Seanad Éireann díospóireacht -
Tuesday, 11 Nov 2003

Vol. 174 No. 11

Direct Payments Decoupling: Statements.

Minister for Agriculture and Food (Mr. Joe Walsh)

I am delighted to open this debate on full decoupling of payments under the Agenda 2000 mid-term review agreement that was reached by the Council of Ministers in Luxembourg on 26 June last.

The proposals presented by the European Commission comprised the most radical reform of the Common Agricultural Policy since its foundation. The agreement reached in the Agriculture Council in Luxembourg was the culmination of a long negotiating process. My objective in the negotiations was to safeguard the benefits to Irish agriculture and our rural communities which were achieved under Agenda 2000 and to ensure the best possible level of support and protection of our farming production base into the future.

The outcome of the negotiations contained substantial modifications to the Commission's proposals and represented a successful outcome from Ireland's point of view. The new agreement will reshape the Common Agricultural Policy and secure its future by making it more relevant to modern society and to consumer demands. We now have the opportunity to exploit the new situation to our advantage.

I am sure that the details of the agreement are well known at this stage, but I will outline the main issues briefly. First, the Agriculture Council agreed to amend the proposal for full decoupling of direct payments by giving member states options which would allow them to implement decoupling in a manner best suited to their requirements, thus fulfilling Europe's long held principle of democratic subsidiarity.

On 19 October last, having given careful consideration to the 200 or so submissions which were received under the public consultative process I initiated last July and to the outcome of the

independent research I had commissioned from FAPRI-Ireland, I decided that all direct payments for cattle, sheep and arable crops will be fully decoupled from production as and from 1 January 2005. I had already decided that the new dairy premium, to be introduced in 2004, should also be decoupled from production with effect from 2005. The overwhelming weight of opinion in the farming organisations was in favour of full decoupling and this was also reflected at the 40 or so information seminars held by my Department throughout the country. I believe that full decoupling is in the best interests of Irish agriculture and the development of a sustainable, market orientated agri-food sector.

Decoupling will allow farmers to respond to market demands, without the need to engage in production solely to qualify for direct payments. This will put the control of production back into the farmer's own hands for individual decision.

This view is backed up by independent analysis. In October, FAPRI-Ireland, a group of economists from Teagasc, the University of Missouri and certain Irish universities, published its analysis of the Luxembourg agreement and its effects on Irish agriculture. Out of the many options available, the study focused on three scenarios including partial decoupling of certain premia across all member states, full decoupling across all member states and full decoupling across the EU, with Ireland opting to couple the slaughter premium and decouple all other premia.

The analysis shows that full decoupling of all beef payments from production is the best option in terms of aggregate farm incomes. Full decoupling of beef premia would lead to a decline of around 18% in suckler cows and a consequent drop of 7% in the amount of beef produced. However, following an initial price decline, prices would subsequently increase and when combined with reduced input costs would result in an improvement in farm incomes by an aggregate 10%. The analysis showed that if the link between the slaughter premium and production was maintained, it would not be sufficient to halt the decline in suckler cow numbers. While there could be a small improvement in incomes for most beef producers, there would be a greater overall loss to the sector.

On the milk side, the analysis showed that the decision to decouple dairy compensation payments from production from 2005 will lead to a more gradual restructuring of milk quota and more dairy farmers in the long term. Less efficient dairy farmers will have the option to exit the sector while retaining their payments and this will leave a larger pool of milk quota for dairy farmers with the means and the initiative to expand. The analysis shows milk prices falling by a further 5% on top of the cuts agreed in the institutional prices as part of the Agenda 2000 agreement. Increased efficiency and scale should result in the incomes of dairy farmers keeping ahead of inflation in the period to 2012. The analysis also shows that while the national sheep flock was set to decline substantially under existing policies, the introduction of decoupling will accelerate the decline. However, this decline will be offset by increased prices, leading to a slight increase in the value of sheep output by 2012.

For the agriculture sector as a whole, FAPRI-Ireland finds that there would be a reduction in output value but this would be offset by a reduction in input costs brought about by lower animal numbers and more extensive production. There would also be environmental benefits to full decoupling with the reduction in livestock numbers bringing about a substantial drop in greenhouse gas emissions from the agriculture sector to approximately 14% below 1990 levels. In conclusion, the FAPRI-Ireland results showed that full decoupling would result in aggregate farm income being higher than would be the case if there were no policy change or if partial decoupling were implemented.

A second significant outcome for Ireland was the changes I negotiated in the areas of degression and modulation. The Commission's proposals for degression and modulation represented a serious threat to the level of direct payments in Ireland, which are of such crucial importance to farm incomes. On the issue of degression, I strenuously opposed the proposal to reduce direct payments by up to 13% to meet future financing needs. The compromise agreed requires the Council to review from 2007 onwards the annual financial circumstances and, if budget deficits arise, to take necessary action at that stage. This is a much more reasonable and acceptable approach.

As regards modulation, the rate has been reduced from 6% to 5% when fully operational. The €5,000 franchise or exemption will ensure that almost half of Irish farmers will not be affected by modulation. My objective in ensuring that modulated funds are retained in Ireland for agriculture-based rural development measures has also largely been achieved. Up to 85% of funds modulated in Ireland will stay in the agriculture sector here and will be distributed by my Department. The outcome was a major improvement on the original proposal, where the combined effect of modulation and degression, would have resulted in €464 million being siphoned off direct payments over the period 2006-12.

Much has been made of the decision of the Agriculture Council regarding the milk sector. I do not believe the level of criticism of the agreement, which was concentrated on this element only, is justified. The decision taken in Luxembourg on 26 June provides for a reduction of approximately 4% beyond the level already agreed in Agenda 2000. This is in contrast to the original proposals where an additional 10% reduction was provided for. In addition, I secured compensation of approximately 80% for the additional intervention price reduction of 4% which was agreed by the Council. Therefore, the potential losses to the dairy sector from the net effect of the 4% intervention price reduction and the value of the dairy cow premium, amount to less than €14 million annually, or 1% of the farm gate value of milk output. It is important to bear in mind that this reduction is an intervention price reduction and not a market price one. Farmers who concentrate on the market where the product should be sold will experience no loss if the industry concentrates on the marketplace. Depending on market prices, there could even be substantial gains. The agreement demonstrates emphatically that the dairy industry must realise that selling to intervention is not the way to build a viable industry capable of adequately remunerating its farmer suppliers for its raw material.

Notwithstanding the objective of reducing dependence on commodity products and on intervention purchases, I insisted that a reasonable period of time should be provided for the dairy industry to re-orientate itself to a lower level of intervention availability. The original Commission proposal was for a ceiling of 30,000 tonnes per annum on intervention intake of butter and this would have been disruptive in the short term in that it would not have given the industry sufficient time to remodel its production base and have a larger product mix. Against enormous opposition, I managed to have the annual intervention ceiling significantly increased to 70,000 tonnes initially, reducing over five years to 30,000 tonnes. Overall, the agreement on milk is most satisfactory given that the milk quota regime has been extended to 2014-15. While many farmers were anxious about the future of the milk quota regime, they now know that it will be in place for the next ten years and can plan accordingly. A small price was paid in terms of intervention price reductions for that major objective which will play a key role in supporting the milk price until 2014-15.

