Vol. 478 No. 2
12 Mr. M. McDowell asked the Minister for Agriculture, Food and Forestry if he intends to recover the sums lost to the Exchequer and to the community funds in the matter of export refunds unduly paid on foot of four Bureau Veritas certificates proven by the Commission not to comply with the terms of Regulation 3665/87; and if not, the reason therefor. [10787/97]
The disallowance imposed by the EU Commission in respect of some 1989 export refund payments represented 7 per cent of the export refunds paid to eight beneficiaries in respect of these transactions. These transactions were proofed by four Bureau Veritas certificates. The disallowance was imposed because at the time of the Commission audit in 1992-3 detailed back up documentation relevant to these certificates was not available as it had been destroyed in Baghdad during the Gulf War. However, supporting documentation which was still available at the Paris headquarters of Bureau Veritas was accepted as sufficient import proof to confine the disallowance to 7 per cent.
It is not the case that the Commission proved that these certificates did not comply with the terms of Regulation (EEC) 3665/87. If there had been any evidence that the beef concerned had not in fact reached Iraq, the Commission would have a full 100 per cent disallowance.
By 1992 when the EU auditors reviewed these cases the processing of the files had been completed and almost all the securities relating to this 1989 trade had been released. Security releases must be done in a timely manner to avoid disallowances which can be imposed on grounds of delay alone. It was not possible to pass on the disallowance to the exporters concerned given the decisions taken and acted upon in the early 1990s and the fact that no fraud was ever alleged.
With regard to a review of more recent years, the Deputy may be interested to learn the results of an intensive systems audit carried out by the Commission into beef export refund prefinancing expenditure in six member states. In Ireland the total expenditure audited amounted to £361 million in 1993 and 1994. The results have just been received — major disallowances of the order of 5 to 10 per cent of total expenditure have been imposed on the other five member states concerned, with no disallowances for Ireland.
Is the Minister aware that in June 1994 when these matters came to light and the shortcomings in the certificates were drawn to the Department's attention Mr. Gerry Cody wrote a memorandum to his superiors saying that in the circumstance we would have to consider living with the level of disallowance and recovering same from either AIBP or BV or both? That advice was given in the Department by Mr. Cody. Why was it not followed?
I was not aware of that advice. The advice I received, however, was that something like the general EU beef fine was not specific to a particular consignment or company and that it was not appropriate to do this. There was also a question of the EU changing the goal posts subsequently.Eight exporters were the beneficiaries of the disallowance of £2.29 million, a percentage of four Bureau Veritas certificates covering 89 exports to Iraq. Recovery was not possible where decisions had been taken and acted on in early 1990 and where no fraud was proven or alleged.
On the Deputy's point on the defacing of certificates, apparently there is no disallowance on the 1998 certificates. This relates to a point made by the Deputy at the Committee of Public Account that there was defacing of certificates. No disallowance from the EU relates to those certificates. The dates were independently verified and there was no undue benefit to any individual.I was told that it was not possible to recover for two reasons. First, the decisions had been acted on so that when the matter came to light in 1994 in the clearance of account, it was too late and, second, the disallowances were a general 7 per cent of the overall tranche and did not relate to a particular consignment of meat where civil proceedings were under way, for example, in the Rathkeale case.
The Rathkeale case has nothing to do with export refunds.
I know that. I said there was a difference in the fines.
I asked the Minister a specific supplementary question and he read out points he said he was asked to make which had nothing to do with the question. It is extraordinary that the Minister sees himself as a messenger for other people who wish to make points which he makes irrespective of the question he is asked. If the Minister is not aware of the advice of Mr. Cody of the trade mechanisms division which deals with this, will he make himself aware of it? Was Mr. Cody overruled by a senior official who did not want proceedings taken against AIBP or BV or both, as was recommended? Is the Minister aware of his obligation under article 8 of the governing regulation, regulation 729/70, where he must recover all sums lost? If he fails to make an effort, the Exchequer, as in this case, must bear the burden rather than the EU which would otherwise assume liability.
The Deputy slightly misrepresented the point I was trying to make. In terms of the briefing I received, there is a view in the Department that the Deputy is confusing two separate types of Bureau Veritas certificates which were discussed at the Committee of Public Accounts. I made those points so that the Deputy might be relieved of any misapprehension he may have.
