I thank the Chairman, and congratulate him on his appointment as Chair of the committee, and Senator Lombard on his appointment as Vice Chairman. It is good to see so many colleagues here today. I mention, in particular, my colleague, Senator Paul Daly. There are many new members here and many who made significant contributions to the previous committee. As this is the first time I have attended a committee meeting since my appointment as Minister, I wish to acknowledge the good work of the previous committee Chairman, former Deputy Pat Deering. I will make an opening statement and will then take questions from committee members. I thank all the committee members for their invitation to attend today.
We have all been faced with an unprecedented challenge in the form of Covid-19 in recent months. In the context of this pandemic, human health must be the absolute priority. The agrifood sector is critical to maintaining food supply chains, from farm inputs right through to retail distribution. Activity within the sector is deemed essential and, therefore, the sector has remained in operation since the lockdown in March.
In terms of economic impact, while production was not significantly impacted, the demand for Irish food and drink products was subject to market disturbance. Ireland exports some 90% of the food we produce and the food service industry across Europe, and beyond, experienced a near total collapse in demand due to the shutdown of the hospitality sector. This has also affected beverages, Ireland’s third biggest export. While food retail demand increased, it did not offset the decline in food service demand.
That demand imbalance had, and is still having, significant consequences for primary producers and agrifood businesses. In the first few months of the pandemic, there were lower prices across all commodities. While these have stabilised and risen in some cases, they still remain relatively low, especially beef prices. Live exports of cattle were severely affected earlier in the year, particularly the export of calves to continental Europe in the spring, because of the collapse of food service demand for veal on the Continent.
Exports of agrifood dropped by 11% for the month of April but have since partially recovered, with exports for the first seven months to the end of July dropping by just 1.9% in value compared to the same period last year.
Exports of agrifood to seven of our top ten destinations are down, with the largest decrease in countries where Covid-19 has been most severe. Exports of beverages are down 17%, exports of fish are down 11%, while beef exports are down 8% in value to the end of July. In contrast, dairy exports have increased 6% in the same period.
My Department and its agencies worked with all the agrifood stakeholders to ensure the sector, as our largest indigenous industry, was considered as part of the ongoing whole-of-government response. In addition, specific supports were put in place, such as a scheme of aids to private storage under the Common Agricultural Policy for certain dairy products, a €50 million beef finisher payment to provide support for beef finishing farms which were severely impacted by reduced prices and reduced slaughterings, a Covid-19 voluntary temporary fleet tie-up scheme for fishing vessels, and various other supports and flexibilities under schemes managed by my Department. The July stimulus package included an increased capital allocation of €17 million to the Department for the Howth fishery harbour centre, an additional allocation for on-farm renewable energy investments, and investment in a large-scale habitat restoration project by Coillte.
Farmers, fishers and food businesses also benefit from access to the Government’s liquidity and investment responses to Covid-19 impacts, including the expansion of the future growth loan scheme for capital investment and Microfinance Ireland loans for working capital. I was pleased to be able to launch, with my Government colleagues, the Covid credit guarantee scheme, which is supporting working capital lending to SMEs, including farmers and fishers. In addition, food businesses are eligible for the Covid working capital loan scheme, as well as for Enterprise Ireland supports to maintain business continuity and liquidity. Bord Bia has provided an additional €1 million Covid-19 response marketing package for food businesses to accelerate e-commerce and expand marketing activities.
The beef finisher payment scheme was a one-off, Exchequer-funded grant aid scheme under the Covid-19 state aid temporary framework. The objective of the scheme was to provide support for beef finishing farms which had been severely impacted by the economic effects of the Covid-19 pandemic. The measure, with an available fund of €50 million, targeted support for beef finishers who slaughtered animals between 1 February and 12 June, the most pronounced period of market disturbance. This targeting was in recognition of the fact that beef finishers who slaughtered animals in this period bore the most severe impact of the market disturbance caused by the sudden closure of food service markets across the EU during the Covid-19 pandemic. Support for beef finisher enterprises will ensure that beef farmers, along with other enterprise types such as suckler farmers, will be able to maintain routes to market for their product.