By way of compensation for the intervention price cuts, a new dairy premium will be introduced in 2004. The premium will be coupled to milk production in the first year and will be decoupled from production with effect from 2005. The original proposal was that the dairy premium would remain coupled to production until 2007. Following negotiations with the Commission on 29 September last, I secured agreement to have the dairy premium decoupled from production with effect from 2005. This was an important development in that it will allow dairy farmers to make important decisions in the period ahead about the sale and acquisition of quota and land and associated investment decisions. In taking the decision to decouple the dairy premium from 2005, I took into account the view expressed to me by representatives of dairy producers.

We also argued successfully against the proposal for a reduction of 5% in the intervention price for cereals. The original proposal for a ten year obligatory non-rotational set-aside was also dropped. This would not have been suitable in the Irish context. The new arrangements on set-aside are more workable in Ireland and allow for further set-aside obligations as market needs arise in the future.

The strengthening of support available to young farmers, by way of a special new incentive under the rural development measures is another positive outcome. The maximum support for young farmers undertaking investments within five years of setting up has been increased from 55% to 60% in less favoured areas and from 45% to 50% in other areas. Other changes in the proposals negotiated for young farmers include a more equitable calculation of single payment entitlements for those who entered farming during the reference period 2000 to 2002. For example, young farmers who came into the industry in those years would have found their entitlements being divided by three for the three years. Depending on what year the young farmer joined the industry, they will now be either divided by two or one. This was a significant achievement in the negotiations. There will be flexibility to create a national reserve of up to 3% of established entitlements that will be used in particular to provide single payment entitlements for young farmers who commenced farming after 31 December 2002. Young farmers who inherit farms will also inherit any entitlements established by the retiring farmer.

As I have said, my objective was to preserve the benefits of the Agenda 2000 agreement for Ireland and I firmly believe that I have been successful in this. Full decoupling of payments also has huge potential benefits in terms of reducing substantially the administrative and bureaucratic burden for farmers and my Department alike, while allowing farmers the freedom to farm and to respond to market demands. I assume Members' clinics will be quiet in the future, as no one will be seeking headage premia or other allowances. Under the single farm payment there will be one application and one payment. This will allow Members to leave their clinics early on Saturday mornings in future.

Mr. Bradford

We can get off to the races earlier.

Mr. Joe Walsh

That is right. The new policy framework will ensure a more market-oriented and sustainable agriculture and food industry, which will benefit farmers and consumers alike. Agriculture continues to make a major contribution to the Irish economy and society and we are highly dependent on a strong and viable CAP. Irish agriculture contributes 200,000 jobs, €7 billion in exports and large net foreign earnings that are mainly redistributed within Ireland. In the longer term, I believe that the Luxembourg agreement and the full decoupling of payments from production will be seen as safeguarding its future and creating the conditions for farmers to prosper.

Mr. Coonan

I welcome the Minister to the House. The decoupling proposal has received widespread support and approval from the farming community, primarily as it will do away with the scourge of bureaucracy. It will also allow farmers to farm as they wish and to produce quality products for the marketplace without further restrictions. However, a number of issues need to be clarified. Is there a 100% requirement to farm land to be eligible to draw down entitlements secured in the reference years? If so, this will be a major stumbling block which will add to the price of rented land.

I know farmers who leased land during the reference years. The land is no longer available because the owner has planted it and is drawing a forestry premium on it. If that requirement remains, it will be difficult for farmers to secure land in their locality and land prices will increase. How will farmers who lost quota rights as a result of disease eradication, depopulation and so on during those years be treated? How will farmers who, as a result of errors or bureaucracy, were fined and lost premium rights be treated? What entitlements does the Minister propose to grant to farmers who leased their lands under the early retirement scheme because of ill health or in an effort to survive in farming until such time as their sons or daughters were ready to take over?

A study commissioned by the Irish Meat Association found that decoupling of direct payments from production would lead to a 40% to 60% drop in suckler herds with beef product subsequently falling from 656,000 tonnes to 457,000 tones, a 31% decline. The drop in value would be approximately €445 million, a significant sum. The study suggests that such a drop would lead to a loss of some 2,000 jobs at processing level, a matter of grave concern. The introduction of full decoupling would allow farmers to concentrate on improving the quality of their livestock. The resources from the modulation fund for livestock should, therefore, be used to improve beef quality in breeding and to restructure the suckler cow herd. Focus must be on quality production. This will require an increase in Irish beef for export to Britain and continental Europe. The Department and Minister must focus on ensuring the live export trade operates unhindered and is built upon and expanded to markets in Libya and Egypt.

As the single farm payment is based on historical reference years, it is clear the new system will suit farmers who were well established during that time. It will, however, create barriers for those who commenced or attempted to upscale at that time and also for those who bought land since then. Glanbia chief executive, John Moloney, recently said the average milk producer would require a quota of 138,000 gallons by 2007 to equal the average industrial wage. Currently the average milk quota size in Ireland is 40,000 gallons. That compares badly to other areas such as Northern Ireland, where the quota is 70,000 gallons, Denmark, where the quota is 100,000 gallons, and New Zealand, where the quota is 190,000 gallons. Clearly, therefore, there is enormous pressure on those who remain in dairy farming to upscale their level of production significantly in a short period. Undoubtedly, this will require a thorough restructuring of the dairy industry. The Minister has not, as yet, given an indication of how he envisages the milk quota system being restructured and how it will operate to enable quantities of scale to increase.

The Minister and the Department of Agriculture and Food must take the lead in restructuring the dairy industry. We have heard suggestions of the type of model Ireland should adopt. In particular, reference has been made to the German and Danish models. Given the need for urgent action, the Department must examine this issue and set its proposals on what is best for the Irish producer. It is predicted that there will be a decline in dairy farmer numbers from 26,000 to 18,000 by 2012. Figures released last week further highlighted the increasing number of people leaving farming. This must be a source of concern for all of us. If that is so, the question the Minister must address is what support structures will be put in place in terms of rural development to ensure those who opt out of farming will have a viable economic alternative in place to allow them to live in rural areas.

The Minister must set out what he intends to do to assist young farmers who commenced farming during the reference period. Does he envisage giving them extra assistance through the national reserve fund? What does he intend to do for farmers who bought land since the reference period? They should be eligible for assistance from the national reserve fund. Fine Gael opposed the abolition of roll-over relief in budget 2003. Given the need for farmers to increase their holdings and to upscale as a result of Mr. Fischler's proposals, does the Minister support the view that the Government should reinstate roll-over relief in the coming budget? That relief was of tremendous benefit to young farmers wishing to restructure or consolidate their holdings. Without it, it will be difficult for them to establish themselves in agriculture.

