The restriction of access to the market for drinking milk in their respective areas to registered producers, processors and distributors located in the areas concerned, the subjection of the marketing of milk from outside those areas to a licensing system, and the maintenance of an arrangement establishing a minimum producer milk price were, in the Commission's view, not in accordance with the common organisation of the market in milk and milk based products in Article 30 of the Treaty of Rome. On the advice of the Attorney General it was decided not to challenge the Commission's opinion. Nevertheless, it is very important that the supply of milk for liquid consumption in Ireland should have some form of regulation because, due to the highly seasonal pattern of our production, a complete laissez-faire approach could result in shortages during the winter months. Accordingly, the Department entered into consultations with the European Commission about alternative arrangements which would be in the best interests of both producers and consumers and would be within European Union law. The central provisions of the Bill now before the House are the result of this process.
Both the central provisions of the Bill and the consequential provisions have been the subject of consultation with the various parties affected. There is a very high level of support for the measure on all sides in the industry and I am satisfied that the Agency, which will be financed entirely by the industry itself through a statutory levy on milk sales, will ensure the orderly development of the market for milk for liquid consumption.
The production, processing, marketing and distribution of milk for direct human consumption is important to the continuance of a strong and vibrant dairy industry. The drinking milk sector provides a stable outlet for about 10 per cent of our total milk production, good returns for producers and high employment levels in distribution. There are at present some 4,500 producers supplying 39 pasteurising establishments with milk to a retail value of some £300 million per annum. There are about 5,000 persons employed in its collection, preparation and distribution.
In addition to their statutory functions, the milk boards became involved in the provision of services to the dairy farmers in their respective areas to encourage them in the efficient production of good quality milk. These services included the artificial insemination of cattle, milk recording and mastitis control. As a result of this, the boards have acquired considerable assets and now employ some 125 staff. This ancillary business has declined somewhat over the last few years and this decline is reflected in the boards' financial position. In the four years from 1989 to 1992, inclusive, they lost a total of over £500,000 between them. It is not expected that the audited accounts for 1993 will show a reversal of that trend. The basic problem is that because of the decrease in demand for some of the services which they provide, the boards are now, by commercial standards, significantly overstaffed.
I should, I know, refer to the fact that this is the second time a Bill to abolish the Milk Boards and establish a National Milk Agency has been brought before this House. The previous Bill was introduced in November 1991 and completed its Second Stage in January 1992. I recall that occasion very well, when concern was expressed by various Members to ensure that both assets and staff were looked after in an orderly way. Accepting the concern raised here at that time, I undertook to do that. It has taken a considerable length of time to put things in place and obtain general agreement with the staff associations and unions. I am glad that that point has now been reached. But at that stage, negotiations with the boards' staff were still in progress. It was intended that before the Bill completed its passage through the House, such provisions relating to staff as might require statutory effect would be included in the Bill. However, the negotiations did not conclude until January of this year, when the staff voted to accept an agreement reached under the auspices of the Labour Relations Commission.
Broadly, the terms of this agreement are as follows: the five or six staff which will be required by the National Milk Agency will be recruited from among the milk boards' staff, provided that a sufficient number of suitably qualified candidates apply for these jobs. Some 50 staff will be offered voluntary retirement on terms analogous to those which applied in the Civil Service in the 1987-88 period while the remaining 70 or so employees will transfer with the sale of the ancillary business as a going concern. They will transfer with their existing terms and conditions of employment and these may be altered only in accordance with established industrial relations procedures. In the event of being made redundant through business failure or a further staff rationalisation programme on the part of the new employer, they will have the right to redeployment to the public sector. There will be no compulsory redundancy involved in the abolition of the boards. This has been voted on and agreed by the staff and their associations.
I now turn to the particular provisions of the Bill. Section 1 defines certain words and terms used throughout the Bill. Section 2 provides for the establishment, by ministerial order, of a National Milk Agency. The basic function of the agency is to ensure the availability to the consumer, at all times of the year and at a reasonable price, of supplies of good quality milk for liquid consumption. The agency will have a part-time chairman, appointed by the Minister, and will be composed of representatives of milk producers, processors, distributors, retailers and consumers.
