Dáil Éireann díospóireacht -
Wednesday, 20 Nov 1996

Vol. 471 No. 7

Supplementary Estimates, 1996. - Milk (Regulation of Supply) (Amendment) Bill, 1996: Second Stage.

Minister for Agriculture, Food and Forestry (Mr. Yates)

I move: "That the Bill be now read a Second Time." The purpose of this Bill is to provide for four essential amendments to the Milk (Regulation of Supply) Act, 1994. That Act cleared the way for the abolition of the former Cork and Dublin District Milk Boards, the sale of their ancillary businesses to private sector interests and the establishment of the National Milk Agency to regulate the supply of milk for liquid consumption throughout the State. By and large, the Act has worked very well. The old boards have been abolished, their business sold as going concerns and the National Milk Agency is now well established and operating effectively. In other words, the objectives set out in the Act have been achieved. There is a need at this stage to make provision for the resolution of a few outstanding matters and it is for this reason I am putting forward the proposed amendments to the Act.

The first of these concerns the disposal of the business and assets of the former boards. Consistent with the policy of protecting employment in so far as possible, it was decided at the outset that the ancillary businesses of the former milk boards should be sold as going concerns, with the majority of the staff transferring to the employ of the new owners rather than making them all redundant and selling off only the business assets. Deputies will recall that the Act provided for the establishment of an interim board which would have responsibility for the management of the business in the period leading up to the sale. The interim board sold by tender the business interests of the former Dublin Milk Board to Progressive Genetics Co-operative Society Limited in April 1995 and the following May the Cork business was sold to Pendine Investments. However, the board was advised that it would achieve a better return for the State if it sold the headquarters building of the former Cork Milk Board separately from the ancillary business and decided to act on this basis. A small technical amendment to the Act is necessary to allow the sale of the property as an asset rather than as part of a going concern.

In line with the Act, the work of selling the business and assets of the former milk boards and of running such business until the time of the sale was carried out by the interim board established for this purpose. The board consists of two senior civil servants from the Departments of Finance and Agriculture, Food and Forestry respectively and an outside chairman. The vast bulk of its work is now completed and the board members are of the view that the time for its dissolution is approaching. I share this view. However, there remain certain apparent assets which the board has not so far been able to realise, as well as the possibility of contingent liabilities or certain residual business matters for the completion of which a time scale cannot be established. In the nature of things, this could take some time. The Act already provides for the dissolution of the board, but does not make any provision for the conducting of any business the board may leave unfinished. In order to clear the way for its dissolution, I wish to amend the Act to provide that any business the interim board may leave unfinished, any assets unrealised or any liabilities undischarged shall become the responsibility of my Department. The interim board has discharged its functions very satisfactorily and the purpose of this amendment is to ensure that a vacuum does not arise after its dissolution.

The election of producer representatives to the board of the agency is also a matter which, in the light of experience, calls for some minor amendment of the Act. Deputies will recall that the Act had to be amended last year to allow for the postponement of an election because a sufficient number of producers had not yet been registered to facilitate a fair election. When the contracts came to be registered it emerged that some of them named more than one person as being the milk producer and all parties to the contract were registered by the agency in the register of producers. Thus, in some cases, there would be more than one person entitled to vote in respect of a single contract. This is manifestly unfair. Accordingly, it is proposed to amend the Act to provide that, where more than one producer is a party to a contract, the person first named on the contract shall be regarded as the principal producer and shall alone be entitled to vote in an election of producer representatives. The purpose of this amendment is to ensure a totally fair election.

Finally, there is the question of ensuring regional balance among the producer representation on the agency. As the industry is structured, there are a small number of large scale pasteurising dairies, mainly in the east of the country, and a considerable number of relatively smaller scale establishments in other regions. The agency itself has expressed a fear that, if the electorate is not divided into constituencies, the suppliers to the larger eastern establishments will dominate the agency to the virtual exclusion of all others. To forestall such an eventuality I propose to amend the Act to permit of the division of the electorate into two or more constituencies.

The measures in the Bill are essentially minor and technical in nature. They do not represent any radical change in policy or any major change in the existing pattern. Rather they are small but significant adjustments necessary to allow the initial objectives to be achieved effectively and efficiently. They do not represent any radical change in policy or major change in the existing pattern. They are small but significant adjustments necessary to allow the initial objectives to be achieved effectively and efficiently. I commend the Bill to the House.

