Mr. Joe Healy:

I thank the Chairman and committee members.

I am joined by the chairman of the IFA's farm family and social affairs committee, Caroline Farrell; our farm business chairman, Martin Stapleton; and social affairs executive, Geraldine O’Sullivan.

I would like to acknowledge the work of the Minister of State, Deputy Jim Daly, and his officials who have at all stages recognised the contribution of family farms to maintaining economic activity and employment in the sector. They have worked constructively with the IFA to remove the uncertainty in the NHSS in order that farm families can plan appropriately for the cost of care.

The IFA supports the scheme and recognises its important role in providing financial support and security for people going into long-term nursing home care, as well as their families. The scheme operates under the principle of the ability to pay, which means that a person’s copayment is calculated based on 80% of their assessable income and up to 7.5% of the value of their assets. Under the scheme, the principal private residence is capped at three years and following this period, it is disregarded from the financial assessment.

A key concern for the IFA since the introduction of the scheme has been the potentially uncapped liability on the farm business asset. Farm business assets are productive assets and are required to generate income. They are not a measure of additional ability to pay. Significant uncertainty and anxiety has been created for family farms, with fear that the viability of the farm will be undermined or lost while attempting to meet the costs of care. This has led to the introduction of a three-year cap on farm business assets in circumstances of sudden illness.

It is also important to note that assets transferred for less than five years are included in the assessment of means. As members can imagine, this has proven to be a barrier to the next generation taking over the family farm due to the debt owing on the farm business asset.

At this stage, before I go into detail on the draft heads of Bill and the proposed changes to the scheme, it would be useful to give a brief overview of the agricultural sector in Ireland. It is the backbone of the economy and is our largest indigenous industry with a turnover of €26 billion annually. The family farm is at the heart of the agricultural sector. There are 137,500 farms in Ireland, of which 99.7% are classified as family farms. The 2018 Teagasc national farm survey showed that 30% of farmers are aged 65 or over, while only 7% are under the age of 35. This steady erosion of farm incomes threatens both the viability and sustainability of the family farm and the sector’s growth prospects. This can be clearly seen in the survey findings with only 34% or 47,000 of farms classified as viable.

A farm is economically viable if it can remunerate family labour at the average agricultural wage and provide a 5% return on non-land assets.

A total of 32% of farms are classified as sustainable because of off-farm income and 34% are classified as vulnerable. It is critical to understand that farm assets are productive assets, which are required to generate income. They are not a measure of an additional ability to pay. If the farm asset is reduced, the income earning potential will decrease and the viability of the farm can be put in question. The agrifood sector, which employs more than 7% of the working population and is responsible for approximately 8% of GDP, is vital to the economy, but especially to the rural economy. Farming provides the raw material that underpins the success of the agrifood sector and it is vital that the future viability of family farms be protected.

The importance of the agrifood sector is clearly recognised and has been prioritised as a major economic driver in the programme for Government. It is acknowledged there are significant challenges facing the sector and that a number of important structural deficits affect its competitiveness. In particular, issues such as farm size, fragmentation, low land mobility and an ageing demographic profile are believed to affect negatively the efficiency of primary production. In the 2014 agri-taxation review, there was consensus that such structural deficiencies needed to be addressed and the report proposed a 50% increase in the income tax relief for leased land.

Long-term land leasing has operated in Ireland since the mid-1990s. As a farm business structure, land leasing is growing in importance, not least since the increase in the income tax relief on long-term leases introduced in budget 2015. The income tax relief rates and the tiered structure have encouraged farmers to enter long-term leases. Since its introduction, the changes in the income tax relief rates have resulted in a near doubling of the number of long-term leases and are an important policy driver that encouraged and incentivised farmers to enter long-term leases with third parties. The latest available Revenue figures show that the number of long-term land leases has more than doubled since 2013, rising from 4,370 to 9,790 in 2017. The rate has continued apace in 2018 and 2019, meaning that the number is now far higher than 9,790. It is important to stress that the income tax relief on leased land is not eligible to close family relatives and, therefore, Government policy has actively encouraged farm families to enter long-term leases with third parties.