Farm organisations such as Macra na Feirme – it attended the joint committee this afternoon – and the IFA support an amendment to current tax relief arrangements for the leasing of land. In 1996, the Government introduced a tax relief on income from long-term land leasing. Under this scheme, farmers over 55 years of age or those incapacitated and under 55 years of age are entitled to earn €5,080 per annum, tax free, if they lease their land for between five and seven years. If they lease the land for more than seven years they are entitled to earn €7,620. Would the Minister support the idea of amending the current scheme to include farmers under 35 years of age – I am referring to trained farmers? This would provide an option for farmers who wish to expand production and increase scale, but who cannot afford to buy additional land at current prices. More secure long-term land leases which would provide safeguards for the landowner and the lessee are required. Longer term leasing also provides young farmers with the ability to plan ahead, something they need. They also need assurances that this scheme will run until 2013 and not be radically overhauled within that period.

The income levels for claiming relief have not been increased since 1996. Will the Minister consider increases in that area to take account of inflation? What proposals does he have to ensure that in future there will be free transfer of land between those who opt out and those wishing to expand their enterprise? The Government, in last year's budget, imposed cuts of more than €70 million on the farm sector. The Minister should not pursue a similar policy of cutbacks in the agricultural sector in 2004 as it would be disastrous for the future viability of farm families. Instead, he should create farm friendly policies, such as farm business incentives and tax incentives, to allow farmers to increase their scale of production, particularly in terms of milk quota purchase. Of particular importance is the need to address the difficulties surrounding land transfer. A crucial line in creating a vibrant and sustainable farming community is a change in the income tax code to encourage land leasing on a medium to long-term basis. This is what the Minister should be pushing for at the Cabinet table.

Suggestions made to assist the farming sector, which the Minister should examine, include reducing or removing the age restriction on existing relief on rental income, the re-instatement of capital gains tax roll-over relief and a reduction in stamp duty on land swaps to aid the building up of farms by young farmers in particular. The land transfer process must become more efficient and cost-effective to all concerned if we are to induce those wishing to remain in farming to do so. Speeding up that process will also assist those wishing to leave farming. We must encourage farmers to upscale their operations and to increase their quality of production. We must create viable conditions which will allow them to pass on their businesses to their sons and daughters as is traditional in the farming enterprise sector.

Given that the Prospectus report on the future of the Irish dairy industry noted the important role which the farm advisory body, Teagasc, plays in supporting young farmers in increasing production, does the Minister intend to significantly increase funding for that body in budget 2004? In 2003, the Minister cut funding for Teagasc by €8.5 million, forcing it to close offices and advisory centres all over the country. That is not good for farming and should be corrected immediately. That 45% of farmers are over 55 years of age and 37% have no direct or natural heir clearly demonstrates the potential crisis for farming in this country. As we speak, farming is in an extremely serious state, and it is important that we get everything right this time.

Mr. Callanan

I welcome the Minister of State at the Department of Agriculture and Food, Deputy Aylward, to the House, and thank the Minister, Deputy Joe Walsh, who has had to leave. We last spoke on agriculture on 2 July when we had a very constructive debate on the outcome of the mid-term review negotiations. There was all-round general consensus that the outcome was good under the circumstances. Both our Ministers and our officials from the Department of Agriculture and Food were congratulated on the fine job done at that stage.

There was, of course, one outstanding issue concerning the flexibility allowed to national governments to engage in full or partial decoupling or continue as previously. I welcome the fine decision taken by the Minister and the Department. I recall saying during the debate that I felt it was necessary for the Minister and the Department to engage with the various organisations and other parties around the country. They have done so, and departmental officials visited many areas, attending some 40 meetings altogether. The overwhelming result of those visits throughout the country to explain what was happening was a positive approach to decoupling. The outcome of the negotiations on the mid-term review of the Common Agricultural Policy has enabled the Minister, Deputy Joe Walsh, to introduce a simplified single payment system that will profoundly reshape the CAP.

We cannot overstate the Minister's success at the negotiations, and that contrasts sharply with his Fine Gael predecessor, whose only significant negotiation in Brussels resulted in a cut in our special beef premium quota, which gave rise to a cost overshoot in 2002.

Mr. Bradford

The Senator does not believe that.

Mr. Callanan

It is a fact.

Mr. Bradford

I note from Senator Callanan's smile that he agrees with me.

Mr. Callanan

I note from Senator Bradford's smile that he agrees with me.

An Leas-Chathaoirleach

We will have less crossfire from the Corkonians.

Mr. Callanan

We discuss matters and are still on talking terms. I am delighted to see that the Minister, Deputy Joe Walsh, has also secured a favourable outcome for the special beef premium overshoot, which will be worth some €8 million to our farmers annually. The Minister has brought forward a package of measures that will safeguard the whole Irish agriculture industry in future, making it more relevant to the rest of modern society. The Commission's proposals were for the most radical reform of the CAP since its foundation and have been the subject of detailed analysis and intense public debate, both here and throughout Europe. The issues and concerns of farmers, consumers and taxpayers have been identified and have been well known for some time.

The decoupling of direct payments from production is a fundamental change to the CAP. It will have two major beneficial effects on farmers. First, Irish farmers will now be free to provide a product for the market and the consumer. They will get a single EU income support payment, irrespective of the farm enterprise that they pursue. That will give them the opportunity to produce quality cattle that in turn will enable the meat industry to market the highest-quality Irish beef at home and abroad. Of course, the meat factories have a role to play in this new approach by starting to pay farmers to produce quality cattle. It is time that the factories came on board, stopped their negativity and met their obligations.

Second, the major advantage of the new single income support payment arrangements is that we now have the opportunity to dismantle the dreaded mountain of bureaucratic paperwork that is part and parcel of the array of schemes currently operated. The paperwork attracted a great deal of criticism from farmers, farming organisations and everyone else. Those schemes brought large amounts of money to farmers under their various headings. As they have all been grouped together into the single payment, it will make life easier and overcome the difficulty many farmers felt existed. They were pleased when the schemes were there, but the difficulty of form-filling was one hell of an issue.

Designing and implementing the new payment system will provide the Minister with a major challenge. I have no doubt that he has chosen the model best suited to Irish requirements from the point of view of maximising efficiency and competitiveness and protecting the rural economy. I also have no doubt that the new arrangements he will put in place for 2005 onwards will minimise the bureaucracy that has plagued farmers in recent years. Senator Coonan referred to the anomalies that will exist in a totally changed situation. I am absolutely certain that the Minister and the Department will take cognisance of those and try to ameliorate them as far as possible.

The Minister's complete rejection of the Commission's original degression proposals was a major success, as was the reduction in the proposed rate of modulation from 6% to 5% when fully operational. The retention of the €5,000 exemption will ensure that more than half the farmers in this country will not have modulation applied to them at all. I say to the Minister of State, Deputy Aylward, and the departmental representatives that almost all the modulated funds retained in Ireland for rural development measures should stay in Agriculture House. It is important that the fund be retained there for certain measures where assistance is required. I will ask the Minister either to enhance the existing REPS scheme or introduce a similar scheme that would further benefit farmers. I emphasise that because it has been, and could be, of major benefit to at least 50% of them.

When the agreed system is fully implemented, the Minister will retain over €34 million per annum of the €40 million raised through modulation. That is a major improvement on the original proposal, where the combined effect of modulation and degression would have resulted in €464 million being siphoned from direct payments in the period from 2006 to 2012. Other concessions secured during the negotiations include a member state's right to use up to 10% of its direct payments in one sector to encourage specific types of farming which are important for the environment or to improve quality and marketing. The farm advisory system is to be voluntary for all farmers. The national reserve may be used for certain early retirement cases.

