I am pleased to present the Estimate for the Department of Agriculture, Food and Forestry to the Select Committee. My colleague, Deputy O'Shea, and I look forward to dealing with any questions which may arise. I will sketch briefly the background against which the 1994 Estimate for the Department must be seen. I will then comment on a number of the subheads in the Estimate, which are of most interest to members.
Last year was a good year for Irish agriculture. The increase in aggregate farm income was pleasing following a particularly good year for farm incomes in 1992. As in most years, the growth in farm incomes was not distributed equally across all sectors. While prices for the main commodities — milk, beef and sheep — remained buoyant, pig prices were down substantially on 1992 levels and cereal volumes were adversely affected by poor weather conditions last year.
The performance of the sector in the first four months of 1994 has also been satisfactory. In particular, cattle prices have remained firm and are up on last year's levels, while milk prices to date are up. Prices in the sheep meat sector have been strong and I expect this trend to continue for the remainder of the year. However, the poor weather conditions over the winter and spring may have some adverse impact on cereal volumes this year. On a positive note, the level of direct payment, that is, premia, headage and arable aid should increase substantially this year.
Since this committee last considered the Department's Estimates, approximately one year ago, a number of important political decisions have been taken which will shape the policy environment for the agriculture and food industry until the end of the decade and beyond. These decisions have been taken at different levels, nationally, by our Government, at European Union Councils and, in the context of GATT, at world level.
Before going on to the detail of the Estimate, it is useful to reflect on these decisions and to indicate how the choices the Government made in the context of the Estimates fit into a coherent policy for the future. Earlier this year, the Programme for Competitiveness and Work was agreed between the Government and the social partners, including the farm organisations. The overall agreement contains a programme for competitiveness and rural development designed to help prepare Irish agriculture and the food sector for the more liberal trading environment which will arise from CAP reform and the GATT outcome. The main focus of the programme for competitiveness and rural development is, therefore, to increase the competitiveness of the core sectors of the agricultural economy as well as to encourage farm diversification and rural development measures.
The Programme for Competitiveness and Work has affirmed the overall strategy set out in expert group report on the food industry. This strategy underpins the measures in the sub-programme for the development of the food industry in the National Development Plan. Central to this strategy is the importance of investment in research and development and human resources, as well as the promotion and marketing of Irish food. As Deputies will have seen in the Estimates, provision has been made for the establishment of An Bord Bia, and the Bill to establish this body is before the House. I expect that An Bord Bia will begin functioning along the lines envisaged in the expert group report in the coming months.
At European Union level, 1993 saw the first full year of implementation of the CAP reform measures and 1994 will see further developments in the second year of the revised arrangements for the agricultural sector. The reforms represent a shift in the nature of agriculture income assistance away from market support towards significantly increased direct payments to farmers.
The Government has provided additional resources to ensure that headage and premia payments are made at the earliest possible date. I will speak about this in more detail when dealing with the relevant subhead.
The shift in the balance of support towards direct payments to farmers was a crucial element of CAP reform. A further crucial element was the set of accompanying measures — covering farm retirement, agri-environment and forestry. I am delighted that in 1994 each of these schemes will be in operation. I will refer to these later in the context of discussing the individual subheads.
A further EU development of major importance to the future of rural Ireland is the agreement on Structural Funds. Negotiations on Structural Funds with the EU Commission on Ireland's National Development Plan 1994-99 are now at an advanced stage and a Community support framework for Ireland will shortly be agreed. Parallel negotiations are ongoing in Brussels on the various operational programmes necessary to drawn down the funds. Over the six year period it is expected that the operational programme for agriculture, rural development and forestry, together with the food sub-programme which will form part of the industrial development programme, will attract total public funding of the order of £1.4 billion.
At international level, the GATT negotiations finally concluded late last year and the outcome on agriculture was quite satisfactory. The final agreement addressed almost all the concerns I had identified with the Blair House agreement and it provides a stable base from which the Irish agri-food industry can plan its future. That future will be a more competitive one but this is a trend which had been signalled and for which the industry had been preparing for some time. The task over the coming months will be to ensure that the agriculture agreement is implemented in an equitable manner which respects Irish agri-food interests.
I also recognise there will be, over the medium term, a move toward freer trade in agriculture and food products. We have to prepare for this by increasing the competitiveness of our industry, as envisaged by the programme.
These are the realities, at domestic, European Union and international level and in the food industry, which influenced the decisions my Department and I made on the Estimates. Details of the Estimates have been circulated to Members but because of time constraints, it is clearly not possible for me to comment on each subhead. Instead, I will focus on those which I think are of most interest to this committee.
As Deputies are aware, the administrative budget system applies in my Department as in other Departments. The administrative budget agreement for the 1994-96 period being concluded with the Minister for Finance set the basic allocation for administration and running costs for each of the three years covered by the agreement.
