Charlie McConalogue (Donegal, Fianna Fail) | Oireachtas source

I welcome the opportunity to present the committee with this request for a Supplementary Estimate for 2022. I thank the Cathaoirleach and the committee for the opportunity to be here and for facilitating this meeting to ensure this can be dealt with. The Supplementary Estimate is required in order to provide for two exceptional schemes and to make use of savings in the Department's Vote to provide for a spend across several headings.

In gross terms, an additional €93 million is required by my Department to meeting costs that have arisen in 2022 for the fodder support and tillage incentive schemes. These schemes were put in place with the aim of offsetting some of the impact of the Russian invasion of Ukraine on agricultural input costs and insecurity of supply. The Supplementary Estimate also includes funding to meet the additional costs over the original 2022 provision of the recently agreed extension to the Building Momentum public sector pay agreement for the Department and its agencies.

The net amount of €115 million is €22 million higher than the gross requirement. This additional provision is to account for a €22 million reduction to the projected appropriations-in-aid to be received in 2022 under Vote 30 because a European Maritime and Fisheries Fund payment from the European Commission that we were expecting to receive this year is now expected to be received in 2023 instead. The Estimate will also provide for the movement of savings on certain subheads to meet cost pressures arising in other areas, including the World Food Programme, Irish National Stud and grants for farm capital investments.

An additional €93 million is required by my Department to meet the cost of a number of schemes. The first of these is the fodder scheme for 2022. The members will all be well aware of the scheme which was designed to incentivise farmers to grow sufficient grass and conserve fodder, be it silage or hay, for winter 2022 in order to reduce the risk of potential animal welfare issues arising as a result of the impact of the Russian invasion of Ukraine in February and its impact on price and agricultural inputs, especially on energy and chemical fertiliser. The scheme is expected to pay out approximately €54 million in 2022. In addition to the 2022 scheme, a fodder support scheme for 2023, similar to that operated this year, has recently been opened for applications. At present, it is only open to the approximately 71,000 farmers who successfully applied for the 2022 fodder support scheme and who declared 546,000 ha for support. The purpose of the scheme is to incentivise and support farmers to grow sufficient grass and conserve sufficient fodder, that is, silage or hay, for the 2023 winter and to account for the fact the cost of key inputs such as fertiliser, diesel and plastic for the conservation have increased significantly. I am sure the members will join with me in encouraging those who availed of the scheme this year to reapply by the closing date of 5 December. The budget for the scheme is €30 million and the aim is to provide support to a maximum of 10 ha for eligible applicants.

The tillage incentive scheme 2022 is also covered. We are heavily reliant on imported feed materials for the manufacture of feed for the livestock sector. An average of 4.2 million tonnes of feed materials were imported into the country last year and the year before. Approximately 30% of world wheat and maize exports originate from Russia and Ukraine. In the past year, the price of the key ingredients used to manufacture compound animal feed has doubled. The importance of the tillage sector in reducing our dependence on imported feed and in delivering necessary feed stock has therefore never been more evident in light of the crisis in Ukraine.

The tillage incentive scheme aims to support tillage farmers to maintain their current area under tillage production by helping to mitigate the high level of risk in production that is forecast for 2023. The purpose of the scheme is to increase domestic production of cereal grains and proteins to address feed security concerns for harvest 2023 and to reduce our dependence on imported feed materials. The scheme is expected to pay out €10 million in the current year.

Finally, the Estimate also includes funding to meet the additional costs over the original 2022 provision of the recently agreed extension to the Building Momentum public sector pay agreement for the Department and its agencies. The costs were met from savings in the first instance, with an additional requirement now for €4.36 million.

I propose moving €95 million in savings across other subheads. As these proposed transfers and expenditure involve changes to the original 2022 voted allocations, I believe that it is important to seek the committee’s input and approval. The areas where savings have emerged reflect the very dynamic and uncertain environment in which the sector and the Department has operated in this year. Despite the continuing challenges facing the sector, including additional pressures arising as a result of the war in Ukraine this year and avian influenza, in particular, we have continued to carry out our usual business.

