not accept as being appropriate for the Community no reference whatsoever was made in any shape or form to the budgetary implications. That particularly is the case in relation to imports of a number of products from third countries on concessionary terms. For example, the sugar, beef and dairy sectors all cost the Community money and the Commission themselves have estimated that in 1982 the total cost of these imports will come to somewhere in the region of £1,600 million EUA. That cost to the Community has been artifically self-inflicted. I cannot accept in any discussion on Budgetary problems in the Community that we should leave that considerable cost out of the reckoning. For that reason I object to the way the draft conclusions have been written so far and I will not accept that any valid procedure can ignore the considerable cost to the community represented by those imports.

Another point of importance to us which is not treated adequately—indeed it is not treated at all—in the Commission's mandate document or in the more detailed document in relation to agriculture published on 23 October, is the fact that as far as support of market arrangements in the Community is concerned, the Community bears 100 per cent of the cost. That is not entirely true, but on the whole the Community bears the cost, whereas in relation to the structural elements of the agricultural policy, such as the farm modernisation scheme, western drainage or the western package, the Community bears only a portion of the cost. I have been concerned to make the point that this discriminates against countries like Ireland in that it puts the greatest financial burden on the countries which have the greatest need of further structural development. I intend to pursue that point not only in the context of this mandate discussion but also in the context of future discussions on the farm prices package next year and other related matters. These matters would not have been discussed in the Council of Agriculture Ministers in the Community had we on our side not insisted that that be done. For some time is appeared to me that there was an effort. conscious or unconscious, on the part of the Council Presidency, the Commission and some of the member states to keep discussions of the agricultural topics out of the agricultural council and to concentrate it in other areas where the importance of the details would not be underlined to the same extent. I made it my business to insist that we have a proper discussion of these matters in the Council of Agriculture Ministers. We discussed the matter thoroughly and had two examinations of the Commission's ideas.

On this part of the motion I come to the conclusion that the Government are intensely aware of the implications for this country of the proposals that have been made in the context of this mandate discussion, and it is our concern to ensure that the views of this country are fully taken into account and that no changes are made in Community Policies that will have an adverse impact on us.

We should all do our bit to bring it to public notice and to the attention of our partner States in the European Community that the argument that the common agricultural policy has prevented the emergence of other policies is a fallacy. I remember a number of years ago when difficult discussions were going on in the community about the development of regional policy we had a great deal more leeway in terms of total available Community owned resources than we have today and we did not manage to arrive at the kind of regional policy that satisfied every member state. Nobody can pretend that that state of affairs arose because agriculture was taking too much of the budget. In those years agriculture amounted to a greater proportion of total Community spending than it does at present and the fact that we did not manage to arrive at an acceptable policy all round was not related to the level of agricultural expenditure but related to completely different problems.

There are three parts of the equation being discussed at the moment. We have the problem of the United Kingdom budget contribution; we have the discussion about the level of spending on the common agricultural policy; and we have the discussion as to the total level of the community's own resources. I do not accept that if one of these have to give, it should necessarily be the agricultural policy. I do not accept, nor do the Government, the suggestion that the Community's own resources should continue indefinitely to be limited to the present 1 per cent VAT level. We will ensure this point is properly taken up during the European Council discussions next week.

In this motion we are called upon to take whatever steps are necessary to halt the decline in farmers' incomes and to restore confidence in the agricultural sector. I want to say what the situation is, and how agriculture got into this problem. In 1977 farm incomes grew by 39 per cent. Since 1978 we have seen a decline in farm incomes. We now have a situation where, according to the most recent forecast available to me, we will see a further decline in farm incomes this year — the third year running in which there has been a real decline in farm family incomes, before taking account of interest payments. That happened during a period which saw the imposition on the agricultural sector of a number of new levies — the infamous 2 per cent levy and the disease eradication levy. It is ironic that the Opposition should be putting forward complaints about what has or has not been happening in relation to farm incomes this year, while in previous years under their mismanagement we have seen that kind of decline in farm incomes.

I am very concerned to have implemented the kind of policies that will make a real difference to the farming community, policies we can operate at national and European levels. I would like to remind the House of the measures we have taken since last July. We increased total payments under the sheep headage scheme. We provided finance for the EEC interest subsidy scheme, which is now in operation. We reduced the rate of VAT in contractors charges from 10 per cent to 3 per cent. We increased the flat rate payback for unregistered farmers in relation to VAT from 1 per cent to 1½per cent, in other words an amount which offsets the extra VAT falling on farmers through the increase in the VAT which we had to bring in in the July budget. We have already taken a number of measures that will affect farm incomes this year and that will ensure at least that the decline in farm incomes this year is not as much as it would have been had we not taken action in the July budget.