In the context of the 1994 budget I am pleased that additional resources have been made available to help implement the changes arising from the Common Agricultural Policy reform and the Single Market and to continue to implement information technology and the management and control provisions of European Union and domestic schemes.
My Department was not as advanced in its information technology during the 1980s as were some other Departments. However, significant progress in this area has been made in the past couple of years. I am very committed to ensuring that this progress in information technology in the Department is accelerated.
Indeed this has already been done; otherwise it would simply not be possible to meet the very significant demands of the new CAP. The reformed CAP involves a shift towards more direct payments to farmers. So effective information technology which will enable these payments to be made in as timely and accurate a way as possible is of critical importance to the farming community.
At the same time there will be an improvement in my Department's ability to comply with its regulatory obligations and in its accountability to the Dáil and to the European Union Commission.
I am also pleased to announce that in the administrative budget this year provisions are made for the refurbishment of part of Agriculture House. That work is expected to commence in the next few weeks.
The allocation for Teagasc for 1994 shows a 19 per cent increase on the 1993 outturn. The grant-in-aid for general expenses and for pensions together account for about two-thirds of Teagasc income. The 1994 allocation includes £2.5 million towards the cost of restructuring the organisation to allow maximum use of the opportunities arising from the increased Structural Funds and to address the key challenges facing the agriculture and food industry following CAP reform and the new GATT regime.
Effective information technology is also vital to the national effort for animal disease eradication. Under subhead C2, a sum of £42 million is included to cover the running costs of the bovine TB and brucellosis eradication schemes. The current running costs of the schemes are shared by the Exchequer and the farming community in a ratio of 1:2.
The contribution of the farming community is provided through the collection of disease levies. Revised compensation arrangements have recently been put in place. The new rates which are backdated to 1 January 1994 take account, for the first time, of higher yielding cows and the potential production of in-calf heifers in setting grant rates. The overall package has been unanimously welcomed by the farming organisations. The changes represent a significant improvement in reactor compensation levels and is a serious effort to enable herd owners to replace valuable dairy stock lost through a disease breakdown. The securing of European Union funding for the bovine TB programme will of course provide amplified resources needed for a significant initiative to press for a reduction in the level of the disease including the expansion of the vital research needed to bring essential new technology on stream. I continue to maintain a vigorous case for this funding and we can achieve success in our efforts to have additional resources put into the European Union veterinary fund. Meanwhile, a full round of testing on the national herd has commenced.
The horse racing industry will benefit by an additional £2 million above last year's record grant-in-aid of £4.3 million. With access to this generous funding the new Racing Authority will be well positioned to accelerate the much needed development of the equine industry.
On the greyhound industry, an additional £600,000 grant-in -aid is being provided to the new board of Bord na gCon. The board is currently preparing a strategy for the industry within which the increased funding will be used.
Provision of £1 million has been made for relief to horticulture and potato growers, who suffered serious losses arising from very heavy rainfall last summer. Payments commenced this week and the final cost of the scheme will be nearer to £2 million than the £1 million originally provided in the Estimate.
The overall provision of some £34 million for 1994 shows a 15 per cent increase on the 1993 outturn for on-farm investment. The allocation this year will cover ongoing expenditure under the farm improvement programme, installation aid to young farmers, and new schemes proposed under the national plan.
There is an increase in the provision for headage payments from £82 million in 1993 to £135.4 million in 1994. The 1994 Estimate also includes the additional £10 million provided in the context of the Programme for Competitiveness and Work. This is the first step in meeting the commitment in theProgramme for Competitiveness and Work that over the period of the programme, payments to farmers under the headage schemes will be made by October of the year in question.
It has been agreed in the context of the Programme for Competitiveness and Work that the timely and efficient payment of headage and premia grants is a major priority for the Government. I am glad I have secured extra resources in each of the last two budgets so as to ensure improvement in the delivery of these payments.
In 1993, a new centralised unit for dealing with special beef premium applications was set up in Portlaoise where over 100 staff are employed. This year I announced a further investment of £4.8 million to upgrade technology and provide additional staff in the Department in order to achieve the optimum delivery of services to farmers with special emphasis on the timely payment of headage and premia grants.
Given the very substantial increase in the volume of applications the record level of payments of some £377 million achieved in 1993 speaks for itself. Since the beginning of this year further payments amounting to over £140 million have been made. Over £50 million was paid out in April alone.
I intend to move progressively to a streamlined system for the delivery of all direct payments to farmers. The system will be as simply as possible while remaining consistent with EU regulations and enabling payments to be made as early as possible. I am satisfied that considerable progress has already been made in this regard.
