Andrew Doyle (Wicklow, Fine Gael)
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I welcome from the Department of Agriculture, Food and the Marine Mr. Tom Moran, Secretary General; Ms Bríd Cannon, head of EU and international trade division; Mr. Paul Savage, assistant principal; and Ms Ann Derwin, chief economist. Mr. Cecil Beamish, assistant secretary, and Ms Josephine Kelly, head of seafood policy division, are in the Visitors Gallery and shall join us later. I thank the officials for coming to brief the joint committee on the Common Agricultural Policy and the Common Fisheries Policy.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are also directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name in such a way as to make him or her identifiable.

Mr. Moran will give us an overview of Food Harvest 2020, outline progress and how the implementation plan is going. I apologise for the late start which was due to a change of ministerial rota. The Minister for Agriculture, Food and the Marine was scheduled to take Priority Questions today. As Deputy Éamon Ó Cuív and others expressed an interest in not missing the meeting, we delayed starting it in order to facilitate them. I thank the officials for the forbearance. I now invite Mr. Moran to make his opening statement.

Mr. Tom Moran:

I thank the Chairman and ask him not to worry about the delay, as we are delighted to be present. The joint committee has asked us to discuss three extensive topics. With its agreement, with one team of officials, I shall first make a statement on the Common Agricultural Policy and Food Harvest 2020. Later, with another team of officials, I shall make a statement on the Common Fisheries Policy.

I thank the committee for giving us the opportunity to bring it up-to-date on the first two topics. I shall deal, first, with CAP reform. Members will be aware from previous presentations that negotiations on the package are taking place in parallel with negotiations on the budget or multi-annual financial framework, MFF, which will have a crucial bearing on the timing and content of CAP reform, as it deals with issues of direct relevance to the Common Agricultural Policy. Heading 2 of the MFF deals with the CAP and the negotiations on the size of the budget, the mechanisms for the distribution of funds between member states and non-financial issues such as the greening of pillar 1 or direct payments.

These are the key MFF issues from an Irish perspective.

As regards the size of the CAP budget, the Commission proposal is to maintain agriculture funding at 2013 levels in nominal terms. This represents a decline in real terms over the lifetime of the financial framework. Nevertheless, Ireland's view is that the Commission's proposal represents a reasonable starting point for the negotiations. However, we have pointed out that agriculture is the expenditure heading showing the most restraint, and that the amount proposed is the minimum required.

On the allocation of funds among member states, the key priority for Ireland is to retain our levels of funding for both direct payments, which is pillar 1, and rural development, which is pillar 2. Commission proposals for redistributing direct payments among member states are broadly satisfactory from an Irish point of view. However, it has yet to table a specific proposal in respect of rural development funding and we have concerns that the envisaged use of a combination of past performance and objective criteria for pillar 2 could reduce our allocation. We believe an objective criteria approach cannot provide a solution that will address the concerns of all member states and should be abandoned. The allocation of pillar 2 funds should instead be based on past performance only, as measured over the entire 2007-2013 rural development programme period. Any adjustment beyond that should use the same methodology the Commission has proposed for pillar 1.

Ireland is also pressing for pillar 1 and pillar 2 funds to be considered together, which would be consistent with the complementary nature of the two pillars within one common policy. In addition, no member state with below-average pillar 2 payments per hectare should lose in any redistribution and no member state should lose under both pillars. Ireland receives lower than average payments per hectare for direct payment and rural development funds combined, and we therefore see no justification for any reduction. In any event, it is imperative that we see proposals soon from the Commission on pillar 2 distribution. It is unrealistic to expect member states to sign up to proposals for the allocation of pillar 1 funds without knowing the Commission's intentions on the second pillar. This is a point we have made time and again.

The final key issue from an Irish perspective is greening in the context of pillar 1 payments. In the MFF context, the main focus is on the proportion of direct payments to be used for greening measures. The Commission has proposed that 30% of the annual national ceiling should be used. Ireland considers that this rate would represent an unacceptable hastening of the move to flat rates of payment unless it is applied on an individual farmer basis - that is, each farmer would be paid the same percentage of his or her overall payment, rather than a flat-rate 30%, in return for the greening measures the individual farmer carried out.

