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JOINT COMMITTEE ON AGRICULTURE AND FOOD díospóireacht -
Wednesday, 12 Feb 2003

Vol. 1 No. 5

Finance Bill 2003: IFA Presentation.

I welcome to the meeting the representatives of the IFA, Mr. Francis Fanning, Mr. Walter Crowley, Mr. Gordon Johnston, Mr. Pat Hogan, Mr. Ken Bryan, Mr. Harvey Jones and Mr. Jim Devlin, who represent the national industrial and environmental committee. Before asking Mr. Fanning to commence his presentation, I draw to his attention that while the comments of members are protected by parliamentary privilege, those of visitors are not so protected. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make the official identifiable. I invite Mr. Fanning to make his presentation to the committee.

Mr. Francis Fanning

Thank you, Chairman, for the opportunity to address the committee. There were a number of changes in budget 2003 with regard to roll-over relief which we feel were very unfair. Prior to that, roll-over relief was available to anybody whose land or business was compulsorily acquired by any local authority or the National Roads Authority. In budget 2003, the goalposts were shifted. A deal had been agreed between the IFA, the National Roads Authority and the Department of the Environment and Local Government on a new system for compulsory acquisition of land. In that deal, any of the existing systems in place for CPOs and tax reliefs were to continue, as the IFA understood it. However, in the budget, the roll-over relief - not just with regard to CPOs - was done away with.

This is unfair, especially where land is compulsorily acquired. A farmer does not have the opportunity to decide whether to sell the land but is told that it is to be taken. It is a difficult situation, as is the position of farmers with fragmented farms or those who end up with a fragmented farm after compulsory purchase. It would be difficult for them to consider realigning their farms in their own areas or elsewhere. The people worst affected by it are those with fragmented farms. They will find it not only difficult but impossible in the future to move to a different location or to buy additional land. In the end it is those farmers who are affected by compulsory acquisition who will also be affected by the abolition of roll-over relief. We have with us a number of farmers who will be badly affected by CPOs and will not have the opportunity to re-invest their money in land. If a person chooses not to re-invest in land or whatever it was always the case that he or she would pay the tax on it. If he or she wanted to continue in the business of farming, as agreed in the budget of 2002, he or she could invest in good will in any business. It has been suggested that would not apply in the budget of 2003.

Thank you, Mr. Fanning. Do any of the other members of the group wish to contribute at this stage?

Mr. Gordon Johnston

I will give a rough outline of how I am affected by this road. My farm is a bit fragmented but I am fortunate to have 60% of my land in one block. The road coming through it will split it in three. From the beginning I said this was a disaster. It will also take the farmyard. The whole fabric of the business is going to be destroyed. From the beginning I said I would sell and relocate somewhere else, but these new regulations have knocked that idea on the head. When confronted with the road I expected hassle, extra work and considerable disturbance. It is like winning the Lotto, one's name comes out, there is nothing one can do about it and someone has to take these roads. However, I did not expect to be financially penalised. I would liken this to one's car being rear-ended in a town. One has no choice, one did not ask for it to happen and yet someone comes along and imposes a tax on one's compensation. There is no difference in what is about to happen to me and what happens to those who are rear-ended. Their compensation should not be taxed. Farmers should be treated sensitively on this issue and the boot should not be put in at a sensitive time.

The IFA is running a good CPO support service and I happen to be the chairman of the local IFA group. There is a significant backlash from farmers on the ground about this matter. They are vulnerable and are not being treated sensitively given that the Government proposes to tax them on something that is not of their making. People will find it hard enough to deal with this road without having to deal with the tax issue as well.

On the deal referred to by Mr. Fanning, I was one of those who travelled around the country recommending its acceptance. We had an expectation that the capital gains tax and roll-over relief would remain the same through the NDP; it was a legitimate expectation. There is egg on my face. To a certain extent the IFA has been discredited because of this. We did the deal to the best of our ability and now, as far as I can see, it has gone wrong.

