I thank the Chairman and members of the joint committee for the invitation to address them on reform of the Common Agricultural Policy which, undoubtedly, is the most critical policy issue facing farmers. The Irish Cattle and Sheep Farmers Association, ICSA, took the lead on CAP reform in 2003; it was the first and for a long time the only farm association to support decoupled payments. It is no surprise, therefore, that we have worked very hard to make the case for an historic single payment. We continue to argue that if change must come, it must be gradual and phased in over a long period because in that way it would not result in significant losses for farmers who have continued to farm in a productive manner since the previous reform was undertaken in 2003.
It is fair to say there has been much concern among our members about the implications of what Commissioner Ciolos has proposed. Cattle and sheep farmers are especially dependent on the single payment. In 2010 direct payments accounted for up to 160% of family farm income on dry stock farms. Many of the farmers concerned have now exited REPS and either entered a much less valuable AEOS scheme or, in the case of those who left REPS after May 2011, have no scheme to replace REPS.
The key concerns are that the EU budget be sufficient to retain the current level of CAP support across Europe and that Ireland receive, at least, a similar amount to what it receive at present; that the flat rate payment will not work in this country and that a significant flattening of payments across the board would hit too many farmers too severely; that we do not end up with a whole new regime of extra bureaucracy and restrictions, in particular in regard to greening measures. There is also concern about what is happening to the land rental market as a result of the uncertainty around reference years. The budget remains undecided and it seems there is no great urgency to reach a decision on it. The economic crisis and elections in France are partly to blame, but there is also a range of views on whether the European Union budget should be reduced at a time when austerity is the prescription for many member states.
The problem is that progress in the negotiations is delayed in the absence of certainty on the budget. As it stands, it seems to us that we are not on target for a deal to be done under the Irish Presidency of the European Union in the first half of next year. In turn, it is increasingly possible that the reforms will not be in place for 2014 as planned, which raises questions about reference years. In the Ciolos proposals 2014 is the base year, with eligibility linked to whether a farmer made an area aid application in 2011. That begs the question of whether the relevant years will be 2012 and 2015 rather than 2011 and 2014.
One thing on which we are clear is that there is no possible justification for going back to any form of coupled payment. A campaign is being run by the meat industry which would like to see a reversal of the implementation of full decoupling measures. That is precisely because decoupling created the conditions that allowed the price of beef to pass €4 per kilo and gave us a much improved sheep price in the past 12 months. The sharp drop in lamb prices in recent weeks shows that we are still vulnerable to fluctuations in supply and demand.
The critical point is that the only sensible means of increasing output is to do so in response to improved market conditions. Putting in place artificial incentives to increase numbers is a roadmap to disaster for farmers. The options for recoupling are limited. The proposals would allow Ireland to use 5% of the total national envelope for coupled payments. That amounts to less than €65 million. If it was allocated to the suckler cow scheme, it would amount to a payment in the region of €65. However, there would be an equally strong case to allocate it to the ewe scheme. The question is whether that would be of any benefit to farmers. When we had a suckler cow premium, beef prices were typically €2.50 per kilo, while quality weanlings made €1.90 a kilo live weight compared with €2.50 and €3 per kilo this year. The problem is that if one goes back to a coupled payment, farmers tend to all run in the same direction, with the inevitable consequence of oversupply benefiting the factories but nobody else. The alternative is to limit it strictly with a suckler quota, but it would mark a return to needless bureaucracy for a very small payment which would not be extra money but a deduction from the national envelope. It would be a case of robbing Peter to pay Peter.
The ICSA believes the only strategy is to build alliances to ensure the proposals are watered down sufficiently. At the April farm Council meeting Portugal proposed that no member state or individual beneficiary be subject to a cut greater than 8%. This proposal was supported by Italy and the Minister. The ICSA believes this is a positive development on which we must build. Contrary to our worst fears, there are grounds to believe the Commissioner will have to compromise a lot more than he intended and that we can retain more than we had hoped for. We accept redistribution may have merits, in particular in the case of young farmers or farmers who had enterprises which attracted little or no premiums such as calf rearing. However, we are clear that the gains should be limited in the sense that only those who are actively farming and who continue to do so would receive increases. It should also be limited in terms of the total number of hectares involved. It would be inappropriate to increase payments significantly for farmers with more than 100 hectares when farmers with smaller holdings are suffering cuts.