Against a background of increased pressure on the EU budget, particularly from net contributor member states that are seeking an overall reduction of €100 billion in funding, the Cypriot Presidency last week published the latest version of the so-called negotiating box, which is the framework within which the negotiations will be finalised. We are still examining the proposals in detail, although members will have seen the Minister's initial comment; he made the position very clear in the Dáil earlier today. The key points include a proposed overall budget cut of €50 billion, or about 5%, and a cut of 2% in CAP funding. We are also seeking clarity on the treatment of the new crisis reserve for agriculture and the manner in which proposed cuts to pillar 1 expenditure will be divided between direct payments and market supports.

The MFF proposal will be examined at a number of COREPER meetings over the next few weeks before being discussed at the General Affairs Council on 20 November and the Heads of Government European Council on 22 and 23 November. Officials from my Department are working closely with the Department of Finance and the Taoiseach's Department on this and we are fully focused on securing a deal to provide a well-resourced CAP that will allow us to achieve our objectives for the Irish agrifood sector as set out in Food Harvest 2020.

As to the distribution of the CAP reform package, the key issue from an Irish perspective is the distribution of direct payments within member states. The Minister has already discussed with the committee the impact on Irish farmers of the Commission proposal, and this was well aired in the Dáil earlier today. The impact of the Commission proposal would be dramatic and unacceptable, as it would see payments to about 75,000 farmers increase by an average of 85% while the remaining 55,000 farmers would see their payments fall by an average of 33%.

It is important to point out that we recognise the need to move away from historical payment models, but the Commission's proposals go too far and too fast. We are therefore pressing for the maximum possible flexibility to be given to member states to design payment models that suit their own farming conditions. In our case we advocate what is known as an approximation approach, by which all payments could gradually move towards, but not fully to, the average, thereby limiting losses and gains for individual farmers. Our approach mirrors the Commission's pragmatic proposal for redistribution among member states, and we believe this is a fair solution that will prevent massive transfers from our more productive to our less productive farmers. The model we have put forward is formally supported by five other member states, namely, Spain, Portugal, Denmark, Italy and Luxembourg, and we continue to liaise with other member states and with the Commission in order to gain further support. We must acknowledge the fact that a large number of member states have no difficulty with a move to flat rates - some of them support it - but we are confident there is recognition of the difficulties this poses for some member states, such as ourselves, and that the principle of flexibility will ultimately be supported.

The Commission's proposals on the greening of pillar 1 also continue to be discussed in some detail between member states. While we fully support the idea of encouraging sustainable forms of agriculture, which is at the heart of our domestic Food Harvest 2020 strategy, we continue to have concerns that the proposed structure of the greening payment, which in effect will result in a flattening of 30% of the direct payment, will hasten the movement towards uniform national or regional payment rates. Our preference is to see the 30% calculated as a percentage of an individual farmer's payment, and this is a key element of our alternative internal convergence model.

In addition, there are practical difficulties with the three greening criteria, namely, permanent grassland, crop diversification and the ecological focus areas, EFAs, and we are pushing for adjustments to these criteria. We also see merit in expanding what is called the "green by definition" category to include measures that have environmental aspects that are equivalent to or better than what the Commission is proposing. These include participation in targeted agri-environmental programmes and in certified national sustainability schemes, such as the Bord Bia carbon footprint programme in the beef sector, which is now being extended to dairy producers.

In the rural development area, our concerns about the Commission's proposals relate mainly to process. I will not go into that in detail, but we have misgivings about the incorporation of development funds into what is called the common strategic framework with other funds and about the appropriateness of the application of macroeconomic conditionality. There are also administrative difficulties associated with the identification of ex-anteconditionalities and the operation of performance reserves.