I refer to the Deputy's net point on recovery. Recovery of the disallowance which was imposed is unfortunately not possible. A huge number and variety of import proof documents from custom services and agencies around the world are received by this Department under the export refund system. The acceptability or otherwise of these documents must be judged on a case by case basis and there are few hard and fast rules upon which to rely. It is only at a stage when decisions have been made and acted upon and there is no legal recourse against the exporter that the Commission auditors pass their judgement on the decisions taken and can impose disallowances. The fact that a disallowance is levied on Ireland does not of itself give entitlement to recover any part of the disallowance from companies. Proceedings brought against companies must be based on a recognised course of action in Irish law and be proven in accordance with the ordinary rules of civil proceedings.The cause of action must be essentially related to alleged wrong doing by the companies concerned and, in this case, no fraud has been proven or alleged. The Commission did not relate the amounts given to individual exporters, files, consignments, etc., to any specific loss of Community funds.
I have heard that before but why does Mr. Cody of the Minister's Department, who has it as part of his duties——
What date was on that advice?
16 June 1994. Why did he recommend that the Department should recover same either from AIBP or BV or both? He is an expert in these matters if he works in the Department's trade mechanisms section. He does nothing else except this. He knows what he is talking about and that the money is recoverable under 729/70. It is nothing to do with Irish law but the obligation under European law.
Why are these companies consistently doing this? This is the third or fourth example I have given where export refunds were unduly or wrongly paid by the Department and the securities wrongly released, only for the Department to say that, although those people were improperly paid and enriched, the taxpayer can pay for it and those people can be allowed to keep the money.
Who was Minister for Agriculture in June 1992? It was not Deputy Yates.
No, nor was I Minister in 1991.
He was Minister when he released the securities.
I want to make it clear that those releases and the largest ever forfeiture in the history of the State, against the Goodman group, of which the Deputy will be aware, were put through every conceivable wringer of independent legal and financial advice and I am satisfied they could be put under no further scrutiny. I sent a lengthy, four page letter to the Deputy on 21 April about the Bureau Veritas certificates. I also suggested to the Assistant Secretary in the Department, Mr. Denis Byrne, that he should try and reach the Deputy, as these are very technical matters. We will try to improve on any information the Deputy has with which he is dissatisfied.Irrespective of what Mr. Cody advised or did not advise in June 1994, the advice now available to me at the most senior level in the Department is that there would be no winnable case for the recovery of the money and it would be putting good money after bad to pursue a case which would be unsuccessful.
Why did the Minister tell me on 26 March that there was only one Bureau Veritas certificate not signed by Mr. Gurney when I have since sent him three? Was that not misleading this House? Did the Tánaiste and Minister for Foreign Affairs, in reply to a written question on the same date, not say the same, apparently basing it on information from the Minister for Agriculture, Food and Forestry? It has been shown to be untrue and the Minister acknowledges that in the letter he sent to me. Why has he not taken steps to correct the record and apologise to the House for the wrong information given?
I understand the personal statement made by the Tánaiste, of which I was aware, reflected the Government position and, I thought, dealt with this point as regards the error which I regret was made.
When was the personal statement made by the Tánaiste?
I received a copy of a draft of a personal statement which he made to the House. He discussed it with me. I am not sure at what time he made it but I have a copy of it in my office.
To the best of my knowledge — I am sure I would have been told being the Deputy concerned — the Tánaiste has made no personal statement and has allowed the record to go uncorrected in respect of that matter and another in which I was given wrong information.
I will check that out but all I can tell the Deputy is that there was dialogue between the Departments of Foreign Affairs and Agriculture, Food and Forestry. An explanation was furnished to me by the Tánaiste for the error and the wrong information the Deputy was given and why that was so. I saw the draft of a personal statement which it was not my business to deliver. We had supplied further information to the Department. I do not know whether the Tánaiste subsequently delivered that statement or sent it by post to the Deputy. Perhaps it is with the Ceann Comhairle's office and I can check that out and let him know.
13 Miss Quill asked the Minister for Agriculture, Food and Forestry if he will report on his discussions with the European Commission regarding reductions in EU beef export refunds; if he will list each of the reductions which have taken place within the past 12 months; and if he will make a statement on the matter. [10765/97]
17 Mr. Deasy asked the Minister for Agriculture, Food and Forestry his views on whether the price being paid by the meat factories for cattle is inadequate; and if so, the measures, if any, he is taking to rectify the situation. [10772/97]
23 Mr. Davern asked the Minister for Agriculture, Food and Forestry the steps, if any, he has taken to restore export refunds in the beef and livestock sector which have been reduced by 17 per cent since 1 January 1997. [10742/97]
31 Mr. Davern asked the Minister for Agriculture, Food and Forestry his views on the situation faced by winter finishers in view of the fact that prices have dropped from 95p per pound in December 1996 to 80p per pound in April 1997, resulting in losses approaching £125 per head, due to factors totally outside the control of producers.[10743/97]
I propose to take Questions Nos. 13, 17, 23 and 31 together. I am very unhappy with the prices paid by factories for cattle at this time. The price is now approximately 10 per cent lower in national currency than this time last year.