The Minister referred to changes concerning young farmers and the benefits that accrued to them. Without listing them all, I will pick what to my mind is the most important, namely, allowing young farmers who inherit farms also to inherit any entitlements established by the retiring farmer. That is an absolutely essential criterion, and I am particularly pleased the Minister included it in his presentation. There will also be special payment entitlements for dairy and other farmers that can be traded in the same way as single payment entitlements.

The overall outcome is that the Minister has preserved the benefits of the Agenda 2000 agreement for Ireland. The agreement also has huge potential benefits in substantially reducing the administrative and bureaucratic burden on farmers by allowing them freedom to farm and respond to market demands. The new support arrangements will therefore ensure a more market-orientated and sustainable agriculture and food industry that will benefit farmers and consumers alike. It is important to include the word "consumers". There are times, when we speak of farming issues, that we forget to mention that farming is about producing food. We need consumers to purchase it. The package, as agreed, has a balance within it which repositions the CAP in the modern world. The options for decoupling direct payments will allow such payments to be made secure from challenge in the World Trade Organisation negotiations, which will recommence soon. As a consequence, the contribution of direct payments to farm incomes and, therefore, to the rural economy will be safeguarded in the future.

I have some advice for those who continue to preach doom and gloom and try to undermine the confidence of farmers.

Mr. McCarthy

Hear, hear.

Mr. Callanan

The Senator welcomes my advice.

Mr. McCarthy

I am sure the Senator will give us his advice, as a farmer.

Mr. Callanan

The Senator is dead right. The Taoiseach and the Government are running the country very well. The Department of Agriculture and Food, along with the Minister and the Ministers of State at that Department, are doing a fine job in the agriculture sector. I congratulate the Ministers and the departmental officials. It is important that we do not speak in tones of doom and gloom, as it is off-putting to young farmers who are trying to decide what they will do in life.

Mr. Bradford

Hear, hear.

Mr. Callanan

It would be an awful shame if young farmers were discouraged by the words of those who should know better. I ask farming leaders, in particular, as well as people in public life, to recognise that there is a role in rural areas for young people who are considering farming as a career. They can be well-prepared by the courses offered by the agricultural colleges, which have a legacy of success as a result of past generations. The colleges have met the challenges posed by the changes in this country since 1920. There is a future for young farmers. Rather than using the béal bocht, we should accept the reality that we are doing remarkably well. Our priority should be to manage the transition from the old to the new regime, to ensure a smooth transfer and to enable Irish farmers and our high-quality food industry to exploit the new opportunities to the full.

The Common Agricultural Policy has been in place for approximately 30 years. The policy's purpose when it was designed after the Second World War, under the Treaty of Rome, was to ensure that Europe would have food. The CAP has a certain legacy. Changes are being made at this point because circumstances are changing. Can I suggest that we re-examine the issue of land utilisation? There should be a new energy policy designed to meet the use of land. We could have a debate on the value of an energy policy based on land usage. We are talking about biomass and biofuels. People in this country have a role to play in the development of rural Ireland. There is a place for a sound and solid rural-based population for many generations to come. Such a population has served this country well in the past generations.

Mr. McCarthy

I will do my best to follow Senator Callanan, whose contribution was as eloquent as usual.

The development of Irish farming has reached a crossroads in recent years in many ways. The requirement to revisit the manner in which we make decisions on support mechanisms has dovetailed with the reform of the CAP. If one recalls the initiation of the negotiations, one will recall that their objectives were the preservation, by and large, of the financial benefits that were achieved in the context of Agenda 2000 and the establishment of a policy framework to give farmers and those involved in the agri-food sector the flexibility to adapt to an evolving consumer market and demands for international developments.

The concept of decoupling relates, by and large, to the principle of separating payments from the requirement that farmers produce specified programme crops and/or divert land from production. The removal of an inherently contradictory traditional policy – asking farmers to reduce production while implicitly encouraging more output by tying their needs to each unit of production – is a chief goal of decoupling. The simplification of payment arrangements is one of the main reasons for the Commission's proposal. Decoupling is also being proposed to encourage greater market orientation, to reduce pressure on the environment and to improve efficiency and income transfer to farmers. It will make the extension of the CAP to accession countries easier.

Another issue that may be linked to the rationale behind decoupling is a serious reduction in the amount of red tape. I would welcome such a development, because the amount of red tape has been one of the major causes of criticism of the EU's conduct in respect of farming in recent years. I hope the Minister, Deputy Joe Walsh, is correct to state that "Members' clinics will be quiet in the future" as a result of these measures, We will remind the Minister of that statement if it is not true.

I am interested in the fact that payments will be made irrespective of production. They will be subject to the requirement that land will be maintained in good agricultural condition. Certain problems are linked to establishing the reference year. Some farmers will find that they are not eligible for direct payments because they did not collect payments in the reference year. Other farmers will have invested in quota or land because they expected to receive premium payments in the future. The quota or land will remain the property of the person who sold it to them in the first instance.

I would like to discuss the effects of decoupling on output. By how much will production fall? It is important that we acquire information about that point. What will be the knock-on effects on agri-industry and agri-services? Do we have a response to that? Do we have a clear path in relation to those two issues? I know some of the proposals are rather unclear at this stage, but some clarification would be helpful. I would like to know the environmental effects of more extensive production.

I would like to refer to the heading of eco-conditionality, which was already introduced in the context of Agenda 2000. Suspicions remain about the commitment of EU member states to enforcing conditionality. Do we have concrete proposals about how this aspect of the deal will be pursued? Do we have definite commitments that member states will adhere to this part of decoupling or of the Common Agricultural Policy? The proposals relate to the standards covering environmental safety, food safety, animal health and welfare, occupational safety and the level of standards, meeting mandatory standards or applying good farming practice.

Much was made in the House earlier of Senator Maurice Hayes's comments about the need for a better Irish translation of the word "decoupling". The Irish translation of the word is "díchúpláil". It is important that I divulge some information in light of the fact that certain phrases spoken in this House have been changed in "the blacks" recently. When I returned to my office after the Order of Business, I typed the question "What is decoupling?" into the Google search engine. The definition I found—

Mr. Bradford

Is it family-friendly?

Mr. McCarthy

It is. It does not cover spam, which was discussed earlier.

Mr. Bradford

Is it suitable for a pre-9 p.m. audience?

Mr. McCarthy

It is suitable for a post-lunchtime audience, which is just as sensitive. When I searched the Internet, I found a definition of "decoupling" which said that it cuts the link between subsidies and production and allows farmers to move away from unprofitable production and to respond faster to market changes. The document I found gives about five more explanations. I will be happy to give a copy of it to Senator Maurice Hayes if he is still puzzled about decoupling. I agree there could be a better linguistic approach to the Irish version.

