Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I welcome the opportunity to appear before the committee and hope we can have a constructive dialogue. It is not possible for me to outline the budget for the Department of Agriculture, Food and the Marine today, which will be presented in six weeks time. That would be an unreasonable ask. What we are trying to do is to have more active discussion in the build up to the budget in order that we can have constructive discussion rather than political point scoring but Members have to decide what they want to do with this today. I will be as open as I can. For a start I cannot give the decisions that will be made in six weeks time because most of those decisions have not yet been made. However, I hope that some of the output today will help to inform those decisions. I want to put the context clearly on the table in order that everybody is aware of the challenges in terms of the expenditure ceilings within which we are operating and the priorities in terms of how we spend money and get best value for it.

We had this problem last year. One of the real difficulties we face is that every Department has expenditure ceilings set for it, essentially by outsiders. If we spend over those ceilings we do not get the money. It is important that people understand that. Certainly those who had been in government before this Government will understand that. It is not a place where anybody enjoys being but it is reality. The expenditure ceilings for this year have been outlined in information provided but essentially those ceilings, in terms of capital expenditure, are €168 million, and in terms of current expenditure are €1.057 billion. We have two choices - to operate within those ceilings or to get a ceiling increase from the Department of Public Expenditure and Reform, which means other Departments have to take a lowering of their ceiling. The overall expenditure programme and expenditure ceiling for Government is fixed. People need to understand that. When people say it has been a very difficult year for farming and, therefore, one cannot touch any of the schemes, the way I am able to respond to that request is in the context of having rigid expenditure ceilings that can only be changed by the Minister for Finance or Minister for Public Expenditure and Reform agreeing to take money from another Department to spend in our Department. It is important that we have a real conversation rather than one based on emotion or anything else.

It has been a difficult year. It is a more difficult environment in which to put a budget together than this time last year when there had been a combination of good weather, good yields and good prices in most sectors, with the exception of pigs and potatoes. As farmers made more from the marketplace last year than they would normally make it was a little easier to find ways of reducing expenditure. My priorities last year in the build up to the budget were clear, to protect farm incomes while targeting resources towards active farmers, to support productivity and upskilling of farmers, where possible, to ensure the continued development of the agrifood sector through investment in research and development, food safety, animal welfare and enterprise development in line with the Food Harvest 2020 strategy which, as pointed out regularly by Deputy Éamon Ó Cuív and others, was a strategy of the previous Government. I acknowledge it is a good strategy and we are trying to implement it.

I have the twin priority of trying to ensure farmers can be as profitable as possible from the marketplace while recognising the reality that there are many farmers who do not have the capacity to make a good deal of money from the marketplace and who are heavily reliant on the schemes and the single farm payment for their income. It is my job to get the best possible deal within expenditure ceilings and within the CAP reform process which we are negotiating to keep that income stream as strong as possible. We have been around the country talking to farmers about how we are planning to do that in terms of setting priorities. Both of those approaches, in terms of fulfilling the potential of Food Harvest 2020 and the income potential for farmers as well as supporting people on the land who do not have the potential to benefit from Food Harvest 2020, are equally important in drawing up a budget.

What are the expenditure ceilings for this year? I have given the figures but they only become real when compared with last year's figures. Essentially we are being asked to make savings on the current side of €87 million and on the capital side of €27 million, that is, €114 million which will not be easily found. As the committee asked we have included some areas where there will be savings if we do nothing from a policy point of view given that certain schemes are less expensive next year than this year, such as REPS, suckler cow welfare scheme and other savings to be made through driving efficiencies in the Department and in its agencies. The efficiencies that have happened since 2009 which have been driven within the Department regardless of who has been Minister, are impressive. Since 2009 we have made savings in the cost of running the Department of about €70 million. We have reduced staff numbers by approximately 900. In respect of the 58 district veterinary offices around the country we are in the process of reducing the number to 17 while maintaining the same standard and quality of services that farmers expect. In fact, we are improving the service. Payments in respect of disadvantaged areas scheme, REPS, agri-environment options scheme, single farm payments have issued ahead of any previous year. We are trying to do our best to make savings, to reduce the cost of delivery of services, through everything from salaries to overtime, to staff numbers, offices, capital infrastructure to getting a better deal in respect of tendering and contracts as regards outsourcing some services.

We are also insisting on the same changes within our agencies, such as BIM, Bord Bia, Teagasc and others. However, we will not find €114 million in one year from efficiency gains. Therefore, today I would appreciate if people discussed areas in which we may be able to make other savings, without damaging productivity on farms or the support structures needed, particularly after our bad summer and the resulting difficult winter due to the cost of feed, the quality of silage and other related problems. The target is €114 million, unless we can increase that.

