Mr. Tom Moran:

I thank the Chairman and members for giving us the opportunity to engage in this very useful discussion. The committee gets right to the heart of the matter and I am pleased to have an opportunity to respond to questions. I will give a composite reply to related questions.

Members raised questions on our position in the negotiations. If serious progress is to be made in the CAP negotiations during the Irish Presidency, a sine qua non will have to apply in at least three cases. Good progress must be made on the multiannual financial framework, MFF; there must be serious engagement by the various players, the Council, the Commission and the Parliament; and the Cypriot Presidency must advance the game a good deal. When we say the negotiations are complex, this is often a cliche, but they are really complicated. The negotiations are not just taking place in the Council. We have been through CAP reform negotiations before which many Members would have followed, but this is the first time the Parliament is locked into the co-decision process. This adds a significant amount of work.

The multiannual financial framework will be decided by the Heads of Government. We hope this will happen in November during their extended and dedicated meeting on the issue. It is not just a decision on the overall amount under heading 2 - CAP Pillars 1 and 2. There are also specific points embedded in the negotiating box. There is the issue of greening, in respect of which there is capping and there is the redistribution between members states, which is an attempt by the Commission to move some way towards equalising payments across members states, which complicates matters further. That element of the negotiations is complex and we will need to make good progress and reach a resolution before the final proposal will go ahead.

The Minister for Agriculture, Food and the Marine has said on many occasions that the Department is hell bent on completing the negotiations. We have invested significant resources and will make a serious attempt to bring them to a resolution. As has been said, the sequencing of Presidencies, Commissions and Parliaments make this essential. We are participating closely in what the Cyprus Presidency will do before the end of the year. It will drive towards what is called "a partial general approach", a progress report on certain issues. Depending on how far it can go with it, that will make things much easier, but it is very hard to speculate. I could not possibly speculate on how the negotiations will go. All I can say is that on 1 January 2013, when we take over the Presidency, we will hit the ground running and do what we can. In an ideal world one would rather go into a Presidency trying to drive negotiations on an issue of this breadth and complexity having had most of one's own issues resolved. Some of our major issues happen to be lodged in the MFF and we want an adequately funded CAP. We want a Pillar 2 fund that is not reduced and that we can use. We want to have these issues resolved, as well as make progress on the issue of internal convergence, on which we have been driving very hard.

The Commission's proposals are on the table. Therefore, we are not starting from scratch and designing where we want to go. I think it is generally accepted that the historical base period of 2000 to 2002 will not hold. What we have brought forward is an approach to move gradually from it to reflect the realities of farming. That is the reasonable approach we have taken in our negotiating position.

I fully accept that in this room some take a different view. That gets to the very heart of where we are and have been. We have had in place a coupled system that translated into a single payment system based on historical reference periods. The creation of these historical reference periods was based on what people were doing and claiming under the various schemes in place at the time. In the dairy sector farmers were stuck with dairy quotas and had no capacity to expand. They were holding on to male animals and claiming premia, as was their right. They were developing a beef sector on the back of a dairy sector. This also happened in some parts of Europe. Had things been different and had there been no dairy quotas, they would have expanded their capacity in milk production, as that would have been the logical thing to do. Some built up single payments

Using the year 2000 as the historical reference year was a reflection of what was going on at the time, complex and all as it was. Our information is that there has been no major dramatic change in farming patterns from what was happening during the base year. In the context of the negotiations we are willing to move from historical payments because there is no support at EU level for sticking to a strict historical base period. We have stated we want the single payment to reflect the realities of what is happening in the farming sector which underpins the Food Harvest 2020 strategy and the development of an export oriented and expanding agriculture sector. It is in that context that one cannot, therefore, have an approach to even out in one fell swoop the single payment, irrespective of production capacity, farmers' commitments, loans and ability to develop and all the jobs downstream dependent on the sector. The Food Harvest 2020 strategy is based on a agriculture system that is able to develop and increase its output. I do not accept for one moment that the beef sector will be unprofitable down the road. The purpose of the strategy is to find out the areas that can be developed. The level of beef consumption is holding up, but the level of beef production in Europe is falling. We have a sustainable beef sector that can grow and develop. We have identified a range of areas under the strategy that we will push. The producer groups are working with the beef technology adoption programme, BTAP, that we funded last year.

The Chairman is absolutely correct in his summation that the two issues must be linked. They are. We are looking at the development of the CAP and future EU policy to provide funding for it.

We are also looking at it in the context of domestic policy which is being worked out by the sector and the Department. This was initiated by the previous Government and the Government has espoused it completely. We are looking at the CAP in the context of the Food Harvest 2020 strategy. We cannot have a situation where one pulls against the other. We want to develop the sector in all its aspectsby using the CAP. This runs through a range of the points made to which we have listened very carefully. There is no suggestion a deal will be done without pillars 1 and 2. With others, we are adamant that there be a complete package. Until we see the colour of the money under pillar 2, we will not be able to make progress on the others. We are driving the issue of sustainable intensification of an expanding sector and negotiating reform of the CAP in that context.

