Direct payments by my Department reached a record level of £1,038 million in 1998 and now account for 50 per cent of farm income. These payments did a great deal to support farm incomes in 1998 and, as a result, Irish farmers fared somewhat better than their colleagues in the UK and several other member states.
Last week, the Minister, Deputy Walsh, announced a further £20 million in fodder aid for farmers, on top of the £12 million paid out before Christmas on fodder related schemes, bringing the total Government contribution to £41 million. The new scheme will be applied to farmers in all disadvantaged areas excluding those who have already benefited from payments made in December. Eligible farmers include suckler cow farmers, small dairy farmers with quotas of less than 35,000 gallons and lowland sheep farmers with breeding ewes. Payment rates will be the same as in the 1998 scheme subject to the same ceiling of £300 per beneficiary. In excess of 40,000 farmers will benefit. In addition, the Department is arranging that the 45,000 farmers in the worst affected areas, who received payment under the 1998 scheme, will benefit from a 50 per cent top- up of that payment, bringing the ceiling for such farmers to £450.
A special fodder hardship fund will operate for farmers who satisfy certain eligibility criteria. The objective is to confine this aspect of the scheme to small farmers almost totally dependent on a relatively small farm enterprise as a source of income. In the interests of equity, stringent criteria would have to be met to qualify for this special package. Therefore, a substantial amount of money has been made available to help with the fodder problem. No Government and no Minister can solve the fodder problems of any individual farmer, but a very considerable effort has been made to address the situation.
In further recognition of the continuing difficulties faced by farmers, the Department is making an all out effort to bring forward payments that would not normally be due until well into March. Last week alone, some £50 million issued to farmers on foot of the 20 per cent balancing payments under the suckler cow scheme, and in payments for REPS participants. In addition, more than £30 million will issue to sheep farmers this month under the ewe premium scheme.
This year will see the introduction of a revamped farm assistance scheme costing £43 million in a full year to support low income farmers. In response to the difficulties now being experienced, it has been decided to bring forward the implementation of this scheme to April. Entitlement to payment under the new scheme will be effective from the first week in April 1999. However, in order to allow for the necessary preparatory work, including means testing, the first payments will issue in the first week in June. The scheme will not only benefit small farm families with children, but will also provide increased payments to couples without children and single farmers. The scheme will benefit in the region of 13,400 farm families, including the 6,600 already participating in the existing scheme. I regard the farm assist scheme as a very important innovation and a clear expression of this Government's commitment to practical action on rural poverty.
We are now approaching the critical stage of the Agenda 2000 negotiations. As Members are probably aware, the summit meeting in Vienna last December confirmed that political agreement should be reached on the entire package no later than the end of next month. The German Presidency, in its typically efficient manner, is determined to reach agreement on agriculture at the Council meeting in the week commencing 22 February, less than three weeks away.
The overall thrust of the proposals is to continue along the lines of the 1992 MacSharry reforms, with lower support prices, compensation for farmers in the form of direct payments and further reinforcement of structural, environmental and rural development policies.
While we accept the need for reform to meet the impending challenges of WTO negotiations and EU enlargement, Ireland does not accept the detailed proposals unveiled by the Commission last March. From the outset, the Government has indicated in the strongest possible manner our concerns about the effect of the proposals on Irish farmers' incomes and about the lack of equity – Senator Doyle owes me a fiver as I did not say the words she expected me to – between member states and between different types of production. The Minister, Deputy Walsh, has taken every opportunity to put this case in bilateral meetings with Commissioner Fischler and ministerial colleagues.
It is significant that we obtained acknowledgement of the importance of the beef and milk sectors to Ireland by having written into the conclusions of the Agriculture Council meeting last May a statement that the dependence of particular member states on specific sectors would be taken into account in the final agreement. In the crucial coming weeks, the Government intends to ensure that this Council commitment is honoured in full. A complicating factor in the negotiations is the future funding arrangements for the CAP. The recent review of the EU financing arrangements arose from complaints by some member states, and by the new German Government in particular, that the burden of their net contributions is excessive and they are aiming to take this opportunity to alter the balance. One of the solutions suggested by the Commission is that the expenditure side of the budget could be amended to provide for national co-financing of CAP expenditure on direct payments at a level of 25 per cent. We acknowledge that the concerns of member states with large net contributions have to be addressed. However, we believe that the co-financing option is not an appropriate solution.
The Common Agricultural Policy has been built up over 40 years on three central principles – market unity, Community preference and common financial responsibility. It has contributed enormously to the solidarity which has cemented the Union over the years. We cannot now begin to dismantle that achievement in order to provide a partial answer to a problem that goes far beyond the CAP. While it is fairly clear that stricter budgetary discipline will be applied to the reform, we will be insisting that the resources available must be adequate to fund a worthwhile and equitable reform. There is no point in carrying out reform that is inadequate, simply to save money.