The main cause of the current difficulties is the reduction of export refunds which has been brought about by the EU Commission in an attempt to stay within the GATT limits on subsidised exports. These limits have been put under further pressure in the past year due to a substantial fall in EU beef consumption arising from the BSE situation. This has significantly increased the surplus of beef on the Community market and made it more difficult to stay within the limits on EU subsidised exports agreed in the context of the last GATT agreement. The effect of these reductions in exports refunds on Irish producers has been exacerbated by the revaluation of the Irish agriculture conversion rate.
The changes in export refunds over the past years are as follows: 1 May 1996 — 12 per cent increase in refunds; 14 January 1997 — 10 per cent reduction in refunds; 26 March 1997 — 7.5 per cent reduction in refunds; 18 April 1997 — 5 per cent reduction in refunds for bone-in male beef, boneless male hindquarter beef and live exports of male cattle; 15 per cent reduction in all other categories, mostly female.
I have made strong and frequent representations to Commissioner Fischler regarding these cuts, most recently at the Council of Ministers meeting in Luxembourg earlier this week. I have emphasised the specific problems the Commission's approach has created for beef producers, especially our winter finishers, because of the heavy dependence of the Irish beef trade on third country markets. I have asked the Commission to abandon this approach and, instead, to manage the licensing system through the application of reducing coefficients. I stressed the importance in that context of reversing the recent reductions in export refunds and I am taking other actions to support market prices.
As regards reductions in cattle prices arising from the revaluation of the Irish agricultural conversion rate, I have already answered that question and pointed out the measures we intend to implement. I have also pointed out the adjustment to the deseasonalisation slaughter premium I secured last year which is worth £20 million or 7p per pound. I consider that extremely important in alleviating farmers' difficulties.
Is the Minister aware that the position reached with these constant reductions over the past 12 months of export refunds has been further exacerbated by the revaluation of the green currency? The losses suffered are not just the accumulated reduction in beef export refunds but are augmented by the green currency revaluation. All of it together has resulted in a disastrous situation in which there has been a serious fall in the price of cattle, many markets are closed at the same time and there is much less competition for cattle than one or two years ago. This is highly unsatisfactory. What does the Minister propose to do about it?
I am not sure whether the Deputy was here earlier. At national level I propose to pay £50 per head for every steer and heifer slaughtered from 1 April to 10 June which is the end of the DSP period. This will affect those who suffered most. After the latest revaluation on Easter Saturday prices dropped by 5p or 6p per pound. The £50 per head being paid for by the Irish taxpayer is separate from the £11 million which we will be paying in further compensation and results in a £184 million package over one year for beef.
I raised the matter of the export refunds. The cumulative effect of the cut in refunds would be approximately 25 per cent. The effect of the revaluation is about 6 per cent. This means a 30 per cent reduction in subsidies. The GATT quota is impacting severely. Consumption of beef in Europe is down by approximately 500,000 tonnes as a result of BSE.
If beef is not eaten in Europe and does not go into intervention, it must be sold outside Europe. The GATT quota is 1 million tonnes and it is declining each year. We carried forward 100,000 tonnes of unused GATT licences from last year. From now until the end of June there is only 16,800 tonnes left per week. If trade is to continue there must be an orderly disposal. Even since the refund cut last Thursday, prefixations for licences are 22,000 tonnes. Despite efforts to take the heat out of the demand for licences, we will find it difficult not to exhaust the GATT quota before the GATT year expires.
I have put detailed proposals to the Commission in relation to a different way of sharing the limited licences such as the application of a coefficient and the introduction of a differential rate of licence for non-transferrable licence so people cannot speculate on them. One would only take out a licence for what one was likely to export oneself. There is so little to distribute between now and the end of the GATT year that this will continue on a weekly basis. The latest cut should be enough to see it through this year. The Commission's management of the quota will have to be revised. It will be much tighter next year because the GATT quota will decrease by 220,000 tonnes.
Time is all but exhausted so brevity would help.
I congratulate the Minister for doing his best in difficult circumstances. The measures which are causing the collapse in the price of beef are beyond his control. The disastrous GATT negotiations concluded by the Agriculture Commissioner, Mr. McSharry, three years ago are responsible for the considerable reduction in export refunds which impact upon the price of cattle. People should bear this mind and stop being unfair to the Minister.
Are meat factories exploiting the situation, as generally perceived by the farming community? What additional moneys should they be paying in comparison to the present prices? Is it 2p, 4p or 7p per pound? What is the Minister doing to knock together the heads of meat factory proprietors who are trying to exploit the situation to their advantage?