It was stated in the House last year, during the debate on the Nice treaty, that it was very important that it be ratified by Ireland. I am thankful we did so on the second occasion. One of the arguments made in the House at the time concerned the fact that the Minister, Deputy Joe Walsh, was negotiating the deal in Europe. It was of benefit to him at the conclusion of the Luxembourg talks that we ratified the treaty. Had we not done so, we would have sent him to Brussels, or Luxembourg, as was eventually the case, with one arm tied behind his back. He could not have told potential candidates for accession to the Union that they were not allowed to join and, in the same breath, expect to negotiate a deal that would be of benefit to the farmers and the economy as a whole. Ratification was positive and created a good platform from which he was able to negotiate the CAP.

When the talks had finished in Luxembourg, there was considerable debate in Ireland on the part of many sectors, vested interests, etc. I have stated in the House before that, irrespective of the political affiliation of the Minister of the day, it is unhelpful that comments would be made about him or his officials of the kind made on "Morning Ireland" on the morning the talks concluded. They referred to officials as being tired and to the Minister as being up all night and unclear. Such comments are not constructive when examining this issue in its entirety and do not portray in a positive way the people who are representing thousands of farmers in Ireland. They are absolutely unhelpful, personal and unnecessary.

Although such comments have been bandied about since the conclusion of the talks, it is important that we have clear and definitive accounts from Europe as to how the plan will be implemented. There is general frustration on the part of officials, the Minister and perhaps some of his negotiating team and some of the farmers who will be at the receiving end of the deal. There is a lack of clear guidance – for want of a better phrase – on how the plan can be implemented.

Mr. O'Brien

The mid-term review of the CAP, which concluded in June, represents the background to today's debate. The Minister for Agriculture and Food deserves to be congratulated on another excellent negotiating performance in Brussels. The outcome of the talks generated some criticism in certain quarters, but it would be a very unreasonable evaluation of that outcome to suggest the Minister had done anything other than meet his previously stated objectives.

The level of criticism the agreement generated was in no way justified. The reaction of some Fine Gael Members in the Dáil was hysterical. They spoke of a sell-out and bemoaned the absence of young people in farming while, at the same time, talking the industry down. It has to be said the reaction of farmers to the mid-term review has illustrated a clear desire to plan for the future in an informed manner.

More than 1,000 farmers turned out to hear Commissioner Fischler when he addressed a conference on the reform proposals organised by the Irish Farmers Journal. It has been encouraging that this constructive spirit dominated over any talks of sell-out. One of the achievements of the Minister for Agriculture and Food in the mid-term review was to get the European Council to agree to amend the proposals for full decoupling of direct payments to provide member states with a number of options to implement decoupling in a manner best suited to their requirements. In other words, we had to choose. As a result of this, a major question since the conclusion of the CAP reform talks was whether we should opt for full or partial decoupling. This was an acute question that needed to be settled quickly to secure as much clarity and certainty as is possible in the world of farming. Clearly, whatever option was chosen would have a huge effect on Irish agriculture. Consultation was necessary and the Minister made a commitment to consult with all interested parties. He has clearly delivered on this commitment.

The Minister approached reform in his usual steady and reliable manner and, as before, directed that an information-based campaign be started. Consequently, the Department of Agriculture and Food proceeded to update and inform farmers on the CAP agreement. This was a real case of the Government being in touch with the people. It is interesting, although hardly surprising, to see again how contact and consultation have prevented a panic reaction to change. It seems that farmers have been constructive and, while change is always a challenge, it has been very reassuring to see that they are willing to adapt and see the opportunities not the downsides.

The Minister received some 200 submissions on foot of his process of consultation, and he also commissioned an independent report by FAPRI-Ireland. Overall, there seems to be no doubt that the vast majority of farmers were in favour of full decoupling. In the wake of the consultation and research, the Minister has opted for full decoupling and we can all agree that, on the basis of the evidence in front of us, this was the correct decision to make. Furthermore, given the claims of sell-out last June, I was glad to see the Fine Gael Party welcoming the announcement of the Minister on pushing ahead with full decoupling.

Full decoupling is obviously a radical change in the manner Irish agriculture and Irish farmers are supported under the CAP. It will bring the reality of the market home to us all. However, it must be emphasised that the changes also present an opportunity and a renewed sense of focus on the marketplace and providing what the customer wants will be essential in making the most of these opportunities.

Full decoupling of direct EU payments to farmers from production will greatly benefit the majority of farmers. By opting for this approach we can expect a rise in aggregate income of 10% before 2012. The option of partial decoupling sought by commercial producers and processors would have allowed for an increase in income of just 4%. The worst policy option would have been to stand still because farmers' income would have fallen. I congratulate the Minister, the Ministers of State and all the officials of the Department on another job well done.

Mr. Bradford

I am glad to have an opportunity to speak in this important debate and I welcome the Minister back to the House. I was disappointed by some of the off-the-cuff remarks about the Minister's predecessors made by a number of Fianna Fáil Party speakers. As Senators from all sides of the House have stated in various debates on agriculture during the past 12 months to two years, since our entry into the European Economic Community in 1973, stretching back to the first Minister for Agriculture to negotiate at EEC level, the late Mark Clinton, our farmers and agricultural sector have been superbly represented in Brussels and every Minister for Agriculture has obtained every possible pound, shilling and penny from Community funds. The current Minister, too, has always done his best, including in the current reform project. It is petty to accuse previous Ministers of failing to do certain things. Agriculture, alone among the various sectors of industry, has been superbly well served during the past 30 years in Brussels.

This debate should be the first phase of a wider debate on the future of agriculture and farming. The question we need to pose is whether agriculture is an industry or a way of life. When one talks about agriculture being a way of life, one can be accused of being a hopeless romantic in that one is talking about what has been and gone. Things can never be the same as they were 40 or 50 years ago. If we continue to choose to regard agriculture as no more than an industry and no longer a way of life in rural areas, we will, unfortunately, arrive at a position in which our townlands will have a single farmer instead of being home to a number of farmers.

Although we are debating the detail of the European Union proposals and trying to set in stone a policy which will attract money to agriculture in the coming years, we will also need to debate the future of farming. We have not had an in-depth debate on agriculture for almost a generation. Politicians, particularly those who represent rural constituencies, must ask how many farmers we want to have in ten to 20 years. We must set a figure and try to gear our domestic agricultural policies towards ensuring that this number of farming families can be sustained in our rural areas. While I accept this will be a major challenge for the Minister and his officials, it must be done. Unless we can set out a route map, the trends of the past 20 years will continue with the number of farming families continuing to decline sharply until we are left with one farmer, rather than several farmers, in each townland, which would be a sad development.

One of the interesting aspects of the debate on decoupling was that our farmers were well ahead of the farming organisations and, I concede, the politicians. We wondered how the ball would roll and what way we should hop, whereas farmers quickly made up their minds. From day one, the vast bulk of farmers with whom I spoke favoured any change that would eliminate bureaucracy and red tape and try to simplify a complicated system. It was surprising that it took some of the farming organisations some time to catch up. We are, I hope, now singing from the same hymn sheet and the general policies contained in the Minister's proposals are broadly welcomed.

A number of fundamental questions still need to be answered. The Minister informed the House that Senators' clinics will be slack on Saturdays from now on. During the next 12 months, however, we will receive a large number of queries from farmers who are retiring or who have leased their land, all of which will need to be answered. The booklet we received from the Department two or three weeks ago was helpful and while I accept that it is not yet in a position to answer all questions because they have not been answered in Brussels, I look forward to the loose ends being tied up in order that we will be able to provide specific answers to specific queries.