To pretend in April this year that there was a real prospect there would be an increase in real farm incomes and that what we have done in the meantime is to reverse that situation, is nonsensical. That is not borne out by any of the facts nor has it been borne out by anything that has happened in the meantime. The situation is the reverse. We have brought into operation a number of measures which will help partly to offset the decline in farm incomes which would have happened had we not taken any action.

There are three things which have most affected farm incomes. It is common knowledge that the present difficulties in relation to farm incomes arise from a high level of inflation over a period of years, because farm prices have not increased as rapidly as the prices of farm inputs, and we have had a fall in net farm output. We are aiming to bring forward measures that will counter these developments and that will give our farming community some hope of getting out of the price costs squeeze to which they have been subjected.

An immediate measure we are bringing into operation from 1 December is the 5 per cent national interest subsidy, to which I referred on previous occasions, on interest outstanding on loans in respect of eligible investments. This will be broadly on the same terms as the EEC interest subsidy and the maximum amount of loan to which the scheme will apply will be £50,000 per farm. As from 1 December we will have in operation a scheme of national interest subsidy parallel to the EEC interest subsidy which will put non-development farmers operating under the farm modernisation scheme on the same footing as regards their interest repayments as those development farmers who already benefited from the EEC scheme.

There are a number of other measures in preparation. Deputy MacSharry referred to a number of measures which he announced last May but which by the time he left office he had not got clear with the European Community authorities in Brussels. These are the aid to this year's second time silage-makers, aid for one ton of fertiliser per farm and the calf-heifer subsidy which Deputy MacSharry announced it was his intention to operate and which we have modified. Those schemes were not cleared. I am happy to say that since I took office I have been negotiating those three schemes with the Community authorities and we have made very little progress in that respect. I hope before very long that I will be able to announce final clearance of those schemes by the Commission. In this way we will have underlined again this Government's commitment to the kind of measures we need to turn around our very serious agricultural situation.

Deputy MacSharry proposed that at the European Council meeting this week we should come forward with a series of proposals for special measures to assist this country. I do not disagree with the notion that we do need special measures to assist this country, particularly from European Community sources but I should like the Deputy to reflect on the wisdom of going into the kind of discussion we are going to have at the end of this week. It will be a difficult discussion and we will be defending our own basic interests in relation to the CAP. Can the Deputy imagine what the situation would be if we went into that discussion with a new shopping list of measures and said not only must they not operate the type of proposals before them but they must now go along and have extra special measures? The point is that we must first win the argument that will take place at the end of the week and then we will come along at the due time and when the tactics ensure that it is the right thing to do and request not only the price increase we want to see at European level but also further special measures we need to see taken.

The Deputy has mentioned some of the special measures he had in mind and which he knows were turned down. There are other special measures we can examine and will put forward when we clear the discussion that has to take place at the end of the week. I have just reviewed the items raised in the Deputy's motion and I should like to conclude by saying that the argument that will take place at the end of the week is such an important one that I believe it is opportune for the House to be able to show now that we are unanimous in the approach we are adopting to that discussion.

Mr. Power

I should like to support the motion tabled by Deputy MacSharry. My main purpose in speaking is to bring home to the Minister how vital a task he has as Ireland's Minister for Agriculture at EEC level and at home. I got the feeling from the remarks of the Minister that he is still much more a European than he is an Irishman. He devoted more than 20 minutes of his contribution to the common agricultural policy and what is happening in Europe and he has shown a remarkable reluctance to use his influence as a politician when he goes abroad rather than being a member of a commission that is hide-bound by certain codes of behaviour. However, the desperate plight and despair of Irish farming does not seem to have percolated to certain levels of Coalition thinking. We must act now to help to restore confidence in Irish farming. I agree that the corner-stone of Irish farming is the common agricultural policy and on that depends the whole future of farming here. If one wanted one good reason more than any other why we encouraged people to join the EEC it would be for the good of agriculture and for Ireland's good also. Since our entry to the EEC we have proved to be good Europeans. We are committed to the ideals of the founder fathers of the Community and we have been good Irishmen too. There should not be a conflict of interest between being a good Irishman and a good European. I am sure the Minister will appreciate that as a Deputy for Kildare he does not have any difficulty in being a good Kildare representative, I hope, and a good Member of the House. He should not be deterred in any way in pressing Kildare's case at Cabinet level and I am sure it will not prevent him from pressing Ireland's case very forcefully at European level.