In the draft heads of Bill to amend the nursing home support scheme, it is proposed to extend the three-year cap to farm business assets where the farmer, partner or spouse, or a family successor has worked a substantial part of the working day on the farm for three of the previous five years, prior to the person receiving care, or where a family successor is appointed and commits to continue consistently and regularly to apply a substantial part of his or her working day to farming for a period of not less than six years. Under the proposed changes, family farms leased to third parties are excluded from the three-year cap, as they are classified as an investment asset rather than a productive asset. The proposed changes and the classification of leased farm assets under the draft heads of Bill are inconsistent with other Government policies that actively incentivised and encouraged farmers to enter long-term leases with third parties. Crucial to the success of the income tax relief and the incentivising of long-term leases is the confidence farmers have that in leasing their farms, they will not be negatively affected in the future transfer of their asset. If the proposed changes were introduced, it could threaten the future viability of such farm businesses and undermine the progress made to address deficiencies in the sector.

The IFA proposes that the precedent set out under the agricultural relief, a relief available on farm land transferred either in one’s lifetime or on death, be applied under the fair deal scheme to qualify for the three-year cap. To create cohesive Government policy that continues to protect the competitiveness of the agricultural sector, the IFA proposes that the qualifying criteria under the fair deal scheme would be similar to agricultural relief, which states farm land must be farmed on a commercial basis for at least six years or the property must be leased to someone who farms the agricultural property on a commercial basis for at least six years from the date of transfer. The rationale behind the relief is to encourage the productive use of agricultural land and prevent the sale or break-up of family farms. Introducing a similar qualifying condition under the fair deal scheme for leased farm land would strengthen existing Government policy to address structural deficiencies in the sector and improve competitiveness.

Protecting the sector’s competitiveness has never been so important, when the uncertainty of Brexit and the increasing production costs are considered. The IFA proposes that the eligibility criteria for the three-year cap are that the farm is farmed on a commercial basis for three of the five years prior to the person receiving care, by either the farmer, partner or spouse, family successor or leasee, or that the farm is farmed on a commercial basis for at least six years from the date the person receives care, by either the farmer, partner or spouse, family successor or leasee. Amending the draft heads of Bill to include the leasees is vital if the future viability of the family farm is to be protected.

Another condition not addressed in the draft heads of Bill is the clawback on farm assets transferred for less than five years. The IFA is fully supportive of and encourages lifetime transfers of farms. It is fundamentally opposed to a financial burden being placed on a transferred asset and is unclear how a third party could find itself responsible for the previous owner’s cost of care. There is no doubt this has proven to be a barrier to the next generation taking over the family farm, as the viability of the farm business may be undermined by the impact of an unknown cost of care on the future value of the assets. Furthermore, farmers face a challenging credit environment and would be unable to secure credit to make the necessary investment in the farm business to increase efficiencies and production. The clawback mechanism is grossly unjust and must be reviewed. In other support schemes for elderly people, such as the non-contributory pension, when ownership of the farm asset is transferred, it is no longer included in the means assessment. If a transfer has taken place, the person is asked to supply a copy of the deed of transfer stamped by the Revenue Commissioners, or if the deed has been lodged, a letter from the solicitors confirming that the deed of transfer has been lodged with the Revenue Commissioners is supplied.

The document, Review of the Nursing Home Support Scheme, A Fair Deal, was published in July 2015, three years after the IFA’s submission to the consultation process. It recognised the IFA’s position that income generating assets should be treated differently. In July 2018, the Government approved proposals to change how farm assets are treated under the fair deal scheme. At the time, the Minister stated the draft heads of Bill would be progressed in the Oireachtas in the autumn session. It took a further year, however, before the draft heads of Bill were published in June 2019. The significant delays in the legislative process have had a negative impact on the viability of family farms. The Government has given a commitment that the changes will be applied retrospectively, which means that once the Act is amended, it will apply to existing nursing home residents as well as new entrants. The IFA proposes that the retrospection be applied from July 2018, when the Government approved the proposal, and that the existing nursing home residents who satisfy the three-year cap as of July 2018 be refunded their contribution from the farm business asset. Farm families should not be financially penalised as a result of the delays progressing the drafting the legislation.

In conclusion, the IFA welcomes the opportunity to share its concerns with the committee, and present constructive and realistic recommendations that, if enacted, would enable farm families to plan appropriately for the cost of nursing home care and positively affect the future viability of Ireland’s family farm model

We would very much welcome any questions members may have and thank them for their time and consideration.