Section 3 provides for the dissolution, again by ministerial order, of the two milk boards and the sale of their ancillary business. It also provides for the possibility of transferring the business to an interim board. The House will note that the Bill provides that the order, which abolishes the boards, will at the same time replace them with the new agency. My intention is that the ancillary business should be sold at just about the same time. However, as a precaution against any delay in concluding the sale, the Bill includes provision for an interim board comprising three ministerial nominees to take over direction of the ancillary business until such time as the sale is completed.
Any such transfer would be technically liable to stamp duty so it is necessary to provide in the Bill for an exemption in keeping with the realities of the situation, hence the reference in section 3 (8) of the Bill to the Finance Act, 1895. The sale of the business will be by competitive tender, in keeping with Department of Finance guidelines for the disposal of State assets.
Section 4 deals with the pension position of the boards' staff. Basically, it provides that once the boards are dissolved, the administration of their pension schemes will become the responsibility of my Department. It bestows power to amend these schemes. It thus provides, in accordance with the agreement reached with the staff, for enhanced redundancy and severance payments for temporary and seasonal staff who may be granted voluntary early retirement, to provide notional "added years" of service for permanent staff in the same circumstances thus enhancing their pensions and to provide for the possibility of spouses and children's benefit for former and present members of the schemes.
In this latter connection, it is necessary to amend the Milk (Regulation of Supply and Price) Act, 1961, and this is done by subsection (7). Since future pension liabilities will be borne by the Exchequer, thereby securing the pension rights of staff, subsection (8) provides for the taking over by the Exchequer of the existing pension funds.
Sections 5, 6 and 7 are at the core of the Bill. These sections provide that milk may not lawfully be sold for liquid consumption in the State unless it is produced on foot of a registered contract between a registered producer and a registered processor. There is provision for certain exemptions and prescribed penalties for contravention. There are also requirements that, in order to qualify for registration, a contract must provide that the raw milk supplied be at least up to the quality prescribed by law, be for a period of at least 12 consecutive months, include supply during the winter months and specify a price level adequate to satisfy the agency that ample compensation is being provided to the producer for maintaining production during the winter months.
The three substantive elements of the contract — milk of appropriate quality, all year round supply and adequate compensation for the producer — are all interlinked. Given the grass based, summer concentrated pattern of Irish milk production, the quality and continuity of supply during the winter months can best be assured by a regulatory system of the type I have described.
Section 8 provides for the payment of a levy to the agency in respect of every litre of milk acquired under a registered contract. The rate of levy will initially be fixed by ministerial order and may subsequently be adjusted by the agency with the consent of the Minister. The section also deals with matters ancillary to the obligation to pay the levy, such as the requirement to make proper returns of milk supplied so that the amount due may be calculated and the procedures to be followed, up to and including the cancellation of registration, if the levy is not paid. As I have mentioned, it is the intention that, by means of this levy, the agency should be completely self-financing.
Sections 9 and 10 make provision for records to be kept and returns to be made by registered parties to facilitate the agency in its work of regulating milk supplies. Section 11 distinguishes between information which may be published and that which must be kept confidential. Sections 12, 13 and 14 deal with matters such as the alteration of registration or its cancellation for reasons other than non-payment of the levy which, as I have stated, is already dealt with in section 8 and the admissibility of registers as evidence in the courts.
Sections 15 to 23 are classified as miscellaneous provisions. They make no new substantive provisions; their purpose is rather to provide powers and impose obligations to ensure that the preceding provisions in the Bill can be effectively and efficiently implemented and also to fulfil certain necessary legal technicalities.
The Schedule to the Bill sets out detailed rules applicable to the new National Milk Agency, many of which I have already covered in general terms.
I hope I have given a clear outline of the contents of the Bill and I commend it to the House.