Mr. Cowen

This is a technical Bill the principle of which I have no difficulty in accepting. It deals with the sale of property in Cork as real estate rather than as the going concern provided for in the 1994 Act. I am glad the Government has converted to the idea that it might sell some real estate in Cork. There are also necessary provisions dealing with the election of producer representatives. The election has had to be postponed and the Bill makes legal provision for this.

My difficulty is in the intended composition of the board of the National Milk Agency. The Minister's intention is that the composition will continue to be five producer representatives, four processors, one retailer, one distributor and one consumer. The virtual exclusion of direct consumer representation is unacceptable. I have tabled an amendment to ensure the number of consumer representatives will not be less than three. It has the support of the Consumers Association of Ireland.

The 20 March announcement in the House of Commons and the continuing BSE crisis have completely changed the atmosphere in which the food industry operates. The customer is king, tokenism will no longer do. If the issue of the credibility of the dairy industry is to be treated seriously and in a pro-active way, the interests and concerns of consumers must play a central role in the affairs of the National Milk Agency from the beginning. When a crisis comes, it is too late. The lesson of the BSE crisis is that the belated assurances of official agencies which have hitherto ignored the consumer are of no use. It is for this reason the credibility of the Department of Agriculture, Food and Forestry is at rock bottom. Characteristically, information has had to be dragged from the Minister and, invariably, within a short time there is another revelation which undermines the veracity of the original disclosure. Only this week on the front page of one of the national newspapers there was another damaging revelation about pigmeat.

The unnecessary damage to the industry could have been avoided if the Minister had revealed the facts about antibiotic residues in pork when he first learned about them. Instead, it was only after weeks had passed and a survey by the Consumers Association of Ireland had forced his hand, that the Department released the information in its possession. The mishandling did not end there. We now know the supposed full facts were not the full facts. The issue was again put in the spotlight this week with the revelation that carcases had passed into the food chain, even though they had tested positive. With friends like this, the food industry will never need enemies.

My amendment is an effort to deliver the National Milk Agency at birth from the approach that has already caused other food sectors incalculable damage. If we are serious about the customer being king, we must put customers on the throne — royalty does not take kindly to being left outside the door.

Although this is a technical Bill, the debate gives us an opportunity to take an overview of the dairy industry. In that respect, it is timely given the mounting difficulties in the industry. The number of milk producers is likely to decline from about 41,000 in 1994 to 30,000 by the year 2000. The policy of strict control of milk output through the superlevy regime, while maintaining the incomes of those lucky enough to have a decent milk quota, is ultimately leading to a declining and stagnating industry.

Since the quota regime was introduced in 1984, the national milk production quota has been reduced by 9 per cent, despite a recognition of the special position of Ireland, its dependence on dairying and a promise of priority access to future quota allocations at the time the quota regime was introduced. In the meantime the Italian quota has increased by 11 per cent while the Greeks have increased their quota by 20 per cent.

Increasing milk quality standards and the near impossibility for small producers or new entrants throughout the main dairy areas of increasing production to make a viable enterprise will result in a halving of the number of milk producers between 1984 and the year 2000. The dynamism which for so long was the hallmark of the dairy industry has been replaced by a virtual closed shop.

Meanwhile the processing industry is being starved of important raw material to develop its markets and has been forced into overseas acquisitions to grow and develop. Immediate delivery on the promise of special consideration for Ireland in the allocation of future milk quotas is the number one priority.

Irish milk production has a competitive advantage in Europe. We must be allowed to exploit this advantage. Low cost milk production, based on naturally produced grassland, suits most areas of this island. Because of its relatively high labour demand spread throughout the year, dairying is particularly suitable for small to medium-sized family farms. Milk can be produced just as efficiently on small to medium-sized farms as on large units.

Opening up the opportunity for production to a new generation of dynamic young dairy farmers would allow the transformation of the industry and equip it to meet the competitive environment it is undoubtedly facing. To be in a position to produce milk competitively, it must be possible for these people to expand and enter the business without incurring high capital costs in the acquisition of quota.

Small dairy farmers, especially those in the most disadvantaged areas, will continue to need support at the end of the current quota regime. This income support must be an integral part of any new policy proposals.