I am from the village of Horse and Jockey, north Tipperary, and I am a dairy farmer. I already own a fragmented farm. I have a milk quota of 62,000 gallons and milk 54 cows. I milk those 54 cows on a block of 57 acres - 42 acres owned and 15 acres leased - and produce a 62,000 gallon milk quota. I own 27 acres on the other side of the N8 which are not suitable for grazing dairy cows as it is a busy road. I also own 33 acres, two miles from my home, and lease another 20 acres. The block of 57 acres is being divided by the proposed motorway. The leased 15 acres is also being divided by the motorway and the other leased 20 acres is divided by the motorway. When the motorway goes through my five pieces of land I will have seven pieces of land. While I am already a fragmented farmer I will be further fragmented. If I am to continue dairy farming I will not have a block any bigger than 25 acres with farm buildings in which to milk my 54 cows, so I have no option but to relocate. All my buildings are on the home block of 57 acres - 42 acres owned, plus 15 acres leased. My only option if I am to continue in dairy farming is to relocate.

I am one of those farmers who hope to be farming post-Fischler. I have a son who is doing his leaving certificate this year and who is enthusiastic about farming and wants to join me on the farm. He will attend an agricultural college later this year. It is absolutely essential for me to have roll-over relief. If I am to continue dairy farming I have no other option but to acquire another piece of land - another block that will carry at least 54 cows. The piece of land with the farm buildings - milking parlour and dairy unit - will have only 25 acres accompanying it. Dairy farming would be out for me without acquiring a new block of land. It is essential for me to have the roll-over relief. The compensation I will get will have to be added to and I will have to borrow money to acquire another piece of land, let alone pay tax in the form of capital gains. I will have no gain, I will have a loss, so I could not pay capital gains tax. Therefore, it is essential for me to have roll-over relief.

Mr. Ken Bryan

I am from Kildare. I am on the family farm and we have farmed it for in excess of 50 years. It is being affected by the Dublin-Waterford road and is being divided diagonally. I do not want to sell the land, I need every acre I have, but I do not have a choice. It is all happening under a compulsory purchase order. In that scenario I would expect to be compensated at least for the land taken but that is not the case. I am being hit for 20% inheritance tax and 20% capital gains tax. In effect, the Government is stealing my land for 60% of its value. Is that fair? How would one feel if the Government took one's house and offered one 60% of its value? Would that be fair? This is not just a piece of land, this is my livelihood and my family's livelihood. We have to live on it.

Mr. Walter Crowley

I am chairman of the IFA national farm business committee. We were absolutely stunned when we heard this news filter through. Three gentlemen have clearly outlined their opposition individually. As regards the CPO there is no incentive for the farmer who wants to farm. If I am a farmer and get €50,000 for two acres of land and go down to the pub to drink it, that is my own business. However, for my neighbour who wants to invest it in his farm there should be an incentive and there has to be an incentive. If a farmer wants to purchase some land and goes to the land market, his or her biggest opposition is an industry that does not have the same tax problems as farming. That is an issue that has to be changed. It is important that if a farmer wants to invest in his or her farm, allowances should be made. Roll-over relief has to be put in place for those people who want to stay farming but for those who do not want to stay farming, that is another day's work. For people who want to stay farming it has to be put in place.

The other issue I want to touch on is the capital allowance. The changes in the capital allowance were a move in the wrong direction especially for agricultural contractors on whom farmers are so dependent. An agricultural contractor with eight year old machinery on the road would not be in business. Obviously the changes are a move in the wrong direction.

Indexation will not affect us this year or maybe even next year but I guarantee that in five or ten years we will have major problems, especially in the transfer of farms to younger generations.

I thank the IFA representatives for coming here to make their submission. I will have to leave shortly because I have to attend a function in town at which I agreed to speak. I apologise for that.

Mr. Crowley mentioned some other issues but this is the main issue for farmers, and it is the main issue in the budget. I am in favour of infrastructural procedures going ahead although I realise the taking of land is very difficult for people. I have been involved in many difficulties over roads in my constituency of Wicklow when there have been agreements with farmers. People may say it is easy to comment when one is in Opposition, but it is inherently unfair that someone has to pay tax when disposing of an asset against their will. I understand where the Minister is coming from in general. He has reduced capital gains tax from 40% to 20% and has sought to close off the loopholes - "reliefs" would be a better word - but he has provided for an exemption in the case of sporting organisations in the Finance Bill. I hope the Government members present will use their influence between now and Committee Stage of the Finance Bill to encourage the Minister to bring in some measures to redress the problem that arises when land is acquired for infrastructural projects so that the rollover relief would be applicable. It is imperative that is done. It is not a case of considering compulsory purchase orders; it is better if there can be agreement on assisting the movement of these projects. I call on the Minister and his colleagues to examine cases where land is being acquired for infrastructural projects and make the rollover available. We hope to put down an amendment on Committee Stage to that effect and we are currently examining the wording of the amendment.