The Department and its agencies, in consultation with stakeholders, continues to monitor the impacts on the agrifood sector as the situation evolves, and it will seek to provide appropriate supports to the sector.
My Department is contributing to the whole-of-government response to managing outbreaks of Covid-19 in food plants. The resilience and recovery plan for living with Covid-19 sets out a number of important actions for my Department. It will work collaboratively with other Departments and agencies and other stakeholders within the sector to ensure that standards of compliance with Covid-19 protocols are maintained in order that food production can continue safely. This is essential for the well-being of our population as a whole. This collaborative approach between regulators, employers and employees, together with personal responsibility, will be key to maintaining safe operations in all workplaces throughout the country.
My Department is participating in the HSE-chaired national standing committee on high-risk settings, which meets on an ongoing basis to review existing protocols and compliance measures and to identify any additional control measures required. It is also supporting the HSE and the Health and Safety Authority in monitoring the effective implementation of all relevant Covid-19 guidance in Department-approved food plants. Findings from these inspections suggest that compliance with these Covid-19 protocols is generally very good. As well as the over-riding public health priority, it is in the interest of the meat industry to ensure its workers are protected and that all appropriate protocols and advice are fully implemented.
The Government decided in August that the HSE should implement a programme of serial testing of workers in food plants and other large businesses. The first cycle of this serial testing programme is due to be completed by the end of this week. As of last Friday, 2 October, 24,824 samples had been tested under the programme, with 101 positives detected, giving a positivity rate of 0.41% - a rate lower than the current rate in the general population. However, there is no room for complacency, and my Department is continually engaged with industry to ensure that basic measures, such as physical distancing and use of personal protective equipment, PPE, are being implemented correctly.
International evidence has shown that meat plants are at particular risk of outbreaks. My Department is leading research on the environmental and operational factors in meat plants which may influence the transmission of Covid-19, and looking, for example, at such aspects as ventilation systems and the recirculation of chilled air in plants to identify and address these risk factors.
Much commentary has concerned wider factors in respect of employees in the food industry, such as shared accommodation and transport and sick pay and other employment conditions for workers. I welcome as a very positive step the code of practice agreed by Meat Industry Ireland, MII, and SIPTU for the safe management of staff in the primary meat processing sector during the pandemic.
My Department is engaging with the ESRI to scope a research project to examine some of these wider issues. Meanwhile, if employees, or their representatives, have any specific concerns regarding employment conditions they should contact the relevant statutory agencies, such as the Health and Safety Authority, the Workplace Relations Commission or the Department of Employment Affairs and Social Protection, as appropriate.
In addition to the challenges associated with the pandemic, we are facing a difficult period ahead with the Brexit deadline approaching and an increasingly volatile and unpredictable international trading environment. Regardless of the outcome of the EU-UK negotiations, several outcomes are already clear. In less than three months, the UK will be outside of the EU Single Market and customs union. Notwithstanding the significant amount of preparation already completed, some degree of delay in the movement of animals and goods will be inevitable. There will also be inevitable changes to the Irish agrifood industry from 1 January 2021, with new customs and regulatory requirements, including sanitary and phytosanitary, SPS, checks for importers of agrifood products from Great Britain.
For exporters, export certification requirements for the movement of goods to Great Britain will be introduced by the UK on a phased basis from January 2021. Complying with customs and regulatory requirements will increase the cost of trade and result in delays in the movement of goods, although every effort will be made to ensure the minimum possible disruption to trade flows and supply chains. Any business that moves animals and goods to, through or from Great Britain will be subject to a range of customs formalities and SPS regulatory requirements that do not apply to such trade today. It is essential that businesses, no matter how small, take immediate steps, if they have not already done so, to understand the impact these rules and processes will have on their operations.