As regards the superlevy and the major problem with temporary leasing, this year's superlevy fine for dairy farmers is heading for a record £33 million. Production levels to the end of October were running at an unprecedented 30 million gallons or 3.5 per cent over quota. Producers are facing the highest ever levy, over twice last year's figure. There is serious concern that the butter fat level is also likely to be breached. Small scale producers will be worst hit.

The impact of the looming superlevy is directly related to the desperate need for more quota. The failure of the Minister to pursue the issue of extra quota, given the plight of small dairy farmers' is a scandal. Not only did he fail to seek any long-term solutions he also failed to exercise the controls already at his disposal. His handling of the temporary leasing issue has been as incompetent as it has been costly for small farmers. His decision not to give priority to small or category A producers with quotas of less than 35,000 gallons was a disgrace. His subsequent U-turn under pressure demonstrated as much.

The Minister's claim in June, when the revised rules were put in place, that the problems caused for small producers were not foreseen is not credible. The only basis for that threadbare claim is that the monitoring capacity of the Department is seriously deficient. Perhaps, we had another systems failure. The reality is that the needs of small farmers have been consistently ignored. The clawback, introduced by the Minister as an eleventh hour attempt to stave off disaster, will not produce an extra gallon of milk in the current milk marketing year. The failure to include existing leases will rob the measure of most of the impact it might have had in future years.

The failure of the Minister to address the concerns of consumers and the needs of small farmers was vividly demonstrated by the quick cancellation of the dairy hygiene scheme at zero notice. The announcement was tactically timed late on a Friday evening after the close of the ploughing championships. The Minister slammed the door on small producers in spite of the fact that more than 75 per cent of dairy farmers failed strict new EU milk hygiene controls. On that occasion his spokesperson was quoted as expressing "serious concern". A crackdown was promised that would include forcing farmers to update their facilities. The Minister vowed to have 20,000 farms assessed this year. I refer to a report in The Examiner of 24 November 1995. What he did was to shut down the scheme which would have allowed many farmers, particularly small and medium-sized producers, to make the investments they need to make to remain competitive.

This is not only a farm development issue, it is a consumer confidence issue. Confidence in food begins with the Protocols and standards observed on farm. In this neglect of dairy farms, the Minister has sown the seeds of future serious problems.

The most positive development in dairying during the past ten years has been the development of a range of first class farmhouse cheeses and other dairy products. These have the potential to add enormously to the value of milk production and to keep jobs in local areas. They must get the full support they require for their continued success and development, including access to milk supply, training, marketing and quality assurance support systems. They are now a vital national resource.

The key criterion for development of the food industry in terms of rural development is additional value in the areas where the raw material is produced. An Irish dairy policy that will lead to a dynamic industry after 2000 must be developed and put in place immediately. The industry needs a decent lead-in time in order to respond.

With the proviso that consumers are brought in out of the cold as far as the National Dairy Agency is concerned, I have no problem in principle with this Bill. The agency must have consumers in the boardroom in meaningful numbers. A failure to do this now will rob the agency of its credibility at a future time when the industry may depend on the credibility of the agency's assurances to consumers for its survival.

Mr. O'Malley

In addition to my other disadvantages, I am at the additional disadvantage of not having a copy of the Minister's script. It is a great pity that he or his Department will not provide it to Members, as it is the normal practice when a script is delivered by a Minister that it is circulated at once. Unfortunately I must work from memory of what the Minister said — I did not take notes because I assumed the script would be circulated.

Mr. Yates

I apologise to the Deputy — this should not have happened and I am arranging for distribution of the script forthwith. As we are taking all Stages together we will have an opportunity to discuss matters on Committee Stage but I agree with the Deputy that it is not satisfactory.

Mr. O'Malley

No matter how one looks at this Bill, it would have to be described as rather unimportant. When I consider the other matters currently consuming this House and the inability or unwillingness of the Government to give time for their debate or to answer questions on them, it is remarkable that several hours can be devoted to this topic. The legislation is largely a rerun of an Act which went through this House in December last year but was not acted on by the Minister and the Department. It is necessary to re-enact last year's legislation plus another provision to make up for an error in the 1994 Act. Remarkably, we are dealing with the third Bill in two years on a matter as relatively peripheral as this. There are other problems in agriculture which more urgently need legislation — I can name them for the Minister if he is not aware of them, but I think he is.