When a Minister goes to Europe he is our guardian of the common agricultural policy and he is expected to respond to the pressures that are greater than ever on the policy. It is under constant attack from many sides. The only two member states that are 100 per cent behind the CAP are Ireland and France and that is generally admitted. During my stay in Europe I belonged to the European Progressive Democrats which was made up of Ireland, France and a Danish member and that group fully supported the CAP. However, I see a distinct conflict of interests in other bodies, particularly in socialist groupings. Some gave it lukewarm support and even now Germany feels that she has been carrying the can for too long. It is important that the Minister emphasise the need for give and take in any community and that big industrial countries got benefits elsewhere. Our only hope of getting a trick in this game is to get something for agriculture. We do not hear any talk of a milk lake or of butter mountains. That problem appears to have disappeared but there is still talk of levies, including a co-responsibility levy. I am glad that the Minister has said he will resist this. We are not responsible for any increase in milk production. Our milk output has decreased in the last year from £542,000,000 to £539,000,000 in value. I have heard it said that output has decreased by 1 per cent and that Denmark is the only other country in a similar position.

We have no responsibility for the factory type of farming that exists in Rotterdam and other places and has resulted in milk lakes, if they are there. Those responsible should pay. It is important that people realise how Irish farming responded to EEC conditions and demands. From 1970 to 1979 we increased the value of our milk output by almost seven times. That is a fantastic achievement. It may include some inflation but it shows above anything else productivity and an effort by our dairy industry. Had any other industry achieved such targets those responsible would have been declared men of the year or men of the decade but we seem to take it for granted that farming can expand to that extent.

It is important that we should be conscious of the shift of the balance of influence within the EEC from the North Atlantic to the Mediterranean countries. Since the advent of Greece into the Community and the impending adhesion of Spain and Portugal, Europe will be much more emphatic about the needs of the Mediterranean countries. The voice of Italy will have stronger backing and there will be talk of special measures for olive oil, fruit and vegetables. Those countries will be looking for a bigger slice of the cake. It is vital that Ireland's problem be solved now and that the future of Irish agriculture be placed on a sound basis before southern European pressures help to dilute the common agricultural policy.

The question of quotas and levies has been raised. Quotas are fine for highly developed countries. Some other member states have had a 20 year start on us in the EEC and centuries of a start on us as far as the shaping of national destiny is concerned. At the time of our entry we were a developing country and we are still. Even today our milk yields are only three-quarters of the EEC average. Admittedly, we have the best climate for growing grass. We have the mildest climate within the Community and even now at the end of November I am sure the majority of our dairy herd is still out at night. Farmers in other countries could not do that. When Ireland's future as far as the fishing industry is concerned was being discussed we got a commitment under The Hague Agreement that as a developing country Ireland would be allowed to double its catch up to 1980 and after that there would be annual increments to enable it to keep pace and catch up. The same case could be made for developing an infant agricultural industry here. We should be allowed firstly to reach our national potential before any restrictions are placed on us. There should not be any talk as far as we are concerned of levies or quotas until we have reached our national potential.

For instance, since our entry into the EEC, we have drained 500,000 acres of land. There will be much more to be done under the western package although I would despair for our constituency in view of the answer I received today with regard to the Barrow valley. Even so, huge tracts of arable land will become available but what will we do with them if we are saddled with quotas or levies? We must be able to see ahead in agriculture. We must ensure that these areas of new land that become available to us will be in full production. We must have a market in the EEC for our produce at a guaranteed price. We do not want to hear any talk of slumps or gluts. That is what the restoration of confidence in the EEC is all about.

It is obvious to most people than in an EEC context we will have a very small effect, anything we produce will not disrupt the policies or guidelines laid down. As Deputy MacSharry said, it is important that the Minister hold out for a special place for Ireland's expanding agricultural programme, that he holds out for special aid for Ireland, that he does not lack the confidence we would like farmers to have when he goes abroad. He should state his case, put his cards on the table and look for aid for Ireland that is badly needed now.

The question of agricultural prices will become absolutely vital this year. I know the Minister is conscious of that. Every year it comes under attack, every year before the budget agriculture appears to be the thorny problem. There will be the cheap food element. The people whose whole economy has been based on having cheap food for their industrial workers will be very vocal. They are fortunate in that they do seem to draw their greatest support from urban areas. They are somewhat like the Labour Party here — they feel they can confine their support to certain areas — although recent results might not confirm that. I have found that the socialists and Labour supporters abroad are very much anti-farmer, that their anti-CAP attitude is very thinly veiled, that they like to be selective about their membership of the EEC, that they like to pick what suits them and reject what does not fit in with their party's philosophy.