The question of capping is part of the discussions on the MFF and the Commission's proposal is that there be a cap of more than €150,000. The reference to pillars 1 and 2 should be looked at to see what the effect is across the country. There are areas where the average per hectare payment under pillar 1 looks stark, but we are very adamant that the payments under pillar 2 will continue. These are the disadvantaged area and environmental type payments.

Progress must be made on the budget. Timing is crucial. Ireland proposed the payment of a 25% top-up for young farmers, a point on which the Minister is very strong. We have urged that this top-up payment be made mandatory rather than voluntary in members states. Some member states would prefer that it be left up to the member states, in which case we would still be okay.

As far as sugar production is concerned, Ireland bought out of the sugar industry under the compensation scheme until the end of quotas. The proposal is for quotas to end, which we fully support. If there is a suggestion of a deal to phase them out, clearly Ireland will be pressing to play some part in that regard. I hope we will have an option to go back into sugar production in one form or another.

A range of countries like to have flexibility. If one wanted to divide the Council into those countries that wanted flexibility and those which did not, that would be an easier task. There is a variation of the definition of flexibility that people want in relation to convergence. Eastern European countries want a certain degree of flexibility to use national payments that they have used under the SAP scheme to be phased over a period. Other countries want to do different things, for example, some want to have the single payment reflect the type of production involved. However, there is a serious difficulty with this from the Commission's point of view. It does not play ball on the issue because it sees it as a coupled payment which falls foul of WTO rules. On linking the single payment with the level of intensity or type of production, in its initial proposals the Commission is adamant that the link with production must not exceed what can be done under WTO rules. That is the logic behind the proposed figure of only 10% for countries that have had coupled payments up to now and 5% for those which have not. We think everybody should have the option of coupling payments, but what one decides after that is a major issue. Ireland has taken the position that coupling payments suits the development of agriculture in which we are trying to engage. It has the full support of the farming organisations and practitioners, as it gives producers freedom to farm and produce what the market wants. When we decoupled payments, the level of sheep production went down, but it is rising again. As the Chairman knows well, output is up. The quality of our beef is improving and the potential of the sector will continue to improve. It is the market that is determining what one should produce, not the subsidy. That does not mean one receives a subsidy for not getting up in the morning and looking out over the field; the single payment brings with it a range of conditions demanded by society. The taxpayer, be it in Ireland or elsewhere in Europe, demands cross-compliance. A coupled payment system, allied with a cross-compliance approach, is something that can stand up to scrutiny. It can stand up to WTO rules and market demands. It allows the producer to produce for the market, but it also pays off for society in terms of what it is getting.

Deputy Heydon raised the point that the Commissioner's proposal did not take account of debts or commitments. That is also our point. We have a clear position on sugar production.

On the question of the lead-in time, we have to perform two separate tasks - we have to administer as well as negotiate the CAP. If we are pushed right up to the end of our Presidency, we will be up against the wire in getting a reformed CAP in place. There is a greening mechanism that must be dealt with. We are staying optimistic about what we will achieve during our Presidency, as the Minister has made clear.

The Chairman raised specific questions about the Cypriot Presidency. What it will try to do is bring together a progress report, what is called a partial general agreement, in which it will tick off certain items. It is an informal arrangement, to which there is no commitment. There is no suggestion it is trying to have a Pillar 1 agreement and leave Pillar 2 undone. The definition of permanent pasture is still being discussed. I take the points made by Deputy Tom Barry on the effect it can have.

There are two points to be noted on greening. The level of 30% is the one chosen by the Commission. The negotiations within it were probably hinging on this figure. There is also the question of 30% being a flat rate. It is an immediate flat rate which probably has, more or less, the same effect as the Commission's proposals. There are a number of specific criteria, including permanent pasture, crop rotation and ecological areas. There is detailed work to be done on these to prevent the effect to which Deputy Tom Barry referred. Our aim will be to deal with the 30% level as part of the MFF. We are dealing with the issue of a flat rate as part of the convergence discussions. It is a difficult issue.

On the nuts and bolts of the three elements, we are trying to ensure they do not militate against the flexibility cereal farmers need. Some of the specific figures such as a minimum area of 3 ha are unreasonable and make no sense. We will keep in touch with the Chairman as matters develop.

The Department operates a consultative committee with the various players in the industry on an ongoing basis. Only last week a presentation was made to them on the detail of the process, where we are with it, the effects of the proposals and where they are likely to have an impact. We have kept the players in touch with this. It is fair to say that, by and large, there is broad support for the position the Department is adopting at this stage, but it is a moveable feast. Nothing is agreed, and it will continue on. By the end of this year, when the Cyprus Presidency is hanging up its boots and passing over the baton, we will see the scale of the task ahead of us.