There is a marked contrast between the dairy industry on the one hand and the beef and pigmeat industries on the other. We should ask ourselves why there is so little fraud or improper practices in the dairy sector when they are so widespread in other parts of agriculture. If we can answer that question, we might learn lessons for the other areas. The major difference is that the dairy processing industry is dominated by co-operatives, most of which are now in the midst of changing themselves into public limited companies — in some cases that is a gradual rather than an overnight process. To use the in word, there is accountability in the dairy industry, by and large; there is no accountability in either the beef industry or in much of the pigmeat industry.

The result is that the industry which has accountability to shareholders, producers, consumers, etc., has suffered no long series of scandals, nor are people constantly on the fiddle as they are in these other areas. The only form of financial malpractice in recent years in the dairy industry occurred in one or two super-levy cases and where the Department, the Commission or both were able to intervene to stop it and to impose penalties. This is a great contrast to what is happening elsewhere — EUCLAF, the EU anti-fraud section, is constantly involved in trying to get to the bottom of what is happening in other areas of Irish agriculture.

Part of this Bill is a direct rerun of the Act passed last year, simply substituting the year 1997 for 1996. The other part — as far as I can ascertain from reading the Bill and listening to the Minister's speech — relates to clearing up drafting errors in the 1994 Act, which did not allow the disposal of all the assets of these dissolved boards unless they were sold as a going concern. It was an error in the 1994 Act not to allow the disposal of assets in the normal way and this mistake must now be corrected. The House will be perfectly happy to do so and to make these amendments, but I hope we will not need a further correctional Bill next year. The old and interim boards should now be wound up, the new agency should take over, and that should be the end of the matter. This prolonged transitional period, which seems to have continued for ages, should cease.

Neither the 1994 Act, the 1995 Act nor this Bill refers to the numbers of people on the new agency representing different interests — that was fixed by ministerial order under the 1994 Act. It is interesting that the agency is completely dominated by producers and processors with a lone, nominal consumer at the end of the list of members. That accurately reflects the thinking of the Minister and his Department, who have always regarded consumers with contempt and felt they were there to serve the producer and the processor. Consumers have given good service to producers and processors over the years, frequently at their own expense, which I regret. I fully support Deputy Cowen's proposed amendment, which tries to redress the balance, but increasing the mere numbers of consumer representatives will not make a major difference. That can only come about when the Minister and his Department fundamentally change their attitude that the producer and processor are kings and no one else matters. This country has paid a high price — including fines of £71.9 million in one year, £8 million and £9 million in others — for the failure to recognise the rights of consumers and to regulate processors in particular adequately.

I cannot let the opportunity pass without expressing my profound regret about something which happened in the last few days but has not received much media coverage in this part of the country. One of the major dairy processing co-operative societies has been ordered to pay compensation of £130,000 for practising religious discrimination vis-à-vis its employees. It is the largest award ever made by the Fair Employment Commission for Northern Ireland, because it was regarded as the most serious case of religious discrimination it had ever come across. It is deplorable that happened under the auspices of a large co-operative, now a quoted public liability company. It is a great pity it has been so little commented upon and is regarded almost as the norm, just another business expense. It goes much deeper than that. I deplore what happened. I am aware it does not relate directly to this Bill but it relates to the processing and distribution of liquid milk and is a matter about which all of us should express our profound regret. The Minister should intervene to ensure there will not be a repetition of what happened in the company concerned.

The Bill is largely of a technical nature to make up for defects in the earlier Act and the fact that last year's Act was not implemented. I have no objection to it, but I contrast the fact that we have a relatively large amount of time to debate this rather unimportant Bill while we will have only half an hour to debate 38 amendments from the Seanad to the Family Law (Divorce) Bill. It seems those who order business in this House have an extraordinarily strange sense of priorities. In addition, the debate on the latest adventures of the Minister for Justice is deliberately put back until after Question Time today so that 70 questions would be disallowed by the Chair in anticipation of that debate. Since questions to the Minister for Justice will not be taken again for a month, those questions cannot be asked until then. If that debate had started this morning those questions could have been allowed this afternoon and the debate would be much more meaningful. It is a great pity that cover-up is taking place and a Bill of this kind is inserted to facilitate it.