The current payment levels have been achieved against a background of EU regulations which precluded any payment under the suckler cow and special beef premium schemes before November 1993, and even then, limited to an advance payment of 60 per cent. Payment of the balances due under these schemes was subject to EU regulations relating, in particular, to the ceiling on eligible animals and stocking density. In fact, member states are obliged to process all applications received from an applicant in the course of a year before paying out the balances. The November 1993 tranche of applications were therefore a factor in the payment of balances. Payment or foot of November 1993 applications commenced at the beginning of April 1994 and this allowed for payment of balances under all 1993 schemes to commence in April.
Ireland's performance in the delivery of these payments compared more than favourably with that of most other member states in the European Union. No advance payments under the suckler cow premium and special beef premium were made in several member states. The CAP reform measures have resulted in a considerable extra administrative burden on farmers and administrators. I appreciate that many of the schemes are highly complex and farmers have found it necessary to devote much time and effort to the completion of the necessary back-up documentation which is an essential part of the new regime. My Department, in conjunction with Teagasc, has made very effort to give the necessary information and help to all farmers.
Given that the schemes involve considerable amounts of money — as much as £640 million when the CAP measures are fully in place next year — it is not unreasonable that the EU lays down strict conditions for the filling of forms and the meeting of other requirements.
Farmers can help in the speedier delivery of payments by ensuring that the necessary documentation is completed carefully and fully. The experience with some of the 1993 schemes confirms that some farmers are not as careful as they should be in this regard. Incomplete or incorrect application forms is the principal factor holding up payments. There is no delay in getting payments to any farmer who makes an effort to ensure that all documentation is correctly completed.
As most Deputies are aware, the 1994 Vote represents only a small percentage of the expenditure handled by the Department. It does not, for example, include FEOGA guarantee expenditure in Ireland, which is expenditure funded by the EU budget or market support measures such as export refunds and intervention purchases. FEOGA guarantee expenditure in Ireland last year amounted to almost £1.2 billion. During the same year the Department took some £200 million worth of beef, butter and barley into intervention. In the overall context of FEOGA guarantee activities the Department's borrowings, as intervention agency for the EU in Ireland, at the end of December 1993 amounted to £503 million.
Expenditure incurred by the Department in purchases of intervention commodities is met from funds borrowed by the Department. The borrowing costs and the technical costs of storage, freezing, handling, transport etc., is initially met by my Deparmtent subject to subsequent part recoupment by the EU budget.
There were no significant developments in intervention stock levels of dairy products in 1993. This was due mainly to a relatively buoyant market for skimmed milk powder and a stable market for the butter sector. Beef intervention stocks, however, have been reduced dramatically since the beginning of 1993. This is a reflection of the firm market conditions which have resulted from the substantial reduction in beef production in the European Union and in eastern Europe as well as the reopening of some important third country markets. Irish exporters responded well to improved market conditions and consequently Irish sales of beef into intervention in 1993 were down to a quarter of the 1992 level. It is anticipated that there will be little of no use of intervention this year. On intervention stocks, it is a matter for the EU Commission to determine sales disposal programmes for these products.
Due to the large amounts of money needed to fund the CAP the Department is authorised, subject to the consent and guarantee of the Minister for Finance, to borrow to fund the system. The decreased provision for 1994 is due to once off devaluation costs which arose in 1993 on some foreign loans resulting from the devaluation of the Irish pound in February 1993.
The provision for the Leader and INTERREG subhead has more than doubled on the 1993 out-turn. The increased allocation is designed mainly to deal with the demand which will arise for 1993 claims which will not mature until this year.
As part of the CAP reform, three accompanying measures, part funded by the FEOGA guarantee section of the EU budget, are being introduced in member states. The start-up costs of the agri-environment scheme —£10 million — and the early retirement from farming scheme —£7.5 million — are being provided for in this year's Estimate.
Another part of my portfolio receiving substantially increased funding in 1994 is forestry under Vote 32. Increased expenditure in 1994 reflects the Government's ambitious plans for the development of the forestry sector. It is proposed to spend almost £50 million in 1994 on grants to promote forestry. The expansion of the national forest estate is a priority. Ireland's forest estate currently covers approximately 7 per cent of the country and the National Development Plan sets a target of 10 per cent to be achieved by the year 2000.
In 1994 we estimate that close on 25,000 hectares can be planted and if we can achieve this it would be a significant step towards attaining the ultimate target of 30,000 hectares per annum. Even then, we would still be a long way behind the average throughout the European Union which is just under 25 per cent. That the EU is not self sufficient in timber supplies means that there is a ready market for quality timber and timber products at competitive prices. We have the opportunity to exploit this market and the launch yesterday of increased afforestation grants and forestry premia, which are reflected in the 1994 Estimates, will add momentum to the forestry development programme.
The Minister of State, Deputy O'Shea, and I will be glad to answer questions later.