Mr. Joe Healy:

I thank the Chairman and members for the opportunity to speak to them today on the key issues regarding farm income for 2016. I first congratulate the Chairman on his appointment and wish every success to the members of the committee. We worked closely with the Chairman's predecessor, the Minister of State, Deputy Andrew Doyle, and we wish him well in his new role. We obviously look forward to a positive interaction with this joint committee, as well as engagement on all agricultural issues.

On farm income pressures, difficulties undoubtedly have been experienced in many sectors in Ireland throughout 2016 through a combination of a number of factors involving low product prices, a bad spring and negative political events. Families are under severe pressure as cashflow tightens as the autumn approaches. In addition, the vote by the United Kingdom to leave the European Union has created much uncertainty. For Ireland as a whole, for Irish agriculture and for the agrifood sector in particular, with 40% of our agrifood exports going to the United Kingdom and a shared land Border, the implications of their decision will affect us greatly. No one is underestimating the major challenge that Brexit presents for the agrifood sector but at the outset, I wish to highlight farmers' anger at the behaviour of meat factories in the weeks following the vote in over-hyping the Brexit result in an effort to push down their prices and to create panic in the trade. This was not reflective of the strong market conditions for finished cattle that existed at the time and which continue to exist in the UK market. Moreover, further evidence of this behaviour by the factories was to be seen this week. At a time of political uncertainty and in advance of formal negotiations, the IFA’s focus is on highlighting the key issues and on identifying the best means by which these can be addressed.

This brings me to budget 2017 and the farm schemes and in this context, the Government must use budget 2017 to take funding and taxation decisions to alleviate the farm income difficulties being experienced and to underpin the longer-term development of the sector. The IFA is clear that having experienced a reduction in funding to the agriculture budget of almost 40% during the downturn, there must be an increase in funding in this year’s budget for important farm schemes. These schemes are vital in supporting farm incomes and economic output on lower-income farms in particular, as well as in supporting important capital investment across all farming sectors. A viable agriculture sector is critical to the strength of rural Ireland and the rural economy. It contributes to employment across the country and underpins our agrifood exports, which have grown by almost 60% since 2009 and are likely to exceed €11 billion in 2016.

Our expenditure priorities for the farm schemes in budget 2017 are: the funding of €250 million for the agri-environmental schemes, with full payments for all green low-carbon agri-environment scheme, GLAS, agri-environment options scheme, AEOS, and organic scheme participants; the introduction of the targeted sheep scheme of €25 million with minimal costs and bureaucracy on farmers to maximise its benefits; additional funding for the areas of natural constraint, ANCs, to reach €225 million, thereby commencing the process of restoring ANC payments to the position in 2008 before the cuts; the immediate reopening of the beef data and genomic programme to new participants with additional funding of €25 million to increase support for the very important suckler cow herd; and a funding allocation of €50 million to the targeted agricultural modernisation scheme, TAMS II, to meet the demand across all farming sectors for on-farm investment.

In addition, farm assist is a vitally important scheme for low-income farm families, particularly in a year like 2016. The IFA recognises the commitment to a review of farm assist in the programme for Government. To that end, the income and child disregards that were fully abolished in recent years must be reinstated in this year’s budget.

As regards taxation, budget 2017 also provides the opportunity to address ongoing challenges in farming through the taxation system. Everyone is clear that income volatility is a real challenge. The barriers preventing more farmers from using income averaging must be removed as a priority. In addition, a more targeted and individualised volatility scheme is required. The IFA is proposing to maximise the number of farmers using income averaging; the current restrictions on eligibility where the farmer’s spouse is in self-employment must be removed. Also, the income averaging system must be adjusted to allow a farmer on averaging, in a year when income falls significantly, to pay the tax due for a single year only. The deferred tax would then be carried forward and paid over a three-year period. This flexibility could assist greatly with cashflow pressures.