As with all negotiations some people will probably draw the short straw. We must try to make provision for those who through various circumstances are set to become the biggest losers from this process. I trust we will return to this issue in future debates and hope these questions will be answered in the near future.

I also hope the national debate I have called for will act as a counter-balance to the negativity in the debate on agriculture in recent years, to which Senator Callanan referred. We express surprise about the large number of young people drifting away from agriculture and regret that so few people proclaim farming as their chosen profession. Why should we be surprised? If every doctor were to tell his or her sons or daughters that medicine had no future, nobody would do medicine in Cork or Dublin. If every carpenter told his or her sons or daughters the trade was a disastrous way of life, who would want to become a carpenter? If every computer scientist put out the word that there was no future in computers, companies would not expect recruits. For too long, the debate on agriculture has focused on saying there is no future in the sector. We should not be surprised that young people have not flocked to the farming fold. We must try to be positive about the sector and paint a clear and optimistic route map for it. If we do not succeed in attracting young people to return to farming while, at the same time, retaining others in the sector, it will be a great failure on our part.

Senator Callanan also referred to land policy, which also needs to be debated extensively. As with all of these issues, it will be controversial because the question of land use and policy has been contentious, harking back to the 1950s, 1960s, 1970s when there was a socialist tinge to the issue and eastern Europe countries conducted failed experiments in this area. If we want to indicate to farmers that we are serious about keeping them in farming and retaining their sons and daughters in the sector, we have to show there is a way ahead.

Senator Callanan stated that land policy should take energy policy into account, which is somewhat similar to previous debates in which it was suggested that people get involved in deer farming and other alternative farming methods. Many people got in at the deep end and we suddenly realised it was not sustainable to have 50,000 people involved in deer farming or producing wind energy, alternative crops and so forth. Nevertheless, the market has room for alternative energy crops, wind farming and so forth. While these are not a complete solution, they form part of the overall jigsaw of solutions and should be examined in greater detail.

The Minister mentioned further aids for young farmers, all of which I welcome. Will he outline the position on installation aid grants, which the Houses have debated on a number of occasions? Is it correct that we still do not pay the maximum level of grant available under EU regulations? If that is the case, we must ensure that maximum installation aid grants are paid at the earliest stage possible. Reference was made to REPS payments by other contributors. The rural environment protection scheme has a major role to play both economically and environmentally. Perhaps the Minister would let us know if he has plans for the scheme.

I welcome this as a first step in building a degree of certainty about the future of agriculture. This lays down the parameters and the ground rules but, from a policy perspective, the Oireachtas needs to decide how Irish agriculture should develop and how many people should remain in agriculture. If we set targets, they can be achieved but they will require courageous and often controversial decisions. The alternative is to let the big farmers become bigger and the small farmers disappear. That is already happening and rural Ireland is beginning to pay an enormous social cost for our neglect in that regard. I look forward to a vigorous debate on how to reverse the tide.

Mr. Scanlon

I welcome the Minister's positive speech. It is now over four months since the conclusion of the mid-term review of the Common Agricultural Policy. This time has afforded us an opportunity to reflect and deliberate on what is best for Irish farmers and, indeed, Irish consumers. It is obvious that not only will the reforms work to the financial advantage of most Irish farmers but consumers can expect to be supplied with produce of superior quality. In addition, the CAP reforms will have a beneficial environmental impact in terms of lower levels of air and water pollution.

The process has yet again shown that we have an adept and reassuring Minister for Agriculture and Food. He is one of the longest serving Ministers in Europe and one of the most experienced. We were fortunate to have a Minister of his calibre on this occasion. In the course of the review he behaved in a calm and collected fashion, refused to indulge in alarms and secured important concessions from the original proposals tabled by Commissioner Fischler. The farming organisations, as Senator Bradford pointed out, did not know which way to jump but the Minister had a decision to make. He made that decision and I believe Irish farmers, recognising the work the Minister did, are happy with his decision. The Minister also faced up to the concerns expressed by those who were most anxious about the prospect of reform. He and his Department have sought to explain the changes in a reasonable and reassuring manner.

At all times, the Minister has stressed that while change will be challenging, there will be benefits. The prognosis for Irish agriculture is positive but only if we learn to adapt to change. As in any other area of life, we must remain open to new opportunities as they arise. The Commissioner, Franz Fischler, played his part in briefing Irish farmers by meeting 1,000 of them at a function organised by the Irish Farmers Journal.

The case for full decoupling is clear. It will allow the country maintain the existing level of financial support for agriculture, regardless of farm output level. With regard to the important cattle sector, it is understood that cattle exported live to other EU countries will be entitled to the slaughter premium in those member states which have chosen partial decoupling. This is most welcome and will provide a shot in the arm for the live export trade. It should dispel any anxiety and apprehension that may exist among farmers about opting for full decoupling. With full decoupling, farmers keep the value of slaughter premia in their decoupled single farm payment while, at the same time, cattle exported live can collect a coupled slaughter premium. With full decoupling, all payments, including the slaughter premium, will be used to calculate the single farm payment.

Not everybody will benefit of course. The larger commercial producers of beef will suffer some setbacks. There is no doubt the numbers of cattle and sheep will fall. However, the analysis and research undertaken by Teagasc has demonstrated that the great majority of farmers will benefit from full decoupling of farm production from direct payments. It is likely that aggregate income will increase by 10% before 2012. The alternative option of partial decoupling that many commercial producers and processors wanted would only provide for a 4% increase in income. A no change approach was unrealistic as an option because it would see farm incomes fall by 9% in the long run.

A critical factor in the future of Irish agriculture is going to be the attention producers pay to the demands of the consumer. As the Minister said in a recent newspaper interview: "the decoupling of support from production will help create a market environment which will be more orientated towards consumers' needs and should allow clear market signals on pricing and quality issues". Decoupling could prove to be a liberating experience for farmers as it may well enable them to diversify and participate in opportunities that might offer the best margins from production.

Our top dairy, beef, sheep and tillage farmers are among the finest in Europe and the world. We now have the chance to adapt production systems to real need rather than premia payments. This redirection of farmers' efforts will have a positive impact on quality and will help food processors in developing and supplying quality markets. We also should not forget the positive impact on the environment that full decoupling will bring about by reducing the negative contribution to greenhouse gas emissions by agriculture.

Now that the Minister has made his decision we must look to the future with a renewed sense of optimism. It is good that the Minister has opted to make the change as early as possible. To use a term often used by another Cabinet Minister, the sooner we adapt to the "new reality", the better. The Government was explicit throughout the summer that whatever decision was made, we would not have to wait until 2007 to implement it. We can now go forward knowing this Government has listened to the industry, taken opinions on board and made it decision accordingly. The majority of farmers favour the option taken by the Minister. The positive and constructive attitude exhibited by farmers and the industry means we can go forward with confidence.

