Mr. Tom Loftus:

Thank you, Chairman. The opportunity to discuss the European Commission proposals relating to official controls along the agrifood chain, and particularly the proposals relating to fees for such controls, is welcome. I will cover the current cost recovery regime, proposals for change, and the Department's current position on the proposals.

Current EU rules under Regulation (EC) No. 882/2004 require charging of mandatory inspection fees only for a limited range of official control activities; principally, controls in the meat and milk sectors and controls at borders. Historically, these were the areas in which methods of control by various member states were first harmonised at EU level. External research, carried out in 2009 for the EU, concluded that the overall objective of ensuring that adequate financial resources are provided to perform official controls is not being met throughout the EU. It also pointed out the unfairness of a system to which only certain sectors contribute and which does not discriminate effectively between compliant and non-compliant behaviour. A further study in 2011 highlighted the difficulty in quantifying overall control costs, and a diverse spread in cost recovery between member states.

The Commission proposal is designed to ensure full cost recovery by extending mandatory fees to cover all controls performed on businesses operating under food and feed hygiene regulations, as well as operators defined in plant health and plant reproductive material, PRM, law. Microenterprises would be exempt in order to fulfil a commitment to lower the burden on very small businesses.

The rationale behind the Commission proposal is as follows: to generate a reliable flow of funding to maintain controls at a level justified by the risks; to ensure that business activities that benefit from efficient controls participate in financing them; to minimise dependency on funding from public finances; and to prevent discriminatory treatment between operators located in a member state where the user-pays rule applies and those located in a member state where that is not the case. It is proposed that fees may either be calculated at a flat rate, on the basis of the overall costs being spread across all operators in a particular category, or on the basis of direct application of the actual costs of each individual official control.

The two main areas where cost is recovered in Ireland at present are the meat and milk sectors. The amount recovered from the milk sector, through a levy of 0.1 cent per litre of processed milk, was €5.2 million in 2012. These receipts are sufficient to fully recover the cost of the Department's food safety inspection service in the sector. Fees paid in the meat sector are mainly based on the level of throughput - for example, unit fees for animals slaughtered, ranging from €5 for cattle to €0.01 for small poultry. The amount recovered by the Department from the meat sector in 2012 was €15.2 million. There has been a significant change in the Department's meat inspection service in recent years, both in how the service is delivered and in the associated costs. The cost of the service has been reduced from €41.9 million in 2008 to €29.5 million in 2012. Cost recovery consequently increased from 35% to 52% over the same period.

As indicated in the information note for the committee, Ireland welcomes the broad thrust of the draft proposal, subject to consideration of the detail of each proposal, which is now under way. Ireland welcomes the focus on improving the link between fees and compliance but, in common with other member states, has some concerns about the proposals relating to the introduction of new fee arrangements. Specific concerns of the Department relate to the proposed extension of full mandatory fee collection within the food and feed sectors and on to the plant sectors; the prescriptive nature of the proposed new collection system - flexibility should be provided to retain existing systems, which work well, have industry acceptance and can deliver equivalent results; the consequence of a diverse spread of cost recovery between member states persisting under the new regime, which will be that industries in member states which most thoroughly implement the new regulation will be at a competitive disadvantage; the difficulty of achieving full cost recovery across the board, which, for practical reasons, might be better phased in over a period of years.

In addition to detailed discussions now under way in Brussels, the Department is liaising with the FSAI and the Department of Health on this matter and is also engaging with industry representatives. It is to be expected that the Department's and Ireland's position will evolve as discussions progress. That concludes my statement.