Since September 2022, over €956 million has been paid to farmers in respect of their 2022 basic payment and areas of natural constraints schemes. The Department issues these advance payments at a rate of 70% and 85%, respectively, to farmers at the earliest date possible under EU regulations. The remaining balancing payments, at a rate of 30% and 15%, are due to commence in early December.

I will outline where the savings which we propose to use have emerged, starting with Programme A: Food Safety, Animal and Plant Health and Animal Welfare. This year I continued to fund vital services to ensure we have the highest international standards of food safety and quality. To ensure these standards are maintained, I am requesting an additional €6.5 million to bring the non-administration part of the programme to €141.601 million. The reasons for the increase are that there were six highly pathogenic avian influenza H5N1 outbreaks in 2021, and all of these flocks were depopulated. My Department received applications for compensation for animals culled, animal products, and animal feed or similar items that were destroyed in these 2021 outbreaks. To date over the course of this year, €1.9 million has been paid in compensation to owners of animals culled. This compensation was not included as part of my Department’s original Estimates for 2022 and was paid from within existing resources within Programme A earlier this year.

The on-farm market valuation scheme was the principal compensation measure available to herdowners whose herds are affected by disease under the TB eradication scheme. This compensation is based on the market value of the animal, subject to individual animal ceilings under the on-farm market valuation scheme. Buoyant output prices have resulted in strong market prices for both beef and dairy stock this year, which has contributed to the cost of the increase in the on-farm market valuation scheme.

In addition, in recent months the number of reactors per breakdown is increasing which is also impacting on the cost of compensation per herdowner. This additional funding will also fund the Department’s purchase of TB tuberculin supplies which is required for TB skin tests.

On Programme B: Farm Sector Supports and Controls, I am increasing the allocation to almost €992 million. The reason for this increase is the introduction of the two fodder schemes and the tillage incentive scheme which I discussed earlier. These schemes are in subhead B12. My Department continues to operate the large on-farm investment scheme: the targeted agricultural modernisation scheme, TAMS. It is made up of a suite of seven measures and was launched under the Rural Development Programme 2014-2020. The allocation for TAMS for the period 2022-27 is €404 million. To date, expenditure under TAMS II has exceeded €379 million. Payments under the TAMS II scheme continue to issue on an ongoing basis. To date in 2022, we have issued payments of €59.5 million.

Savings of €12 million arising from the less than anticipated take-up of demand-led schemes from subhead B3 are moving to subhead B5 to fund TAMS payments.

An additional €500,000 for subhead B3 will provide investment focusing on the integration of a grass biorefinery and anaerobic digestion at farm level and equipment to facilitate the robust testing of feed additives, which are critical to fill the knowledge gaps, inform agricultural mitigation policy and support implementation at ground level.

I propose re-allocating capital funding of €7.9 million and also €200,000 of current funding from the forestry subhead. This saving has arisen because planting of new forestry, which attracts establishment grants and premiums, is much less than the targeted 8,000 ha. The saving of €200,000 from current funding arises from the less than anticipated take up of funding under the knowledge transfer scheme. This is the final year of the current programme, and it is customary for many to wait and see the details of the new programme before committing to planting. Anyone who will have observed the increased rates which we introduced over the past week will understand that dynamic. There are afforestation licences issued for 7,000 ha which have not being taken up yet.

It must also be noted that a new strategy for forestry, Shared National Vision for Forestry 2050, has been developed along with a new programme for the next five years which awaits state aid approval. The new programme is grounded in this recently published vision which, if achieved, will result in a country with multi-functional and diverse forests delivering multiple benefits for climate, nature, wood production, people, communities, the economy and rural development. The new programme will be the biggest and best-funded forestry programme we have had and will provide unprecedented incentives to encourage the planting of trees that can provide a valuable addition to farm income and help to meet national climate and biodiversity objectives. This funding guarantees continued payments to those forest owners who planted under the current scheme and who are still in receipt of premiums. It also offers new and improved financial supports to those who undertake planting and sustainable forest management under the new programme. We intend to increase premiums for planting trees by between 46% and 66% and, very importantly, to increase the length of time for which annual premiums will be available from 15 years to 20 years for farmers. This will be very significant in respect of the prospective farmers take in respect of embracing forestry.