We all admit that when Irish people go abroad, whether at ministerial level, Commissioner level or as members of the European parliament, we should use every title of influence we have on an united front to get the very best possible agricultural deal and reject any dilution of CAP. I accept what the Minister said this evening about his attitude to CAP — he has had experience abroad — and I would hope that the results of his endeavours will bear out our high opinion of him as a campaigner abroad.

One of the saddest features of which we must be conscious in this country, and possibly one of the saddest features that has emerged from politics in the seventies, has been the growing rift between rural and urban communities. It is noticeable enough in Europe; it is noticeable enough here. Possibly the attitude of farmers to paying tax, or any tax at all, some time ago sparked this off. Probably various statements at Government and union level fanned the flame and were not of any great help. We all have a duty to heal this rift. We must show a united front as far as this island is concerned. We should remember that what is good for agriculture is good for Ireland also and that the spin-off benefits downstream of a prospering agricultural industry will find their way into every home in Ireland.

About a year ago I read a very fine speech delivered by the British Minister of Agriculture, Mr. Peter Walker, in Brussels, that highlighted the importance of agriculture in an EEC context. It was somewhat surprising to read, bearing in mind the source from which it emanated. He laid great stress on the relative cheapness of food, continuity of supply and the security of knowing that we were self-sufficient from a food point of view in an emergency. That fact could best be appreciated by a generation like mine who grew up during the Second World War in Europe. It is important to remember that farmers have virtues also, that they have responded to national urgings, that they have played their part in the economy and in a European context as well. When the Minister looks for better prices for our produce at EEC level he can be assured he will have our undiluted support here.

I should like to deal now with the question of farm incomes. It is obvious that measures are needed at national and EEC level to solve these problems. The situation is very bad. Unfortunately, or perhaps fortunately, the Minister was not available this night week when hundreds of farmers gathered for a convention in the Hotel Keadeen in Newbridge. He was lambasted there from all sides. I do not know whether he is aware of the attitudes but he was subjected to frightful criticism. I got the distinct impression that they were not entirely enamoured of Deputy MacSharry as a Minister. If they were both vets and if farmers were sending for one or other of them the Minister would be left in his bed. That is the impression I got. But it is obvious to everybody that never, since the mid-sixties, has there been such an air of despondency in all areas of farming. If one were to pinpoint the biggest problem — and funnily that over which we should have most control — it is that of inflation. Present inflation was quoted that evening as 22.2 per cent——

Mr. Dukes

They are suffering from three years worth of it.

Mr. Power

——from 18 per cent when we left. That is very obvious. It is easy to remember the 22.2 per cent. If one was a poker player one would probably open with a hand like that.

Inputs into agriculture since 1978 have been abysmal. Only today I saw a poster being prepared for the "tractorcade" that will be staged in Dublin on Friday. I saw some figures that to me were unbelievable. When one balances that with a 60 per cent drop in farm incomes in the last three years — and we must claim a certain amount of the responsibility for that; we are not denying it; I suppose the good Lord cannot deny either that he sent bad weather for two of those years — it throws up some picture. Before the last election I met representatives of the Irish Farmers Association. They dismissed all the goodies that Deputy MacSharry had brought from abroad, the series of packages he had brought. Their biggest worry at that point was inflation. They asked what we could promise them. I replied that if everything went well and we did not experience any great difficulties we might be able to reduce inflation to approximately 12 per cent in three years. I think I was being reasonably honest. As it is we import 6 per cent of our inflation and if we could reduce domestic inflation 6 per cent more we would be doing reasonably well. But current inflation cannot be counter-balanced by an annual increase in prices. It is something we must tackle at home.

Fianna Fáil cannot be blamed for all the inflation. When we left office the rate of inflation stood at 18 per cent. In the short time they have been in office the Coalition measures involving direct taxation have been responsible for an additional 5 per cent. It is generally agreed that in their few short months in office they have increased inflation by 5 per cent by direct taxation measures at home. That is why there is no confidence in agriculture. That is why the farmers who gathered together this night week — we were not allowed speak to them; we had to sit there and listen — feel that they were conned, that the Minister came as a man of great experience, talked nicely to them, made promises to them and then let them down. The sad part was that we had to sit there and listen — we were told we were merely observers — and neither Deputy Durkan nor I had an opportunity of defending the Minister much as we would have liked.

Possibly that is why members of Macra na Feirme are setting out from Wexford. These young farmers are very worried about their future. When they get to Athlone, as some of them will, on the western side of the Shannon, they will look back and say that they had every need to worry. One of the first things they will be remembered for is the impending closure of the Tuam factory. That was a very cynical exercise for any Minister for Agriculture to engage in in 1981.

Debate adjourned.