Last October’s budget finally saw the first steps in removing discrimination against the self-employed in the income tax system with the introduction of the earned income tax credit. We recognise the commitment in the programme for Government to increasing this to match the PAYE credit by 2018. However, it is vitally important that the Government equalise those credits fully by 2017, which means bringing forward the two-thirds into this budget. This would give a direct cashflow boost to farmers and other self-employed people.

I will now discuss Brexit taxation measures. The weakening of sterling in the aftermath of the vote by the UK to leave the EU has had a negative impact on the competitiveness of Irish agri-food exports into the UK market, and for products competing with UK imports at home. The more labour-intensive sectors in agriculture are seriously affected by the impact on prices arising from exchange rate volatility. Those particularly affected in the short run are the domestic horticulture sector and our mushroom industry, almost all of whose €120 million of exports are destined for the UK market. It is critical that action be taken in budget 2017 to offset this negative impact and maintain cost competitiveness. In this context, IFA proposes that the lower rate of employer PRSI should be temporarily reduced in order to reduce employment costs for export-dependent SMEs in all sectors.

There must be no increase in excise rates for marked gas oil - that is, agricultural diesel. In addition, given the importance of maintaining competitiveness, we would have to question any move by the Government to increase excise rates on other road fuels at this time.

I will now deal with access to credit, including low-cost cashflow funding. Farm income difficulties are being compounded by a clear market failure in the Irish financial sector. The lack of competition and flexibility within the banking sector is affecting farmers’ ability to secure finance at reasonable rates. Extending merchant credit to deal with cashflow pressures is a high-cost and inefficient way of dealing with short-term farm financing. The IFA has clearly identified that the Government and the Minister for Agriculture, Food and the Marine must deliver, without any further delay, alternative sources of lower-cost long- and short-term funding for farm enterprises. The €11.1 million funding allocation for dairy and other livestock farmers agreed by the EU in July must be matched by national funding to bring the total package value to €22.2 million. This must then be used to help farmers with their cashflow difficulties.

In the grain sector we have seen income losses of €100 million this year, as they endure their fourth successive year of losses.

Up to 75% of crops in the north west have yet to be harvested. The Minister must deliver a European aid package for tillage farmers and the sector, which has been so badly affected this year. The Minister must also not lose sight of the need to allow farmers in all sectors to convert their accumulated merchant credit, utility, superlevy and other bills into low-cost, short-term loans. This type of loan package, based on the €15,000 state aid de minimusrule, was proposed by the IFA earlier this summer. While the response from the Minister has been positive, the time for delivery is now. The July agreement of the EU Council of Ministers confirmed that member states may make advance payments of 70% of the basic payments scheme and 85% of rural development payments on 16 October. This will help farmers in a very difficult year. All payments for farm schemes must be made on time and in line with the deadlines set down in the Farmers' Charter of Rights 2015-2020. This is particularly important in a year when farm cashflow is under stress.

High input costs are also a challenge to viable farms. The Government must take a strong stance at EU level to support the IFA campaign to remove the tariffs and duties on EU fertiliser imports. This would deliver between €50 million and €70 million for Irish farmers. The fertiliser issue is of particular importance for to tillage farmers who, through a combination of low prices and yield, are facing an income drop of up to €100 million this season. Additional support measures that must be delivered for the tillage sector include increased GLAS payments, increased coupled funding to support the expansion of the protein crop and the delivery of funding for the TAMS investment programme. In addition, there is an urgent need to develop a national certification scheme to promote Irish grain and its maximum use. What is needed to drive this agenda is to get all stakeholders around the table through the establishment of a national grain forum led by the Minister, Deputy Creed. I call on him to act on that immediately.

A combination of market factors and political decisions have contributed to create a difficult income situation on almost all farms in Ireland this year. Urgent action and support from all stakeholders in the agrifood industry is required. I urge the committee to support the proposals we have outlined to tackle the income challenge at farm level across a number of fronts.