We are all in this together. The ceilings were set before I came into office. The ceiling for agriculture was significantly lower, but we increased it significantly last year, particularly on the capital side. If we had not done that, we would have had no forestry programme this year. Of course, I will make the case around the Cabinet table for an increased ceiling for agriculture, particularly on the capital side, as I did last year. Whether I will be successful in obtaining that remains to be seen, given the pressures so many Departments are under, particularly the Departments of Health, Education and Skills and Social Protection. There are pressures in every Department.

We have gone through some of the savings of the €114 million that are possible, but these are not agreed. Therefore, I encourage people not to take them as given. For example, with regard to the suckler cow welfare scheme, we have said we are spending €25 million this year and that if we do nothing, that scheme will cost us €12 million next year. However, obviously farmers want me to put a new scheme in place. Funding for REPS is €185 million this year and this will be down to €168 million next year because there are fewer farmers in REPS. However, we have opened a new AEOS and there are funding implications for that in terms of increased cost. People demanded this and we have delivered on it, but it makes the budget more complex. Similarly, early retirements that are hangover payments from a previous policy will be €24 million this year and €14 million next year, a potential saving of €10 million.

Marketing processing grants will cost €23 million this year and €19 million next year, but they relate to a demand-led scheme. We have companies that have already received agreement on grant aid from the Department and it is up to them as to when they draw that down. Therefore, there is an element of the unknown there, which is one of the many reasons for underspend last year. However, I assure the committee there will be very little, if any, underspend this year as we have been obsessive about this on a monthly basis. With regard to renegotiating the relationship with temporary veterinary inspectors, TVIs, in our factories, they have been very progressive in terms of discussing modernising and improving their role and helping us find savings. We are trying to save another €1 million in this area. We are also seeking to make savings on Teagasc programmes.

We have given the committee an idea of some of the savings possible, to the tune of approximately €48 million. However, it is possible none of these will happen. This is a policy decision I must make on behalf of the Government between now and six weeks time when we have the budget. Therefore, I would appreciate people's input on this. Even if we do all I have suggested, there is still a significant shortfall in terms of what we must save. Therefore, the kind of loose talk about finding low-hanging fruit is irrelevant. We must make real savings, just like we did last year.

Let me remind committee members of the savings we made last year and why we made them. We targeted REPS, because in the current climate REPS is a pretty generous scheme. Many farmers, even if given the opportunity to get into REPS at 10% of a reduction last year, would jump at the opportunity. We felt that we should start with the most generous scheme, REPS. It is a great scheme and I would like to continue with it into the future, if we had the budget for it. However, I thought the fairest place to start saving was with REPS and the 10% reduction in payments made some savings for us last year.

We then looked at the costliest scheme which involves 100,000 farmers, the disadvantaged area payment. In previous years, the cuts to the disadvantaged areas scheme, DAS, simply cut income from everybody, either by reducing the number of hectares for which farmers could apply or by reducing the amount per hectare. We decided that was not the most strategic way to deal with making savings and, therefore, we reshaped the qualification criteria. The idea was to ensure that the people who need the money the most and who were the most active farmers would qualify for DAS payments. As a result of that decision, more than 90,000 of the 100,000 farmers who get DAS have had no reduction in their payment at all. We focused on the other 10,000 who, for whatever reason, are in different circumstances.

In terms of the changed criteria, if people feel they have been caught out unfairly, we have introduced a derogation system for which they can apply and have introduced an appeal system, independent of the Department, in case they are unsuccessful in the derogation system. As a result of all of this, we will not make the savings we hoped for in DAS. We hoped to make €30 million in savings, but will probably only make close to €15 million or €20 million. This has implications in terms of the need for other savings next year, as this saving will not carry from this year into next year. In trying to be fairer with regard to DAS, we have a less scientific calculation in terms of the amount of savings that can be made, due in part to the derogation and appeal system.

Deputy Ó Cuív has criticised me for the way this has been implemented. If we have made some mistakes, let us learn from them and ensure we do not make them again. By and large, the principles and thinking behind the changes to the DAS scheme were much fairer than just taking income from everybody. The change implemented came about as a result of discussions around the table between the Department, farming organisations and Members so as to get the best solution we could. Of course, nobody wants to suffer cuts and will lobby to prevent them.

Today, I would like to hear from committee members what their attitude is towards finding savings, how we can find them and how we can make savings from schemes without damaging farm income significantly. Where, how and who should we target? These are not easy decisions. People may say to me today that I cannot cut anything in agriculture because of the bad summer. With all due respect, that is the job of a lobby group and such groups do that job very effectively and keep me under pressure to try to minimise cuts. However, that would not be a helpful contribution today. That would be politics and would not be helpful in working out the figures.

It is up to the committee members to approach the discussion any way they want. I will answer questions as openly as I can and if I do not have the figures on specific issues, my officials may be able to help out. While I will be as open as possible, I will not provide the budget today. First it is not decided and even if anything was, such a decision should be announced on budget day rather than six weeks early.