We welcome the proposal to retain key market support measures together with the use of exceptional measures and a crisis reserve for emergency situations. We have seen in relatively recent times how important these can be in the dairy sector. We strongly support the Commission's proposal to abolish sugar quotas in 2015, but we will also closely monitor the negotiations to ensure that Ireland does not lose out if that quota system is extended. We are also carefully monitoring the situation in regard to producer organisations and inter-branch organisations. We want to ensure that the Commission's proposals in this area, which include the extension of rules and financial contributions to non-members, do not have the potential to interfere with the operation of the Single Market. That is a key element for us and always will be when we export as much as we do.

The negotiation process for the CAP is complex and difficult, but all our efforts are focused on achieving the best outcome for Ireland. As to timing, the proposals are being discussed both by agriculture Ministers in the Council and by MEPs in the European Parliament, and a number of elements will be the subject of substantial discussion, amendment and compromise in the coming months. The plan is to conclude negotiations during the Irish Presidency, but this is contingent on making substantial progress on the technical elements over the coming weeks and securing agreement on the budgetary framework at the end of the month. We will continue to build on our close working relationships with key members of the Commission, Council and Parliament ahead of a major effort to achieve agreement during our Presidency.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I thank the Secretary General for a comprehensive overview. There are some issues on which I can agree with him. I asked the Minister about pillar 2 today. In view of the huge uncertainty with pillar 2 a farmer will add up his payments and compare them with what he used to get. We have seen how vulnerable pillar 2 is to national changes as well as European Union changes. It is vital that nothing is signed off on pillar 1 until pillar 2 is ready for signing off at the same time; in other words, the farmer needs to see the whole package and half packages will not suffice.

Many statements have been made on the approximation measure as opposed to Commissioner Ciolos's proposal. Statements have been made to the effect that those who receive large single payments are, by definition, more productive per hectare of land. I would appreciate if the Secretary General could provide direct evidence of the link between the size of the single payment and the productiveness per hectare of the farmer, taking into account the quality of the land. There is no point in comparing a farmer on poor land with a farmer on good land in terms of production. I hope the evidence can be provided because from my knowledge of farmers it is fair to say that most farm the land according to the potential of the land, provided they are in good health, young and able to do so. I learned one sharp lesson when I went to the west. I was managing a hill farm of 1,000 acres and had great ideas about reclaiming the land, getting rid of ferns, draining it and so on. I employed a Kerryman, a graduate in soil science, as manager of the farm. After about a year he told me I was wasting my time and that the more money I put in the more I would lose. He also said that the local farmers had figured out how to get the best return on their land. Over-intensifying would not solve the problem but would cost money and not make money. How right he was. The farmers knew they had to farm extensively rather than intensively on the type of land they had. It was their land, their livelihood, and the place where they were born. In examining the productivity of land one must take into account the land in question as well as the farmer.

Unless one is a Deputy, most people if they are paid €50,000 in a year before going to work would not have the incentive to work. They might be inclined to say they do not have to work and if they have €100,000 all the better. They would not push themselves because this payment will continue rolling in the door before they do anything and would just toddle along on a minimalist basis. It appears that a high single payment is a disincentive to production. That leads to the next big question. If production, without the single payment, is a loss-making exercise, the farmers with the greatest losses from the actual farming enterprise would be the most intensive farmers. If, on the other hand, farming without the single payment in a good farming situation is a profitable exercise, those who have a large single payment and a large productive farm benefit on the double. They receive the large single payment, the kick-in payment, irrespective of whether they farm and they derive a large profit from the farming exercise. If all farming, even on productive land, is losing money then there is a huge incentive not to farm. Farmers are generous and fine people but the logic of farming from a money point of view is that the more one farms the less money one will make does not make any sense to farmers who have kept detailed accounts. I am sure that is what they are doing because farmers are not fools. The catchcries of active and productive farmers do not stand up. I see no justification for paying anybody a single payment of more than €50,000 or more than €500 per hectare.