I do not oppose the Bill, there would be no point in doing so. It is a very minor Bill and I look forward to hearing the Minister deal with some of the provisions in greater detail on Committee Stage.

Minister for Agriculture, Food and Forestry (Mr. Yates)

I thank Deputies Cowen and O'Malley for not opposing the Bill. I will respond to some of the points they made. If this debate concludes before the designated time I am not sure whether the order of the House provides that other legislation may be taken, but there is no attempt on my part to filibuster or delay matters. Since this legislation is required for the electoral process to be cleared before the Christmas recess I have brought it forward with some urgency.

On the general critique of the Department and myself vis-à-vis the consumer, I acknowledge that the Department must be seen to be pro-consumer. The dependence of producers on the consumer has been understated in the past. I will come back to the composition of the board. My predecessor was responsible for the primary legislation and I have not altered that basic structure. The numbers were determined at that time and we are dealing here with the method of election.

I have started dialogue with the Consumers Association of Ireland, the Director of Consumer Affairs and other interested bodies to see how the Department can improve its relationship with consumers and their representatives. I intend to set up structured dialogue on a regular basis in the form of an advisory group so that all aspects of the Department are subject to quasi audit by consumers. This is not something I am doing with fanfare but it needs to be included in the workings of the Department. During Question Time last week I announced that every report vis-à-vis pesticides, residues and so on will be laid before the Houses of the Oireachtas and when reports are made available to the Commission they will be available here. There will be dissemination of all the information at the earliest possible date and quarterly specific documentation on residues will be published.

Mr. Cowen

A new start.

Mr. Yates

On the changes I have made in regard to pigmeat, there is a new industry agreement whereby a producer must give a written declaration that he has not fed antibiotics to animals and has observed the withdrawal period. Every consignment of pigs is to be tested at processor-factory level, which is significant. Incidents have been reduced from an appalling level of 21 per cent to about 3 per cent, but we must aim for complete elimination. New publication methods are in place.

In regard to random testing as referred to in this week's lead story in the Irish Independent, carcases are now being retained for random testing. In virtually every European state there are two types of testing: random screening and testing of suspect cases. In the event that there is a 1 per cent incidence and a factory or producer is identified, a second level of testing will be carried out on the basis of suspicion. A whole range of testing may be carried out without notification.

In most member states carcases are not retained for random testing. We are introducing a system of retention to give an indicative analysis which may be pursued with vigour to find the culprits. A system of random and screen testing is being introduced as opposed to direct suspicion-related testing — that information has been somewhat lost sight of. Under this system the thousands of carcases tested on a random basis will be retained and, where found to exceed the maximum residue limits, condemned. The public, consumers' representatives and Members of the Oireachtas will be accommodated if they want increased food safety standards. In regard to pigmeat in particular, I recommend that the Food Safety Board, which has power of binding recommendation vis-à-vis Protocols, study this area in conjunction with the interim board.

Deputy Cowen raised a number of points on the milk sector generally. An expert group is studying the future of quotas beyond the year 2000. The year 1997 will see the first steps of reform of the dairy sector. I have received mixed advice to date, first, that there is an inevitability that quotas will be abolished and, second, that it is not in Ireland's interest that there be a free market in milk. The prevailing price of milk to producers, at £1.05 per gallon, is subsidised to the tune of 40p per gallon by Europe. The market for dairying has deteriorated rapidly in 1996 as against 1995. In 1995 production in the southern hemisphere dropped, with increased buying by Russia. In 1996 130,000 tonnes of skim milk powder went into intervention while 30,000 tonnes of butter went into intervention. That downturn will probably continue into 1997.

Farmers want the best of both worlds, they want unlimited production at the higher prices, but they can only have higher prices with fixed production. I take the point that in the long-term Europe cannot continue to lose market share and whether it is an A and a B quota, we need to evolve change in that regard. I want expert advice, however, and there is still some time remaining for that.

On the question of the super levies, I am concerned that in addition to a record super levy last year of £14 million, there is a prognosis that we will have a super levy in excess of £30 million this year. I am totally mystified as to the reason some farmers cannot accept that they own and manage their quotas. I have not introduced any change in quotas since 1983. Whether farmers have 5,000 gallons or 105,000 gallons they know how much they can produce every month, or pay a super levy. The rules have not changed. Some people are obliged to live within their quotas. I have sympathy for the people who got temporary leased milk but for those who have not culled cows because there is a bad price for them, there is no avoiding the fundamental reality that there will be super levy payments which will place an additional burden on them.