On cutting per hectare payments, the EU proposal constitutes revolution, not evolution. It is unacceptable that the Union wants a flat rate payment within member states by 2019, yet it has admitted that a flat rate payment between member states is not attainable until 2027. Therefore, the objective must be that reform is about reducing the extremes between now and 2019, not about having a flat rate payment that sounds plausible in theory but which will not work in practice. An acceptable arrangement would be one where farmers who possessed entitlements in excess of €270 per hectare would witness some adjustment on a gradual scale. In this model farmers with entitlements worth between €270 and €600 per hectare would see a cut of 3% per annum on the amount above €270, while those with entitlements worth above €600 would see a cut of 5% per annum on the balance above €600. Entitlements worth above €800 would see a cut of 10%. In this way, there would be a gradual move towards more even payments, while respecting the principle that almost no beneficiary should lose more than 8% in the period 2014 to 2019. The money saved by these cuts would be much lower than through the cuts envisaged by Commissioner Ciolos. Accordingly, we would limit the beneficiaries to deserving cases only using objective criteria to limit the gains to active farmers and in setting a maximum of 100 hectares on which the extra rates could be paid.
On greening measures, the proposal is confused and unclear. The greening element was initially seen as a voluntary top-up, but now it seems it will be compulsory for all. This makes setting aside 30% for a greening component meaningless. The main concerns are that the 30% will be immediately reconstituted as a flat rate payment, thereby accelerating the move towards a full flat rate payment. There is much concern that greening measures will lead to more red tape. Being required to allocate 7% of an area for such measures is most worrying. In addition, we consider the idea of compulsory rotation of three crops as not workable on a typical-sized Irish farm. In a strange way, we take some consolation from the reality that there is widespread hostility to greening measures across many member states and that, therefore, the measures are likely to be watered down.
One point concerns whether farmers will be allowed to resubmit for consideration land currently classed as ineligible such as hedgerows and scrub. We would like to know whether such areas could be included in the figure of 7%. One thing which must happen is that the contradiction between the single payment and agri-environment schemes must be resolved. Farmers are losing ground and incurring penalties under the single payment scheme for marginal land that is being encroached on by scrub but they are blocked from dealing with that under the rural environment protection scheme, REPS, designated areas and now under the land reclamation regulations.
While much of the focus is on pillar 1, we must not lose sight of pillar 2 reforms. Oireachtas Members have a special role in ensuring the Department of Finance faces up to the need for co-funding to ensure maximum drawdown under pillar 2. Under pillar 2 we would prioritise a return of the young farmer scheme, retention of the disadvantaged areas scheme and a new, more viable agri-environment scheme.
I wish to comment on the rental market. The disastrous decision to announce a reference period of 2014 in advance has played havoc with rental markets. The subsequent decision to announce that only those who made an application in 2011 will be affected has only marginally resolved the problem and is storing up many hardship cases in terms of farmers who start in 2012 or 2013.
We see there is a growing need for land use and tenants' rights reform to give more protection to farmers who are renting ground. The current system is not working. In my part of the world land is just not available and we are forced to travel to rent ground. With land making up to €200 per acre, there is no sense that we are facing up to this problem. What are young, trained farmers to do?
As a general principle, reference periods should only be announced when the period is passed to avoid the mess we have now. I fear the damage is already done in terms of CAP proposals but I believe that placing limits on those who will gain from the reform will be an essential part of tackling this problem. That will ensure the land is in the hands of active farmers who have a progressive plan for the long term.
I commend this committee on its interest in this vital topic. We will be working closely with the Minister and the MEPs as well as lobbying officials here and in Brussels. We need a strong campaign by the Taoiseach to get movement on the issue of the budget and to get the more extreme elements of this CAP proposal reversed. I thank members for their attention.