With less than three months until the end of the transition period, time is short and prompt action is required. Planning and investment are required, and this is not something that can be left to the last minute. Importantly, many of these changes will not apply to trade between Ireland and Northern Ireland. On 9 September, the Government launched an updated Brexit readiness action plan and a new communications campaign for businesses. The Government has put in place a range of business support and advisory services, and we will do more as needed. Updated Brexit legislation is also being progressed.
The Government's July jobs stimulus included a €20 million Brexit fund to help small and medium-sized enterprises, SMEs, that trade with Great Britain to put in place the staff, software and IT systems to be ready for the new customs arrangements from 1 January 2021. A new ready-for-customs grant is available from this fund through Enterprise Ireland, which will provide up to €9,000 per eligible employee hired or deployed within a business in a dedicated customs role. Customs training and supports are also available from Skillnet Ireland, Enterprise Ireland and the local enterprise offices, LEOs, and other organisations, including Bord Bia.
The Government will continue to intensify outreach to stakeholders in the coming months. The Revenue has written to all businesses that have traded with the UK to remind them of the need to prepare for Brexit. These letters included a specific notice from the Department of Agriculture, Food and the Marine for relevant companies trading in agrifood products. As part of the whole-of-Government approach, my Department has been preparing for Brexit for more than four years so as to be as ready as possible for all Brexit scenarios. The focus has been on infrastructure at ports and airports, staffing, the development of robust IT support systems and communications with stakeholders.
My Department has ensured that financial and budgetary measures were put in place to help the agrifood and fishery sector over the last four budgets. These measures were aimed at enhancing competitiveness and market and product diversification, and included low-cost loan schemes, supports for Bord Bia and Teagasc, direct support for farmers and capital funding for the food industry. The former Minister, Deputy Michael Creed, previously led an intensified series of trade missions to develop and grow new markets in light of Brexit, and this important work will continue, albeit perhaps virtually, of necessity, for the time being.
I will ensure that all supports are kept under review to help the sector prepare for and adapt to a new reality post the transition period. I welcome the multi-annual financial framework, MFF, agreement reached in July, which includes a €5 million Brexit adjustment fund for those member states most affected by Brexit. I will work to ensure that the agrifood sector gets a significant allocation from that fund.
Bord Bia has published an updated Brexit action plan. This complements the Government's Brexit readiness action plan and serves as a deep dive into the actions required specifically by food and drink manufacturers in preparation for 1 January 2021. It covers actions required in respect of customs operations, sanitary and phytosanitary, SPS, measures, supply chain issues and finance arrangements.
So far, there have been nine negotiating rounds in the EU-UK future relationship negotiations. The ninth negotiating round took place last week against the backdrop of the publication by the UK Government of the Internal Market Bill and the issuing by the EU of a formal notice to the UK for breaching its obligations under the withdrawal agreement, which marks the beginning of a formal infringement process against the UK. Time is growing short and a no-deal outcome is not in anyone's interest. In the absence of a free trade agreement between the UK and the EU, tariffs would apply to agrifood trade between Ireland and the UK, excluding Northern Ireland. The EU's common external tariff regime will apply to imports from Great Britain to Ireland and the UK's global tariff regime will apply to Irish exports to Great Britain. This analysis is very stark for the agrifood sector. In the period ahead, Ireland will continue to work as part of the EU27 to ensure that our collective approach to these negotiations reflects our values and interests.