I have considerable sympathy for the small intensive farmer who receives a small single payment. Some 70% of farmers have a single payment of less than €10,000, 90% have less than €25,000. I am not saying that 90% are not farmers or are not productive. Somebody said recently that 40% of the cattle for fattening are produced in Connacht. An option that should be explored is a national ceiling in respect of the amount of single payment. The sum of €100,000 which is paid to 800 farmers is much too high. That is a joke. It will have to be reduced to a much lower level. According to the Secretary General's figures if it was reduced to a maximum of €50,000 there would be a saving of €50 million. The saving could be greater because 90% of farmers receive less than €25,000. An idea that could be examined to help the intensive small farmer would be to frontload the first 20 hectares, approximately 50 acres, by means of a higher payment and after that surely he would make a profit on the rest of the farm.

I do not know where the Department got the idea that it was speaking for the people. I know the IFA favoured this approach but there are many people who are not members of the IFA. Many IFA members have approached me, particularly from Senator Comiskey's and Senator O'Keeffe's counties, asking that I tell the leadership of the IFA that it does not represent them in respect of the proposal it put forward. I do not accept the proposal put forward. It is a continuation of the status quo. In a parliamentary question I have asked the Department for an approximate breakdown of the people who receive the large payments. I do not believe, for example, that it is pure dairy farmers who received the large payments but in many cases that it was the people who were buying the calves from the dairy farmers who are getting slaughter premiums. I believe it was beef farmers who got very large compensation, in other words, certain sectors.

The single payment farmers receive now does not relate to farming activity at the time but to the grants paid to certain sectors and not paid to other sectors. A pure dairy farmer who did not raise his own calves but sold them on did not do well out of the single payment. However, a beef farmer who bought calves, finished them, and got the slaughter premium in the reference years, did extremely well out of this arrangement. I do not believe there is a relationship between the historic payment in 2002 and activity; some farmers had much activity but received little payment. What the Secretary General is proposing is to continue history. That means that the farmer who was 40 years of age in 2002 will be heading for 60 in 2020, the farmer who was 50 years of age will be heading for 70, and the farmer who was 60 will be heading for 80 if he is still alive. That the position in 2002 somehow translates linearly to the future and that things do not change dramatically in 20 years is a crazy notion with which the Commissioner was right to try to break the link.

I have major problems with the Minister's approach. I know Mr. Moran's role is to do whatever the Minister has laid down for us - I am not trying to tie him to policy because he must adhere to the political decision - but we have a big problem in this regard. The DS payments are €88 per hectare, but we must examine two aspects, the first of which is that there should be a relationship between the DS payment and the disadvantaged areas payment. There is no such relationship. A hill farmer receives €99 for land that in some cases holds one mountain ewe to the acre - that is what the Department rules tells us we can keep - but for a low land farmer the figure is in excess of five ewes to the acre. One can see the relative productivity levels, yet the Department is paying them virtually the same disadvantaged areas payment. We cannot discuss Pillar 1 without discussing Pillar 2. For example, if there was to be a disadvantaged areas payment, with no acreage limits, of say, €400 a hectare in mountain areas, it would change the game.

The Minister and the big farming organisations throw up their hands in horror at the idea of a ceiling on the single payment. It is welcome that everybody can agree that the payments of most benefit to extensive farmers in the west from County Kerry to County Donegal all have acreage limits, including the DS and REPS payments. If it is sauce for the goose, it should be sauce for the gander. If one set of payments has acreage limits, I cannot understand the reason others do not. If the others are not to have acreage limits, none of them should because otherwise there would be no equity.

Tom Barry (Cork East, Fine Gael)
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I take great exception to Deputy Éamon Ó Cuív pointing out that beet farmers were the so-called main beneficiaries. First, they lost their beet. Second, they lost their income. They have increased premiums which will be cut more at this time. Third, the compensation period only extends to 2015, not into the next round. For the Deputy to say beet farmers are having an easy ride in this respect is waffle, as he should know.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I am sorry, Deputy.

Tom Barry (Cork East, Fine Gael)
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That is unfair. The Deputy did not do his homework.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I did.

Tom Barry (Cork East, Fine Gael)
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The Deputy did not.

Éamon Ó Cuív (Galway West, Fianna Fail)
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The Deputy should have listened to what I was saying.

Tom Barry (Cork East, Fine Gael)
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The Deputy listens to himself so much that he now believes himself.

