Mr. Patrick Kent:

I thank the Chairman and other committee members for the invitation to attend.

The economy has made significant progress towards recovery overall.

Figures which show employment now exceeding 2 million people are very positive and reflect a growing confidence in certain sectors of the economy. Increases in tax receipts have helped to support a sense of recovery and allow the Government to consider options that would have been inconceivable two years ago. However, we should not get carried away on that. We saw clearly in the general election that recovery was not something that had reached rural Ireland and, since then, nothing much has changed. We believe that the huge pressures facing all sectors of agriculture in 2016 are integral to the lack of recovery in rural areas. Farmers are not making any money and therefore economic activity in rural Ireland is subdued. It is that simple.

During the downturn, farmers stayed productive and contributed to keeping the economy going when other sectors sank, but we should recall that farmers were among the first to suffer austerity cuts. The disadvantaged areas scheme was seen as an easy target in 2008 when its expenditure was cut from €257 million to €220 million. A second cut led to that figure dropping to €195 million. Those affected were the most vulnerable in the farming community. It is now time to begin the process of reversing those cuts in full. The programme for Government foresees a €25 million partial restoration of the payments, now called the areas of natural constraint, ANC, scheme. The Irish Cattle and Sheep Farmers' Association, ICSA, wants full restoration to the level of €257 million over the next three budgets, with €25 million put in place for 2017.

In other expenditures, we want to see a full drawdown of the €52 million per annum for the beef data and genomics programme. In our view, that will require additional top-ups for existing participants and space for new entrants to the scheme. The ICSA is concerned about the slow pace of uptake of the targeted agricultural modernisation scheme, TAMS II, due to technical difficulties in the Department and, significantly, farmers being unable to commence work due to cashflow difficulties. We want to see more flexibility, therefore, in the next tranche of the green low-carbon agri-environment scheme, GLAS, to ensure maximum benefit to farmers. Also, it is imperative that the sheep scheme is up and running in 2017, and we are somewhat concerned that it may be too bureaucratic to ensure maximum uptake.

Overall, the key message is that we now need to ramp up expenditure under the rural development programme, RDP, to make sure that the total fund is spent. The profile of expenditure suggests an average of €580 million over the full 2014-2020 period, but inadequate spending to date means we need to be spending close to €600 million per annum for the period 2017-2020.

We also need to see the locally led schemes up and running to support farmers with land designated for hen harriers, pearl mussels and so on. However, it is our belief that it is now essential to restore funding from the National Parks & Wildlife Service, NPWS, scheme as a complementary measure to RDP funding. For many years it was accepted that a variety of instruments were required to ensure proper compensation for every designated hectare, something the EU favours. Hence, we need to go back to models that have worked in the past and can work in the future.

I emphasise that all of this money is badly needed by the farming sectors. Brexit has led to a level of uncertainty which is already putting pressure on beef prices. The Government must fight hard to ensure that the impact is mitigated and that a UK-EU trade deal is negotiated to allow our exports to continue unhindered. We also need to fight against unfavourable trade deals with Mercosur and under the Transatlantic Trade and Investment Partnership, TTIP, which would see significant quotas for beef imports. However, while this is a battle to be fought at EU level, we are in control of ensuring adequate supports under the RDP. The Department of Finance must also avoid measures which damage our competitiveness.

The ICSA is demanding that we do not score own goals in terms of adding to fuel costs. We are quite alarmed about proposals to increase taxes on diesel. Even if the insane proposal of the environmental pillar to increase the price of green diesel to the same level as petrol never sees the light of day, the tax strategy group has examined a possible increase in the price of auto diesel to petrol price levels. I can deal with that in more detail when we take questions. It is quite a strange idea to drive up the price of fuel in rural Ireland at this time. Questions arise also about carbon taxes. This move would be extremely short-sighted. Higher auto diesel prices mean we are less competitive in terms of our exports. At a time when we are already struggling with competitiveness in terms of UK exports due to sterling-euro exchange rate movement, any additional pressures provoked by diesel increases would be foolish in the extreme. We must remember this is a double whammy, as increased diesel prices increase the cost of inputs and also affect the export costs of our output.

When it comes to taxation, we are not looking for the Apple deal. However, it is worth reflecting on the apparent consensus that everything possible must be done to protect the 6,000 Apple jobs, and perhaps some 150,000 jobs directly created by foreign direct investment.

Farmers are the foundation of an agrifood sector which accounts for at least 8.4% of total employment in this country. The sector is far more significant than Apple on its own and, arguably, more significant than the entire foreign direct investment sector, particularly when we consider the reach into every community in every county in Ireland. On the other hand, the benefit of Apple is limited to the main urban centres. Hence, we will make no apologies for saying that the levels of tax on sole traders here are way too high. The ICSA supports the phasing out of the universal social charge, USC, and wants to see a 1% cut in it in this budget. We also support the strategy, begun in the previous budget, of bringing in an earned income tax credit equivalent to the employee credit. The €550 announced in budget 2016 must be doubled in 2017, and the job finished in 2018.

These are small changes but it is vital to understand how the universal social charge can be so damaging to the progressive farmer who is investing in his farm but whose capital allowances against income tax do not extend to the universal social charge. Also, our members have to provide their own pension, and there is no relief against the universal social charge for pension contributions. For all of these reasons, we want the universal social charge phased out. It is worth reflecting on the fact that there is almost universal consensus that the 12.5% corporation tax rate is essential to job creation and the sustainability of most businesses, but little appreciation of the fact that farm businesses can be hit for almost 50% tax even on relatively modest incomes.

There are other taxation measures which the ICSA believes are vital but which typically only apply to a small fraction of farmers in any one year. As such, their contribution to the state finances are minuscule but the impact on individual farmers faced with them is immense. The ICSA wants to see further increases in the category A threshold, which was increased in last year’s budget to €280,000, having regard to the fact that it was €542,000 in 2009. The 90% agricultural relief must continue.With regard to capital gains tax restructuring relief, which assists the consolidation of holdings, we want to see this relief extended beyond current deadline of the end of 2016.The ICSA proposes that 50% stock relief be available for all farmers in the interests of encouraging farmers to meet the targets of Food Harvest 2020. In the longer term, the State will reap much more from increased exports and future tax take rather than taking the short-term view, which limits stock relief except in the case of young farmers or partnerships.

With regard to rainy day planning, the ICSA proposes that farmers should be able to shelter a proportion of income from tax in a good year by putting it into a special account where it would be taxed on drawdown in a bad year. The ICSA submits that tax relief for pension contributions should continue at the marginal rate, and take into account the universal social charge as well, until such time as the USC is fully abolished.

I thank the Chairman and the committee members for the opportunity to appear here today. What we are looking for in budget 2017 is modest in terms of the overall strong performance in the economy. When the economy was on its knees, farmers kept going and performed an act of patriotic duty in continuing to produce, which led to annual increases in export earnings. That was the good news story when everything else was gloom and doom. The ICSA is increasingly alarmed, however, that farmers are not getting their fair share of the cake, and that must be examined in other forums. Our members look at fancy strategies such as Food Harvest 2020 and Food Wise 2025 with a jaundiced eye. They do not appear to be getting any benefit from putting more in and taking less as a result. However, while this will be determined by a variety of policies at home and in Brussels, we expect that the measures we have outlined will be delivered. The Government will not be forgiven if our sacrifices in the downturn are quickly forgotten.