Together with my colleagues across Government and our EU colleagues, I outlined to the British Government our very strong concerns regarding its Internal Market Bill. Clearly, any unilateral departure from the terms of the withdrawal agreement is not acceptable. It is very disappointing that the British Government has not taken account of the concerns expressed by the EU and Ireland at the Bill's contents. The Government's position has been clear throughout. We believe the UK should move away from the path it has chosen in the Bill and work to rebuild the required trust by implementing the withdrawal agreement in full. The only appropriate channel for considering issues around the implementation of the protocol for Ireland and Northern Ireland is through the structures of the withdrawal agreement, namely, the joint committee and specialised committee established for that purpose. We welcome the Commission's continued emphasis on the importance of full implementation of the withdrawal agreement, including the protocol on Ireland and Northern Ireland. Ireland's approach has always been guided by the principle of securing a deal that works for the island of Ireland as a whole. It is vital that the protocol is implemented fully.
People need to prepare for the changes that will come about on 1 January 2021. Anyone moving food, animals and animal products or plants and plant products to, from or through Great Britain is reminded that, regardless of the outcome of the EU-UK negotiations, the status quo will not remain the same. With a period of less than three months until the end of the transition period, time is short and action is required immediately. There will be changes for the Irish agrifood industry from 1 January 2021, with new customs and regulatory requirements, including SPS checks, for importers of agrifood products from Great Britain. For exporters, requirements in respect of the movement of goods to Great Britain will be introduced by the UK on a phased basis from January. It is essential that importers and exporters familiarise themselves with the customs and regulatory requirements that will apply from 1 January next year.
Reform of the Common Agricultural Policy, CAP, is the third key topic we are discussing today. I will give a brief overview of the negotiations to date, the current situation with the negotiations and an overview of the CAP budget, which was agreed in July at the European Council. The CAP legislative proposals have been discussed at length during each of the Presidencies since their introduction in June 2018. Two out of the three legislative proposals are considered to be largely stable, namely, the horizontal regulation, encompassing financing, management and monitoring, and the amending regulation, which amends the current common market organisation, CMO, regulation. However, certain elements of the horizontal regulation are dependent on the outcome of the CAP strategic plan regulation. The latter has proved the most problematic for member states to consider and there are a number of outstanding issues, both technical and political, that need to be resolved before agreement can be achieved. These key issues include the new delivery model, the green architecture and elements of the direct payments provisions, including capping.
The current situation in regard to CAP is that significant progress has been made on the legislative proposals in 2020 and we are now at a very critical stage of the process. The German Presidency is aiming to achieve a Council general approach on the CAP proposals at the October Agriculture and Fisheries, AGRIFISH, Council. That meeting is due to take place in just under two weeks' time and there is significant work required for it to be successful. There are still enormous challenges facing member states in reaching final agreement on the CAP legislative proposals.
Much progress has been made with the new delivery model which will monitor the performance of the new CAP. There is further work to be done to conclude this issue but we are at an advanced stage with the reporting system. My Department will continue to engage in this process until the work is concluded.
There has been considerable discussion on the green architecture, but there is still no overall agreement on this key issue. There are a number of outstanding issues, including on conditionality, the system of good agricultural environmental conditions, GAEC, and statutory management requirements that all farmers must observe. Discussion continues on these rules, in particular regarding GAEC 9 and the requirement to have a minimum area on farms for what are known as non-productive features, which are more accurately described as areas that support public goods. The proposal to remove a number of strategic management requirements poses a significant difficulty for Ireland and has yet to be resolved.
Perhaps the most significant issue for Ireland and some other member states is the potential loss of unspent funds when it comes to implementation of the eco-schemes under pillar 1. Enormous efforts are being put in by the Commission, the German EU presidency and member states to find a workable solution to address this issue. Finding this solution is a key demand of Ireland as we move closer to the general approach and I strongly emphasised the importance of this key issue to Ireland at the recent AGRIFISH Council meeting. My Department will continue to work closely with the Commission and the EU Presidency on this issue over the next two weeks.