The most difficult problems to be addressed relate to the beef sector. The 30 per cent price reduction and the supply control measures proposed by the Commission go far beyond what is needed to restore market balance and will fall disproportionately on extensive producers. We believe it is possible to achieve market balance through a lower price reduction and a different approach to supply controls and we have put forward ideas for a solution on those lines.
Another issue of major importance to Ireland is the level of compensation in the beef sector. The Commission proposals aim to shift the balance of compensation in favour of intensive production; changes will have to be made to favour extensive production. It is also central that an effective intervention system is retained to reassure producers that, in the event of temporary market disturbances, intervention will be available to ensure a floor in the market.
A further difficulty in the beef negotiations is that there is a perception among the other member states that Ireland fared particularly well under the 1992 reforms. This is a simplistic argument – the 1992 reforms were carried out for a reason and supported a particular vision of agriculture. However, the Minister, Deputy Walsh, does not intend to give way and has pointed out that our beef prices are as much as 25 per cent below European levels. There are also concerns about the impact on the sheep sector. For some time we have expressed concern about the flaws in the sheepmeat regime, and the consequences of the proposals on extensification would make the situation even worse.
The milk proposals involve a 15 per cent price reduction and compensatory premiums which compensate for 60 per cent of the price reduction. This inadequate compensation is totally unacceptable. The milk quota system has had a stabilising influence and returns to farmers have remained consistently high without undue budgetary pressures. The Irish position is that we should not be embarking at this stage on changes that would be both expensive and of limited benefit. We would prefer to see the current regime continuing for the present but with provision for a review, in say 2003, in the light of developments at the WTO. We have made it clear that if a quota increase is to be part of a final agreement, Ireland will not accept discrimination against us in its allocation. The Council declaration that Ireland would be given priority in the allocation of any increase in quota was an integral part of the 1984 agreement – where the 13 million gallons went missing – and is of vital importance.
On arable crops, the compensation being proposed for the 20 per cent price cut is inadequate, representing only half of the income loss to producers. We are seeking to have this redressed as well as maintaining the separate base area for maize.
My Department has been mindful, throughout these negotiations, of the need to consult as widely as possible about the implications of the Commission's proposals and on alternatives to them. That is why four consultative groups were set up early last year, to which farmers, pro cessors, academics and other interested persons were appointed. We are also conscious of the value of direct consultations with the farm organisations and, indeed, the Minister, Deputy Walsh, will be meeting the organisations just before the February Council meeting.
Ireland is not alone in rejecting the Agenda 2000 proposals as they stand at present and in spite of some of the difficulties to which I have referred, we are not without allies on certain important issues. One of our tasks will be to maximise the value of these alliances to bring about a balanced and equitable agreement. I assure Members we will be doing our utmost in the negotiations to bring about a final outcome which will provide a favourable framework within which Irish agriculture and farm industries can continue to develop for the benefit of those engaged in those industries and of the economy as a whole.
The agri-food sector remains very important to the Irish economy. Primary agriculture is more important to Ireland than to any other member state, except Greece, and its contribution to GDP is twice the EU average. The sector as a whole – agriculture, food, drinks and tobacco – accounts for 13 per cent of GDP and 12 per cent of employment and exports.
The environment in which the sector operates is changing rapidly and will continue to change over the coming years. Agenda 2000 and the next round of WTO negotiations will result in more competitive markets. This new environment will offer both opportunities and threats to the agri-food industry. In order to face the threats and maximise the opportunities for exports and income growth, the Irish agri-food sector must be highly competitive, focused on consumer demands and supported by high quality public services.
In order to prepare the industry for the future, my Department will focus on getting the best possible deal for Irish agriculture in the Agenda 2000 negotiations ensuring that expenditure on agriculture and food in the next round of Structural Funds will address the structural constraints faced by the industry and completing a White Paper on rural development which will address rural development as a broad multi-functional process involving the economic, social, cultural and environmental conditions which influence the quality of life of rural communities.
Recognising the challenges ahead, the Government has decided to establish an expert group to look at the future of the sector. The group will be established once the Agenda 2000 decisions are made and will be expected to provide a thorough analysis of the sector. It will also take on board the conclusions of the White Paper on Rural Development, which will be published, I hope, by the end of March, to ensure a consistent approach to all aspects of rural renewal.
In order to face the threats and maximise the opportunities for exports and income growth, we need an agriculture sector that is highly competitive, tightly focused on consumer demands and actively supported by high quality public services. Given the measures which I have just outlined, the continuing efforts and initiatives of the Department of Agriculture and Food and the ongoing support and commitment of the Government and the Taoiseach, there is a very strong future for agriculture and the Irish agri-food sector.