I thank the Chairman and his colleagues. It is good to have the opportunity to discuss the early retirement scheme. We are all aware that the survival of agriculture requires restructuring and having as many young people as possible involved in farming. In the recent CAP reform and WTO negotiations, it was obvious there is a major competitive element in farming. We all talk about operating in a global economy and we depend on being as competitive as possible.
There is an imbalance in the age profile of Irish farmers, with up to 47% of farmers older than 55 years of age and 11% younger than 35 years of age. The size of farms in Ireland is quite small relative to our competitors. For example, only 3.5% of farms are over 100 hectares, with 39% of farms over 30 hectares in size. The average sized farm in 2003 was 32.3 hectares and 51% of farms are less than 30 hectares.
Restructuring is needed. In 1994, one of the accompanying measures of the CAP reform was the early retirement scheme, which played a key role and has been availed of by many farmers. From 1994 to 1999, in excess of 10,000 farmers availed of the scheme, which facilitated a transfer of more than 250,000 hectares of land to younger farmers. The second scheme was less successful, with only approximately 100,000 hectares of land being transferred by approximately 3,000 farmers. There was a number of reasons for the slow-down in uptake among those reaching retirement age, including the pension rate, the age factor and the Fischler reform, which had a major effect in that farmers were left in an uncertain situation.
During the mid-term review of the 2000-06 scheme by the Department, the IFA made proposals on what needed to be done and also made a submission to this committee. We highlighted the difficulties, the major one being that there has never been indexation of the pension, with other difficulties being the age of the transferee, which was reduced, the off-farm income criteria of transferees and the unit limit of transferors. Also, something of a bad taste was given to the scheme in the early stages. The advice from the Department of Social Welfare to people taking part in this scheme at the early stage was very poor in terms of how it would affect other pensions to which they were entitled.
The 2003 CAP reform resulted in entitlement to single farm payment being established by farmers. The payment was linked to the reference years 2000-02. We made representations to the Department and a number of concessions were achieved for people who availed of retirement. These were people who retired before the reference period, especially people who were not in a position to transfer to a family member. In the case where, on the expiry of the lease, a family member could come in, they would be entitled to the single farm payment. Then there was the case of individuals who retired during the reference period and the farm had been inherited by gift. The new farmers received the entitlements established by the person retiring at that time or immediately after. The retiring farmer could establish entitlement under the private contract clause, where the claim would be put on hold until such time as the land came back into the use of the farmer. These concessions sorted out some problems, but we have to look at the broader picture. A deal was worked out in the partnership negotiations regarding European and national funding for the rural development plan 2007-13. One element of the agreement was that there would be an increased pension and the off-farm income for the transferor and the transferee would be made more suitable.
It was agreed that under the farm development scheme the early retirement programme would include the following: increasing the maximum pension to €15,000; restructuring of the calculation of the pension to ensure front-loading to facilitate people who would not have have the number of hectares to qualify; and increasing the age of the transferee to 45. This addressed a major problem. In the first and second early retirement schemes, people who were transferees found that when their ten-year leases were up they were outside the age category, but were under the age for early retirement. People who are or have been transferees will be allowed to be transferees up to the age of 50. That is necessary. The view could be taken that they should be allowed to have land available to them up to the age of 55 or 56.
The off-farm income for the transferee is to be €50,000. There is no upper income limit for the transferor, except that he or she has to show for the year prior to retirement that his or her income from farming represented 25%. In the case of land transfer, the holding of the transferee must be, in a non-disadvantaged area, a minimum of 20 hectares, or 15 hectares in a disadvantaged area. In regard to any land transferred through lease or outright transfer from 1 January, the transferor and the transferee will qualify for the retirement pension, provided they meet certain conditions.
A number of matters have to be thrashed out and flexibility is essential. We have to look at the broader picture relating to farming and early retirement. Youth installation aid and early retirement must be dealt with together. Tax concessions relating to stamp duty must apply flexibly to facilitate young people to enter farming. If a young person inherits a farm and transfers acre for acre to consolidate, there is a difficulty regarding capital gains. That problem needs to be addressed because there is no point in talking about consolidation while it is being made difficult. There has been an increase of 57% in youth installation aid, bringing it up to €15,000. Indexation is essential to make this aid and the pension more positive. There is also a 10% extra farm modernisation grant for people qualifying for installation aid.
Farmers used to be fairly conservative. They dealt with sheep, cattle, dairy and tillage. Younger people are more enterprising and many of them would like to diversify. A farmer who decides to afforestate part of his land can consolidate his entitlements. That same provision needs to apply if a farmer wants to go into an enterprise where some of his land is not available for forage. He should not lose entitlements if he wants to establish an alternative enterprise, which might not begin to pay for five or six years. In a disadvantaged area he would lose that payment anyway if he did not have the forage area. In the single farm payment it can be consolidated.
We need to consider how best to maintain farming as an industry and attract young people to it.