Direct payments have not been discussed in any great detail since before the German presidency. However, the agreement of the multi-annual financial framework, MFF, post-2020 proposals in July has seen direct payments discussions come back to the fore. The agreed MFF proposals see the CAP pillar 1 payments capped at €100,000. According to the agreed proposals, capping will only apply to the basic income support for sustainability. However, in light of demands from Ireland and others, the German presidency put forward a proposal for member states that will allow for some degressivity below that level. I am supportive of capping and I am still seeking the flexibility proposed under the Commission’s original proposal. However, in the context of the European Council agreement on the MFF proposals in July, challenges remain.
The European Council agreed the MFF budgetary proposals, including the CAP post-2020 budget, at the European Council in July. The agreed proposal takes into account the current Covid-19 pandemic and is targeted towards the EU's recovery plan in the next programming period. The recovery plan includes a reinforced multi-annual financial framework for 2021 to 2027 of €1.074 trillion, boosted by an emergency European recovery instrument, of some €750 billion, giving an overall MFF total of €1,824.3 billion, in 2018 prices.
On current prices, the proposal outlines €386.73 billion for the CAP, with an additional €8 billion for the European agricultural fund for rural development under the European recovery instrument, to be targeted towards the recovery of the sector and green transition. The German presidency is seeking to have this additional funding made available during the transition period and I fully support that.
Overall, Ireland's CAP allocation, including the European recovery instrument supports, is estimated to be some €10.7 billion in current prices. The MFF process now moves to the next stage where the European Parliament is asked to give its consent to the budget. These discussions are ongoing. The German presidency considers that it should have finalised all aspects of the budget by the end of October.
There is still much work to be done before final agreement can be reached on the CAP legislative proposals. Work will continue in Brussels to finalise the text with a programme of meetings planned. The German presidency will also engage in ongoing bilateral meetings with member states, both at official and ministerial level, focusing on their key issues. If the general approach is achieved at the October Council, negotiations will commence between the Commission, Council and European Parliament. My Department officials and I are committed to working with the German presidency, the Commission and member states in an effort to reach agreement in two weeks.
With regard to the CAP transitional regulations, the rural development programme is fully committed. We have drawn down over 80% of the funding and are well ahead of the EU average of 60%. I am sure the committee is keen to hear what the arrangements will be for 2021. The transitional regulation is still under negotiation at European level. We had expected that the work would be nearing completion and we would have the final rules and budget in the coming weeks. However, there are a number of factors that still need to be resolved. The July agreement on the MFF, by the Heads of State and Government, needs to be signed off by the European Parliament to provide the budget amount. The German presidency is expecting to conclude this work in October. This will allow the finalisation of the legal text for the transitional regulation.
The committee will be aware that, at the end of June, the European Parliament and the Council agreed to a two-year transitional period. The Commission recently indicated that it could agree to two years on certain conditions, including a substantial increase in environmental ambition.
The matter will only be finalised when the MFF negotiations are concluded later in the month. For now, we are awaiting final positions on the key elements, including the budget and the duration of the transitional period. As always in these situations, nothing is agreed until everything is agreed. I am conscious of the need to provide certainty for farmers. It is not possible to do so without the rules and the budget but my officials and I are considering what the options will be. We need to look at how we can dovetail what we will be doing in the transitional period with our programme for Government commitments and how all of that will fit in with the preparations for the CAP strategic plan. There are very ambitious targets set out in the EU biodiversity strategy, the farm to fork strategy and the green deal. We also have national targets to achieve in regard to climate change and the environment.
As members know, we are in the middle of the Estimates process that precedes the announcement of the budget for 2021. I am working with my officials and ministerial colleagues in that regard. My aim is to provide continuity and stability for farmers in these unprecedented times and to safeguard the efforts they have already made in the area of climate and environment. We will build on that existing work as we move to new arrangements under the CAP strategic plan. I intend to continue my meetings with farming bodies and stakeholders in the coming weeks to hear their views. I am conscious that we have limited time to make decisions and implement workable solutions. I am very interested to hear the views of committee members on what we should do in the transitional period and in regard to the CAP strategic plan. I wish the committee well in its work. I look forward to engaging with members today and in the time ahead.