Earlier today, the committee on agriculture heard a presentation from Macra na Feirme. Members of Macra na Feirme are optimistic about the future of agriculture. They gave a fine presentation to the committee. I do not have time to deal with every issue they raised but a number of positive measures were proposed. One of them, which the Minister might examine, is the issue of rollover relief for young trained farmers who, as a result of compulsory purchase orders, have land taken from them for the provision of roads. Perhaps the Minister would allow them to benefit from rollover relief in such cases.

Another request was that young trained farmers who qualify for entitlements would have their entitlements spread over their existing holding rather than force them out into the market to buy more land. Other issues were raised but I am sure they, too, will be brought to the Minister's attention.

Mr. Bannon

I hope much of the bureaucracy will be taken out of farming. As we speak, there are tribunals taking place in various parts of the country where farmers are brought before a court of officials to account for why an animal died and the reason they were unable to replace it. Farmers are losing up to 16% of their benefits as a result of non-replacement of an animal that dies.

Only last week I was made aware of a case where an animal died last July. The herdowner was a small farmer and he was told there would be a reduction in his payment as he would lose rights on two animals in his herd. I know the man well. He has many commitments and he has a young family he is trying to send to school. He told them honestly that the animal died and that he could not afford to replace it. However, he was not allowed to claim a premium. Is that fair in farming circles or in society? Perhaps the Minister could consider such cases in any review which takes place. Perhaps he would consider having a discussion with some of the inspectors about being more lenient in cases where accidents have occurred. Anything can happen to a farmer's animal and it may not be possible to replace it at that time because of cost factors, etc. I ask the Minister to take that on board.

What will the full decoupling of agricultural payments, due to be introduced from 2005, mean to Irish farmers? Weeks after its announcement by the Minister, most farmers can only guess what it will mean to them. This issue must be clarified. The big question for every farmer is whether the introduction of decoupling will signal the end of their farming careers or an enhancement of their current position. Full decoupling of all EU farm payments is undoubtedly the best policy option for our agricultural industry. The analysis by the economists who have completed research points to the fact that the highest level of farm incomes will be achieved by full decoupling or the complete removal of the links between farm production and payments. We are promised a considerable aggregate increase in incomes by 2012 compared to the income level under current policies.

Nothing stands still, therefore, change is important. There is an old saying that nothing is permanent, except change. Change must take place. Perhaps the Minister could explain in detail the proposed changes which will take place in the agricultural trade policies under the World Trade Organisation. I understand there will be a shift of emphasis in the policies. I hope the market floodgates are not opened. It is important to get clarification in that regard.

From January 2005 the link between EU subsidy payments and production will be broken. Farmers will receive annual payments based on the amount of subsidies claimed in the 2000 to 2002 reference period. Consideration should be given to people who had outbreaks of TB or brucellosis during that period and to those who were affected by a catastrophe outside their control. To qualify for his or her full payments, which will be payable in December of each year, the farmer must manage the same area as that farmed during the reference years. Perhaps the Minister could clarify if that must be exactly the same area or if it can be a reduced area. If a group wants to use some land for recreational purposes, a farmer should be allowed to let it without affecting his or her payments. That should be considered, particularly if we want to become more environmentally friendly. Given that payments depend on whether a farmer collected payments during the reference years, some farmers will lose out heavily and some will be short-changed by such a blanket agreement.

Sheep and beef quotas will disappear which will allow a farmer to enter or expand these enterprises without the current entry costs. Phrases, such as slaughter premiums, special beef premiums, retention period and suckler cow and sheep quotas, should disappear from farming vocabulary for good. While full decoupling of all beef payments from production is the best option for incomes, we will probably see a reduction of almost 20% in suckler cows, which will lead to a reduction of approximately 8% in the amount of beef production. However, price increases of approximately 10% and reduced farm costs will result in the least income prospects.

The new arrangement for dairy farmers will result in a huge decline in the number of dairy farmers from the current figure of 27,000 to under 18,000 by 2012, with an average quota of approximately 65,000 gallons. Early decoupling gives dairy farmers the option to get out of milk, while retaining their payments. The farmers to whom I have spoken want the Minister to clarify that point. Beef producers will be better off as a result of full decoupling, while the big losers will be the factory or commercial farmers. There are not many such farmers because we are a country of small farmers compared to other countries in Europe.

The number of sheep will decline by approximately 20% of current numbers. However, the experts say this decline will be offset by increased prices, which will lead to a slight increase in the value of sheep output by 2012. When we joined the EU, we were told that anyone who became involved in the sheep industry would not do well. However, sheep have given farmers considerable profits over the years and that must be recognised.

Ireland has become the first EU state to completely break the tie between farm production and EU payments, which brings to an end 30 years of subsidy driven farming. It is imperative that hearsay and rumour do not play a part in the transition and that every possible means at the Minister's disposal are used to keep farmers fully informed of their rights and entitlements over the next two years so that an easy transition can be made. I hope that booklets are available in the near future. Senator Bradford referred to the one which was published in September. Farmers must be kept fully informed of any decisions made about full decoupling. I welcome the support available to young farmers and I hope there will be less bureaucracy in the administration of the scheme for young farmers than was previously the case.

Dr. Mansergh

I wish to share my time with Senator Kitt.

Acting Chairman (Mr. Mooney): Is that agreed? Agreed.

Dr. Mansergh

I welcome the Minister to the House. I welcome the successful model execution of a reform, namely, that one studies the question carefully with experts, but one also brings in the interest groups and tries to reach a maximum consensus on the solution. As far as I can judge, most farmers and other interests are either happy with the decision or at least accept it. There are other ways to bring about political reform. There is the crusader approach where the forces of light are on one side and the forces of darkness are on the other. A third approach is what I might call the harlequin approach where one takes on all comers from all sides. However, I prefer the Minister's approach, which, from my experience, is also the Taoiseach's approach.

The elimination of much of the paperwork will be welcomed by farmers. I have come across cases where people have lost large sums of money through minor oversights or technical errors.

It will also mean the redeployment of quite a number of civil servants. No doubt they will be anxious in due course to hear what they will be doing next. There will also be a greater element of commerciality. People will be able to judge what work they will do not only on the basis of subsidies. Also, if prices rise farmers will receive a better return.

It is important that certain minimum standards are maintained. If farmers are in the REP scheme that is taken care of, but we do not want to see a deserted countryside and it is important to the community that farming be maintained. In any case, 2012 and 2013 will eventually come and people will need a base from which to go forward.

As I said in the debate here last week, I disagree with the view of the ESRI that investment in farming should be scaled down. If we are to maintain a certain level of production we need ongoing investment. The reduction in sheep numbers will be an environmentally friendly development because there was overstocking a few years ago. I am pleased that forestry will be re-integrated into the Department of Agriculture and Food from next year. This will result in a much better synergy and perhaps progress will be smoother.

I have found that after a good year, especially from the point of view of weather, there is much optimism among farmers and people begin to think about their plans for the future. The Minister should explore the ideas put forward by Senator Callanan about a possible role in energy development. Active consideration of REPS is also going on. I welcomed Senator McCarthy's opinion that as the Minister and his advisers are negotiating to the best of their abilities in Brussels, people should pull behind them rather than criticise them.

During a trip to the Middle East recently, I visited Jordan and Palestine, which are mostly very barren. I saw a few flocks of sheep and goats but wondered on what they fed. It reminded me forcibly how fortunate we are in this country to have an ideal climate for agriculture and how important it is that the sector continues to be a major part of national life.