I thank the IFA representatives for coming in to make the presentation. I appreciate the difficulties they are experiencing in regard to this issue and the importance of it to them.

I want to address a point made by Mr. Hogan. I gather from what he said that this measure will have a significant impact on young farmers and that the younger generation, who will find it difficult to be engaged in farming, will find that it almost impossible now if this type of fragmentation were to be extended. Will Mr. Hogan comment on the impact it would have on young people coming into farming? I appreciate Mr. Hogan's difficulties and we will do our best in that regard.

Along with my colleagues I welcome the deputation and thank them for both their written submission and the presentation they made. The size of the delegation and the serious nature of their contribution emphasises the vital importance of the issue they raise with us. I appreciate the concerns they expressed and I hope we can have some influence on the matter.

Coming from Kildare, like Mr. Bryan, I appreciate the enormity of the impact of these major road projects on farmers because in Kildare we have had the N4, the N7 and we may have the controversial N9. In terms of the work done in the past, the National Roads Authority has worked closely with the farming community to try to resolve the difficulties as best it could. From my own experience around the N7, with the bypass of Naas, Newbridge, Kildare and now Monasterevin, farmers in general have been reasonably satisfied with the eventual outcome but I am aware of the trauma it causes initially when one discovers that one is likely to be impacted upon, and the long delays that ensue between that discovery and eventually getting compensation. I appreciate it will cause enormous difficulties for people if this issue is not addressed but we have to live in the financial climate in which we find ourselves.

I note from the written submission that the IFA has written to approximately 6,000 farmers on the affected routes. Could we have more realistic figures of what the representatives believe to be the actual number of farmers who will be affected by these major capital projects? Have they any experience or idea of the percentage of those farmers who would be likely to want to reinvest in agricultural land or other benefits and hence avail of the rollover tax were it to be restored?

I, too, thank the IFA representatives for their presentation. In another life I was a farmer and I spent two hours last Saturday week with the IFA delegation in Waterford and brought from them a submission to the Minister. I sympathise with the position in which the delegation members find themselves, which is very difficult. We find ourselves in an awkward financial position here but along with my colleagues I will certainly put their case to the Minister. The case made about the farmer who wishes to reinvest should be examined. We will put the case made by the representatives as forcibly as we can to the Minister.

Along with my colleagues, I welcome the IFA representatives. I have first-hand experience of this problem because my own farm in County Mayo was fragmented by the N17 and I know all about the pain involved. At that time there was no talk of roll-over relief or tax exemptions so I can sympathise with what these farmers are going through, including the mental torture of the farm being fragmented. I will bring the farmers' views to the attention of the Minister. We felt that we were hard done by and that we had to pay tax when we did not want to sell, and it is terrible to have three or four acres of a farm on the far side of the road and it is next to impossible to cross it. There is no compensation for that. I assure the representatives that I know at first hand what they are describing.

I welcome the delegation. I listened to their views and I sympathise with them in that regard. I want to refer first to capital allowances on machinery. I was taken aback in that regard because we stress the importance of health and safety but if we have machines that are eight years old, we cannot have regard to health and safety. Mention was made of silage cutting, harvesting, etc. but we all know that these machines deteriorate rapidly. I cannot say what will happen but this is an issue of major concern. We fought for capital allowances on the basis of modern equipment and farmyards but this is a retrograde step from a health and safety point of view. We are aware of the difficulties at farm level, the number of accidents taking place and the rigid approach taken by the Health and Safety Authority towards farmers in terms of them not having machinery up to date.

On the question of the severed land, Mr. Hogan painted a gloomy picture of what will happen to him in that regard. Ireland has a history of severed land and difficulties in farming but with the growth in the economy over the past number of years, it has become very difficult to farm land in a number of areas which did not experience any problems in the past.