I concur with Deputy Deasy. As a former Minister for Agriculture he knows the reality of the situation and his analysis is correct. The GATT deal agreed in 1993 set out the terms, coupled with the CAP reform. The CAP reform took away the safety net. When BSE struck in 1990, there was an intervention safety net. Nine out of every ten bullocks went into intervention. The safety net for intervention beef for Ireland is 72p per pound. It is not worth a damn to us.
The liberalisation of agricultural trade in the Blair House agreement has resulted in a situation whereby we are prohibited by a legally binding agreement from giving a subsidy, which was 64p per pound, to beef which we cannot sell in Europe. Once one reaches 1 million tonnes that is it, not one more ounce of beef can be subsidised.That is the difficulty because three out of four cattle in Ireland are exported to third countries.We are more dependent on that trade than any other member state.
There is no black and white analysis which will say to what extent the meat factories are responsible for the current low price. The factories need to answer certain questions. Regardless of the fact that they have 30 day prefixations at refunds before they are cut, why do they apply the cut immediately? If a meat factory has a consignment of beef which it is going to fill from something prefixed four weeks ago, why does it apply a price cut immediately even though the effect takes some weeks to work through the system? The factories must state whether they are profiting from the rapidity with which they apply the refunds.
The Minister should withdraw their licences if they do not play ball.
We do not have time for interruptions.
Farmers have always believed that when there is no live trade to compete with the mart, the meat factories seem able to collude in what appears to be a cartel in that there is no difference in the price they offer for Us, Os or Rs. Why is this? Some of them have business with Algeria, Saudi Arabia, the UK and so on.
The factories must also explain how it is that, with the same level of refund and intervention, there is such a discrepancy in prices between Ireland and the rest of Europe. Beef prices are 20 to 30 per cent higher on the Continent. We would supply most of those markets only with cow or heifer beef but why is female beef not more reflective of the price in the UK or the Continent?The meat factories have exacerbated a bad situation.
I will take my share of the responsibility but with BSE and GATT I am in the wrong place at the wrong time. I have to work through a system of trying to find compensation and stopgap supports in the most difficult circumstances.
Would the Minister agree that the management of the regime is the problem? Is he going to Cairo to reopen markets which were locked up to now? What is taking the Minister to Cairo if he cannot open the markets? Is the Libyan market closed? Is it not true that the factories will operate as a cartel because they are in a commercial environment and will pay the lowest price they can?
They are licensed by the State.
What is the point of the Minister's complaining? Impoverished beef farmers want to know what the Minister is doing about introducing a system of transparency. This would allow us to know whether factories should be paying 2p or 3p more or less per pound. For example, in the diary industry there was a lot of transparency introduced so that they had to pay the going rate. The House and farmers want to know what the Minister is doing to insist that factories pay the prevailing rate?
The Deputy will be aware that I was in Luxembourg this week and Agriculture Commissioner Fischler said to me that given the GATT quotas and that there are six weeks to run, Ireland could not seek non-existent refunds, and would have the same rate as any other member state. I proposed APS to deal with residual winter fatteners, 20,000 tonnes of beef, to raise prices in the short-term. However, when I returned this morning I discovered the meat factories will not operate APS, they do not want to know about it. There appears to be a conflict between the legally possible and affordable measures I am endeavouring to take to support prices which the Commission is examining, and which may or may not be accepted at the beef management committee on Friday next, and the meat factories concentration, not on reflecting producer prices but on their own returns.
Commissioner Fischler believes Irish meat factories bear some responsibility for the prevailing price here. While I do not suggest they should take all the blame, neither should they escape their responsibilities.
In relation to third countries, the same GATT quota would apply to live or dead exports, animals on the hoof or processed beef. While I am open to any suggestions on transparency, whenever the export refund is suspended or reduced, invariably one hears of some meat factories that had prefixations while others had not. Yet, when prices drop, they all pay the same, which smacks of collusion.
——or racketeering.
We are experiencing difficulties vis-à-vis three markets only, Egypt, Iran and Libya, because there were 73 cases of BSE here last year, compared with 16 cases only the year before. Had numbers continued to decrease we would continue to export to all of those markets. A number of countries were picked out — France, Portugal and Ireland, all next in league after the United Kingdom, which had 180,000 cases.
It is not a matter of lack of political, diplomatic or veterinary activity — the record speaks for itself. There is a direct relationship between BSE cases and difficulties in the markets. Whenever the incidence of BSE decreases here our exports are more readily accepted. On Wednesday last our BSE eradication plan was endorsed by the standing veterinary committee, comprised of the chief veterinary officer in each of the 15 member states, in respect of which we will receive refunds from Brussels. That is an endorsement of ours being the most stringent and effective BSE eradication plan in Europe.