Mr. Kitt

I welcome the Minister who mentioned that agreement had been reached by the Council of Ministers in Luxembourg on 26 June last. Reading some of the newspapers at that time I noticed that the Minister was being severely criticised by the farm bodies. An article from July states that farm bodies are turning on the Minister over reform. It was interesting to hear the IFA opinion that a very bad deal was on offer. The ICMSA said the Minister should be criticised for his failure to defend Irish farming interests. The Minister showed that he is a capable negotiator, but one of the best things he did was to hold information meetings throughout the country. I attended one with my colleague, the Minister of State, Deputy Treacy, in Loughrea and there was a great welcome for full decoupling. The only issues raised that evening were the farm retirement scheme, which has been mentioned, and the question of young farmers and quota. I hope those issues will be considered, especially from the point of view of the national reserve.

The Minister and the Department have made it clear all along – they said this as far back as July – that 100% production was still needed, even with partial decoupling of subsidies. There was no way people wanted partial decoupling; they wanted to go down this road and the Minister has responded to this. However, he has also shown us the great benefits involved in achieving this Agenda 2000 agreement, such as the great flexibility mentioned by Senator Callanan and the lack of bureaucracy. Getting rid of paperwork will be a welcome development among farmers, who are well ahead of us and the farming organisations in their thinking about the future. The Minister mentioned the savings of €464 million that will be made through changes in the degression and modulation proposals, which are to be welcomed, along with the removal of the proposed reduction of up to 13% in direct payments to meet future financing needs. The proposed rate of modulation has also been reduced from 6% to 5%, with a return to Ireland of €34 million of the €40 million modulated.

As a Senator from a rural area I feel the objective of retaining modulated funds within Ireland for rural development measures is important. This has largely been achieved by the Minister. It is important that young farmers receive the benefit of this. Environmental measures should also be introduced because these issues are important in rural areas. For example, the issue of good water supplies and sewerage schemes in our villages and towns must be considered. If we must obtain help through this measure I would like to see it put in place. It is important to consider what we can do for young farmers and those who may feel they are caught by the farm retirement scheme.

Minister for Agriculture and Food (Mr. Joe Walsh)

I thank every Member who contributed to this debate. The Seanad is an ideal forum for discussing an issue such as this because there is no great emotion and people speak sincerely about their concerns. Debate such as this is helpful to me as Minister.

A number of the issues raised are of vital importance to people in the future. Concerns were expressed about farmers whose herds suffered because of animal disease during the reference years 2000 to 2002 and farmers whose families had undergone difficulties in that time. Those people will be regarded as force majeure cases. We had an example of this during the foot and mouth crisis of 2001 when some herds were entirely wiped out. These people are obviously entitled to full credit. They will be the first people to be credited – their quota will be given out first, followed by the 3% reserve, and the remainder will be divided out in quota entitlements to individual farmers. The type of cases regarded as force majeure cases are those in which the death or long-term illness of a farmer, a natural disaster, the destruction of buildings by lightning or similar, or animal disease such as BSE, brucellosis or TB, occurred during the reference years. The farmers in these cases are certainly entitled to full credit.

Another category about which people were concerned was farmers who suffered penalties because of a mundane error or minor miscalculation of some kind. I did negotiate this. Those penalties will not be taken into account in forming the entitlement for farmers; they will receive their full entitlements. There are also new entrants to farming. These will be a priority category in obtaining quotas from the national reserve. This is right because in order to have to have a younger generation of farmers we must give them hope and offer them a chance of succeeding by giving them a decent quota. Younger farmers with inadequate quota are entitled to make a case for additional quota from the national reserve. I am pleased the Commission gave us some leeway in this regard.

We also have farmers who for one reason or another did not measure up to the entitlement. In some cases, farmers got into farming in one or two years and they have a more equitable distribution of their entitlements. As a number of Senators said, next year will be busy because the Department will have to make out entitlements for each individual farmer. There will be a percentage of farmers who will be aggrieved or dissatisfied with their entitlement and we will do our best to ensure equity prevails. To be as fair as possible, I intend to set up an appeal system to allow people make an oral presentation before an appeals board, with their adviser or advisers, and get the fairest return possible. In making out the entitlements, establishing the appeal system and keeping up the payments, next year will be extraordinarily difficult and busy for the Department. As Senator Bradford said, the clinics probably will be fairly busy as well because individual farmers will want to get as good a deal as possible.

Full decoupling has been acceptable to individual farmers and farming organisations mainly because it takes the bureaucracy out of farming and allows farmers to get on with the business of farming – I believe farmers will surprise us all by doing a great job in that regard. We are talking about farming for the marketplace and it has been clearly shown at some of the information meetings referred to that the single farm payment is not the best deal for farmers. The best deal is to have the cushion of the single farm payment, engage in good professional farming, perhaps reduce one's stock a little, cull the inferior stock, maintain better quality and operate a more efficient farming system. Teagasc people, particularly at the information meetings, showed that farmers can increase their income substantially by doing that.

Another important aspect of the reform of the Common Agricultural Policy is that it will stand us in good stead in the rejuvenated World Trade Organisation talks referred to earlier. Unfortunately, as Members will be aware, those talks broke down at the Cancun conference, but in the fullness of time they will be put back on the rails. The fact that we have decoupled means that payments to farmers are no longer coupled production. They are no longer regarded as aids to production. They will go from the blue box into the green box and they will be free from challenge in the WTO talks. That is important for the future and it will be a source of consideration for farmers because they will know where they will stand for the next ten years or so.

Senator Mansergh made the good point that we have the benefit of consensus Government and this is a classic example of negotiation and consultation and information made available to farmers. The social partners were asked to submit their views, which they did, and based on all of that collective information, we made the right decision. I appreciate that the political system also showed a good deal of consensus in reaching the decision.

Senator Callanan raised the issue of land use and an energy policy and referred in particular to the possibilities for alternative energy use. I strongly support such moves. A co-operative in Bandon, in west Cork, is to the forefront in developing alternative energy uses, particularly green energy sources. There is a great opportunity for that and there will be a further opportunity with the natural resource of forestry coming within the remit of the Department of Agriculture and Food because that is an ideal land use activity. I would like to think I would be able to inject some dynamism into that area of activity because with decoupling and further land becoming available for use as a forestry resource, and the combination of forestry and the rural environment protection scheme, a synergy exists of which we can make good use over the coming years.

I thank the Senators for their positive and unbiased contributions to the debate. I will take the various points made into account and if anybody wants a copy of the Department's information booklet, we will make it available. We will have to await the final detailed text, which will not be available for the next eight or nine weeks, before we can definitively publish an information booklet, but in terms of making the information available up to date, we can do that. The idea of making the decision now and making the information available was to let farmers and the industry know in good time the outlook for the future, thereby allowing them to make their decisions and get away from the confusion or lack of information available to them.

Mr. Callanan

On behalf of Seanad Éireann and the Members present who took part in the debate, I thank the Minister for coming to the House and for the presentation he made. I thank him in particular for his clarification of the points raised, which we know will be debated further.