Will Mr. Hogan indicate if the council is interested in buying all his land or will it give him a replacement farm because his land is extremely severed? It is obvious that Mr. Hogan is a very enterprising farmer. I sit on the finance committee which will deal with these matters and we have to be realistic about these issues. Knowing the Minister for Finance, Deputy McCreevy, it will be difficult to get him to turn back on this issue. He is fairly rigid on other issues not necessarily related to agriculture and as the representatives will be aware, the State finances are part of the problem, although I realise they will say there is a pay-back in terms of what they do. The Finance Bill will be introduced in the House shortly, with Committee Stage being taken on 25, 26 and 27 February, and all these issues will be decided at that time although I do not know what will be the outcome. Apart from meeting this committee this evening, I understand the IFA has been in negotiation with the Minister also.

I realise the difficulties in this regard in the partnership talks because I am aware of the financial crisis in farming and the current position rather than the position vis-à-vis the Fischler proposals. There is a crisis in farm incomes. I sympathise with the IFA on that and I have been supportive of its efforts. This issue is part of the package it wants considered - as well as many other issues which are not relevant to this discussion - in the partnership talks. We have a fight on our hands to bring about any change in this regard. I would be to the fore in supporting the IFA's efforts and endeavours, but I gather the road ahead will not be easy. There is a strong case for the depreciation proposal based on the age of machinery. That is my tuppence worth to add to what the IFA has put forward. I will leave it at that.

I am also affected by this situation in that my land on the M3 will be divided. Rather than having three sections of land, I will have four. I understand from where the Deputy is coming. This development may not affect me, but it will probably affect my son in years to come, if he were to buy land and reinvest. As Deputy Ó Fearghaíl said, how many farmers does the IFA consider will reinvest and how many will not? Naturally, many will not reinvest. I have great sympathy for farmers, such as Mr. Hogan and others, whose farms will be fragmented as a result of this measure. We will continue to do all we can to bring about changes in this regard.

Mr. Jim Devlin

I thank the members for the opportunity to present our case to them and for their comments. Members will note from the title of the paper we prepared that we are dealing with those worst affected by such developments. We have never made a claim that large numbers of people affected by such road schemes will reinvest in the purchase of land or that the impact of this will involve a significant cost to the State. There is a spectrum in regard to the impact of such developments. Some people will be minimally affected, others will be moderately affected and others will be the worst affected. The people whose farming business will be worst affected by the impact of compulsory land acquisition and who are committed to staying in farming, as my colleagues are, are a minority. My colleague, Harvey Jones, will outline some of the numbers, as this issue was raised by Deputies Ó Fearghail, O'Keeffe and others.

The issue is that there is a small gain to the State as a result of the compulsory acquisition process compared to it having a significant negative impact on committed farmers who are badly affected by it. That is our case and that has been our case since the budget announcement on 4 December. As Gordon Johnston outlined, this issue will not go away. There is a great deal of resentment in regard to it. Members will note from Harvey Jones's comments that many people are affected by road developments, but only a subset of those will want to reinvest in the purchase of land to continue in farming.

Mr. Harvey Jones

I am working at the coalface in that I am managing the CPO support service offered by the IFA to affected property owners. There are currently some 6,000 property owners on my database who are affected by road schemes. The total number of current projects across the country is 126. We only include property owners on the database once a route has been selected. As members are probably aware, in the case of a large number of schemes the route has not been selected and, therefore, the property owners who will be affected by them have not been determined. A conservative estimate of the number of other property owners who will be affected by road schemes is 2,000. That makes the total number of property owners who will be affected by the national development plan approximately 8,000. I have not included those property owners who are affected by the secondary road schemes. Therefore, we are dealing with a large number of people and their families who are affected by road schemes.

As to how we can ascertain the number of people who will reinvest their compensation award in the purchase of land, currently we have only three schemes going through the process under the IFA roads agreement. They include the Kilcock to Kinnegad scheme, the Ennis bypass and the Heath-Mayfield scheme, commonly known as the Monasterevin bypass. I have held clinics and we have held many farmers meetings to guide the people affected through the process. We have not got a handle on this issue yet, because it is early days. However, I would say that 15% to 20% of property owners who are affected would reinvest in the purchase of land. I could do a further analysis on how many people reinvest locally.