The first problem is there are two types of quotas given to small farmers, flexi-milk and temporary lease milk quotas. Flexi-milk has effectively evaporated because when producers did not produce the quota in a given year, that went into the flexi-milk pool in the co-op and it was reallocated to small producers. It dawned on people that if they could not produce milk up to the quota, it was worth money to lease it to someone else privately or to opt into the temporary leasing scheme.

The second problem was that the commercial price of leasing milk was much higher than the 30p per gallon in the temporary leasing scheme. The combination of these factors meant that milk given to small producers dried up. More milk quotas will be given this year to small producers than ever before. Even in the first allocation which Deputy Cowen criticised, a greater proportion was given than in the two previous years. The intention of the 10 per cent clawback is not to create a pool of milk but to avoid penalty and move milk into the temporary leasing scheme.

I do not see any prospect of getting more quota. Other than an agreement on CAP reform I am not aware there is provision for the Commission to propose a 2 per cent quota cut. No other member state is seeking extra quota. There was some mention of the peace dividend from a cross-Border proposal which I would support but that requires the support of the British authorities.

The dairy hygiene scheme was suspended on the exhaustion of Structural Funds. If we had alerted people that we intended to suspend the scheme, there would have been a flood of applications when the money was already exhausted.

Both Deputies have tabled Committee Stage amendments on consumer representation. The consumer representative on the agency monitors price trends, not food safety. The National Milk Agency does not have any remit in relation to food safety. The protection of the health and safety of the consumer is covered under other legislation, Statutory Instrument 9 of 1996, which gives full effect to EU directive 92/46 on the hygienic production of milk and dairy produce. The National Milk Agency is concerned with the control of supply. We can come back to this topic on Committee Stage. My mind is not totally closed on the matter. I understand a balance was agreed with producer and processor representatives. I am prepared to consider the question of an additional consumer representative, but I will return to this on Committee Stage.

Deputy O'Malley raised a number of points. I agree the dairy industry is the most exemplary element of the food industry other than food ingredients and prepared consumer foods. For example, ten years ago there was a great deal of publicity about antibiotics but in a matter of weeks the matter was permanently rectified. The somatic cell counts, the RBIs, the antibiotic and other residue testing of milk are to a very high standard. That is something to do with the nature of the product and the discipline involved in it, but the Deputy's general comments in that regard are justified.

I have been in Brussels for the past two days and I am not aware of the religious discrimination referred to by the Deputy. I abhor any discrimination and I would find it regrettable if a company in the Republic was involved in it. I do not have the details on this matter but I do not condone any such activities.

I thank the Deputies who contributed to the debate. I agree with what has been said. This is a technical measure. I hope it will be the last such technical legislation required in this matter; they will simply have to get on with the elections.

I bring to the attention of the House a Committee Stage amendment I will propose which I understand has been circulated. One issue remains to be addressed on which I want to amend the Bill. Legal advice given to the Department suggests that to hold the elections between now and the end of the year could involve taking an unnecessary risk. Regulations governing the elections must, of necessity, be both comprehensive and detailed. These are near finalisation. Accordingly, I will put down on Committee Stage a further amendment to the Act which will extend the mandate of all the current members of the agency into 1997. This means both the producer members and those representing the other categories will have their term of office extended to maintain the synchronisation envisaged under the principal Act. This involves amending two sections of the Bill. In section 3 two new subparagraphs are introduced to replace subparagraphs A and B in paragraph 5 of the Schedule of the principal Act to extend the mandate into 1997. The paragraphs being replaced were inserted by the Milk (Regulation of Supply) Act, 1995, in this section referred to as the Act of 1995. For legal reasons this Act must be defined and therefore section 1, which contains the definitions, must be amended accordingly. It is the intention of the agency to make arrangements for the election of producer representatives and to obtain fresh nominations of representatives for other categories as early as practicable in 1997. On this basis and on the basis that this will be the last deferral of these elections, regardless of the consequences of that, I ask the House to support these amendments.

Question put and agreed to.