On Programme C: Policy and Strategy, the funding will increase from €403 million to €443 million. I propose to make a capital investment of €6.2 million in the Irish National Stud & Gardens. The function of the stud is the promotion and development of the thoroughbred industry through provision of stallion services and other supports. It educates future industry leaders through its stud management course and has a thriving tourism business. The Irish National Stud & Gardens has submitted a draft strategic plan to my Department covering the period up until 2025 for consideration. It identifies key objectives which are aligned with the main business areas of the stud and the Government's national development plan. The draft plan also outlines a challenging financial environment for the stud as its principal source of revenue, the lead stallion which we will all be all familiar with: Invincible Spirit, is due to be retired.

The stud is seeking a one-off allotted and fully paid share capital increase from the current figure of €13,768,724 to €20 million to support is core business activities, together with the implementation of the strategic plan.

On the World Food Programme, my Department leads on Ireland’s engagement with it. I met representatives from the programme roughly three weeks ago in Rome and discussed many of the challenges facing us in the year ahead. This programme is funded exclusively from voluntary contributions. It works in partnership with other UN and international organisations, NGOs, civil society, and the private sector also, to enable communities and countries to meet their own food needs.

The World Food Programme also plays a significant role in the UN’s global campaign for zero hunger, Sustainable Development Goal No. 2 of the 17 Sustainable Development Goals agreed in 2016, and is at the forefront of dealing with the migration crisis.

Ireland’s commitment to the WFP, expressed through three-yearly strategic partnership agreements, is €75 million for the period from this year until 2024. The proposed €25 million allocation in 2022 represents an advance on next year’s commitment and it will help save lives by supporting food security and nutrition, and rebuilding livelihoods in fragile settings. It also reaffirms Ireland’s role as a country, as one of the World Food Programme’s most engaged partners.

On access to finance, this is a crucial business need and, as one of the main economic drivers of our national, rural and coastal economy, and as the committee will be aware, it is vital that the agrifood sector has access to appropriate financing. As well as liaising with the main banks on issues relating to the agrifood sector, we work closely across Government on important supports for businesses.

I am pleased that we have been able to progress the new proposed €500 million growth and sustainability loan scheme, GSLS, which will facilitate strategic investment by farmers, fishers and food businesses, and ensuring their continued viability and sustainability into the future. The costs for the GSLS are to be shared by the Department of Enterprise, Trade and Employment and my Department on a 60:40 basis, which will ensure support of up to 40% of lending for the agrifood sector. It is estimated that the €500 million scheme will cost approximately €115 million, with my Department providing €46 million between 2022 and 2026. My Department’s original budget allocation for the Strategic Banking Corporation of Ireland, SBCI, for 2022 was €12.8 million. That was a provisional figure, pending the design and confirmation of a new long-term investment scheme.

Our first year costs for the new loan scheme are currently in the amount of €17.3 million. Therefore, in order to cover the first tranche of costs for the GSLS additional funding of €4.5 million will be required.

The allocation in programme D for the seafood sector has been reduced from €207 million to €199 million. Savings within programme D were identified and used elsewhere within the Vote. Savings in the Sea-Fisheries Protection Authority, SFPA, of €1.7 million in pay are mainly attributed to the delayed timing of on-boarding of new recruits. Non-pay savings of €1.5 million are due to continued savings in support service costs associated with a review of the organisational capacity of the SFPA and external assistance with a review and analysis of significant volumes of historical data in response to an EU administrative inquiry which commenced in 2019. There has also been a significant reduction in the legal and professional fees in comparison with 2021.

I will briefly mention programme E, appropriations-in-aid. As I mentioned, the Department's receipts Estimate has been reduced from €429 million to €407 million because €22 million to be received from the European Maritime and Fisheries Fund, EMFF, is expected next year rather than this year.

This is a necessary and important Supplementary Estimate, which I earnestly recommend to the committee for support. I look forward to the engagement and I am happy to take questions. I am joined by my team, including the recently appointed assistant secretary in the Department, Mr. Gordon Conroy, who started a week and a half ago. He takes over from Mr. Kevin Smith who held the role previously. Best wishes to him in this important role. I am also joined by principal officer, Ms Rebecca Chapman, and assistant principal officers, Mr. Paul McNally and Mr. Willie Farrell.