Mr. Walter Crowley

Many farmers who are affected will not necessarily reinvest in the purchase of land. Many of the farmers who were awarded compensation for the acquisition of the lands for the construction of the Piltown bypass upgraded their farms. Some put in place a slatted unit or replaced a machine. They made life a little easier for themselves. Those people who want to stay in farming are the ones we need to look after. I am not talking about farmers with 40 to 50 acres who lost only two or three acres. In this context, it would be enough for those farmers affected to upgrade their farms rather than having to go to the marketplace. Therefore, it is important to keep those farmers on board.

Deputy Upton referred to this measure affecting young farmers. Young people who have come into farming in recent years are committed. Older farmers may have come into farming as a result of being the eldest son, the youngest son or the only son who remained on the farm and they may not have been committed. However, people who came into farming in the past ten to 15 years are committed. They have gone to agricultural college and got green certificates. They want to continue in farming and to expand their farming activity rather than contracting out some of their business. Many of those affected will lose, on average, only five acres. People talk about the amount of money they will get per acre in compensation, but the issue is the practicality of working one's farm having regard to the impact of the damage as a result of the severing of the land, rather than the number of acres one has lost.

Deputy O'Keeffe asked whether the county council has offered to purchase all my land. It would not entertain that under any circumstances. I was keen to purchase a farm that came on the market during the year, which would have suited me to develop as a dairy unit. I put that proposal to the council, but it would not entertain it under any circumstances. It is frustrating to see that type of activity.

A neighbour rang me at about 5 p.m. on 3 December - budget day - to tell me this provision was in the budget. I was devastated to hear about it. I could not work on my farm the day after because I was shocked and I, along with some of the gentlemen here, was involved in negotiating the deal that was done with the Department of the Environment and Local Government in November 2001. I was one of the negotiators who was reluctant to accept the deal at that stage, but a democratic decision was made and we accepted it. We promoted the deal that was done with the Department at local level. It was a reasonable deal.

Some members asked how many farmers we consider will avail of roll-over relief. With the way farming is going, I do not believe many will avail of it. Many farmers will take the money and run because of the low income in farming. I am one of those farmers who hope to continue in farming post-Fischler. I hope to survive in farming. My accountant tells me that I am in the top 5% of dairy farmers in the country in terms of efficiency. I hope to be able to survive in farming due to my efficiency. However, I am going to be damaged as I have outlined because I have seven fragmented pieces of land. I can give an example. I am currently operating four cattle crushes and I have four electric fences. If all my land was in one block, I would need only one cattle crush and one electric fence. Will I need seven electric fences and seven cattle crushes?

Mr. Fanning

I wish to point out to the Government Deputies that under the last partnership agreement, fair and speedy implementation of CPOs was promised. Fair meant fair for the farmer and speedy was meant for the NRA. It meant speedy implementation so it could get the road programme 2000-06 implemented. There is a principle in compulsory purchase orders which provides that somebody is no better or no worse off. We have indicated that in several of the cases we are representing here and, indeed, in many other cases, farmers will be worse off. That is not fair. It is speedy but not fair.

The Government cannot and will not be allowed to forget its commitment under the previous partnership agreement. The Government might plead that it is due to the budget but it is wrong and we will be coming back to it. When the Deputies are making the case to their Minister, they should remind him of the last partnership agreement and the fact that a deal is a deal. We will return to remind them of that if they do not recommend an alteration in the Finance Bill for people who genuinely want to remain in farming and re-invest their money in it.

I suggest that the committee forward a copy of the presentation to the Minister for Finance. We will highlight your concerns about changes in the capital gains tax roll-over announced in the budget. Is that agreed? Agreed. I am sure more representations will be made to individual members. We will use every lever to see if this can be changed.

I thank Mr. Fanning and the other representatives of the IFA for their presentation and their responses to our questions. Usually only one delegate speaks on behalf of a delegation but today every member spoke. The delegation is more than welcome to come before the committee again whenever it considers it necessary. We tried to facilitate you swiftly with this meeting because of the urgency of the matter.

Sitting suspended at 6.05 p.m. and resumed at 6.10 p.m.
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