Andrew Doyle (Wicklow, Fine Gael)
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Deputy Tom Barry was referring to what he considered to be an incorrect point made by Deputy Éamon Ó Cuív.

Tom Barry (Cork East, Fine Gael)
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Correct.

Andrew Doyle (Wicklow, Fine Gael)
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I accept that.

Éamon Ó Cuív (Galway West, Fianna Fail)
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The point I made was-----

Andrew Doyle (Wicklow, Fine Gael)
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We are here to hear from the officials of the Department of Agriculture, Food and the Marine, not each other.

Éamon Ó Cuív (Galway West, Fianna Fail)
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Yes and what I said was that I understood beet farmers and certain types of beef fatteners received a disproportionate amount in single payments because of the way the mechanism worked. For example, dairy farmers receive less because there were not as many premiums paid. I said I had asked for this information from the Department and that I would stand corrected when I received the information I had sought in the parliamentary question. If Deputy Tom Barry is correct and beet farmers are not receiving a large single payment, I will withdraw the statement I made, but that is my understanding and the figures seem to bear out what I am saying.

Andrew Doyle (Wicklow, Fine Gael)
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To be fair, beet farmers were not paid a different amount from those producing any other arable crop such as barley.

Tom Barry (Cork East, Fine Gael)
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Correct, but they are compensated for-----

Andrew Doyle (Wicklow, Fine Gael)
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That has nothing to do with-----

Tom Barry (Cork East, Fine Gael)
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Their payment will be cut disproportionately because of the higher hectarage payment.

Andrew Doyle (Wicklow, Fine Gael)
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The matter has been clarified.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I welcome the delegation from the Department for which I have a few brief questions. The budget holds the key in the negotiations. What progress has been made in that regard? Is it an ambition that we will have an agreement on the budget towards the end of this month at the Council meeting or do the officials believe the negotiations will drag on into the Irish Presidency? What are the chances of that happening because the nuts and bolts of the entire process cannot be put in place until that happens? If it does happen, are we in danger of not having an agreement in our six month term and what would be the consequences of this in view of the countries coming after us, with no disrespect to them?

There is no mention in the presentation of young farmers and the 25% top-up. Is there a danger - this is the key to getting more young farmers back into our system, an issue in recent years - that this could be lost in translation? We must use this as a negotiating tool to get what we want in the other areas. The 25% top-up should be ring-fenced in the negotiations, if at all possible.

Mention was made of sugar quotas and support for their abolition in 2015. Is it expected that this will happen in 2015? There is speculation that it could happen in 2020. In that event there would be a five year gap. What is the likelihood of Ireland being accepted back into the market post-2015 and what, if any, progress has been made in getting us back into the system at that stage?

Flexibility is the key element of the CAP. I note five other member states support our line, although they are not heavy hitters. Are other heavy hitters likely to come on board in the near future to support our cause? I am aware other member states have made their own submissions. What is the likelihood of these submissions gaining traction ahead of ours?

Martin Heydon (Kildare South, Fine Gael)
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I thank the officials for attending and updating us on the position. On some of the comments made, Deputy Éamon Ó Cuív has referred to farmers in the west who may be Irish Farmers Association supporters but who do not believe they are represented by it. I would be interested to know if the Deputy represents his party's view or is he speaking in a personal capacity?

Éamon Ó Cuív (Galway West, Fianna Fail)
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As party spokesperson; I am representing the party.

Martin Heydon (Kildare South, Fine Gael)
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That is interesting because I have a major difficulty with some of the points he made.

I fully support the work the Minister and the Department have done to date. The Minister has been proactive in that regard. It is great that Ireland is giving a lead in coming up with proposals and getting other countries on board on an approximation model. On the idea that we could see a swing where 75,000 farmers would receive an increase of 85%, albeit from a very low base, while 55,000 would see their payments fall by 33%, I am baffled by how anyone could argue this could be good for the overall agriculture system and the general economy. I do not know how we would have any hope of hitting our ambitious targets under Food Harvest 2020 if that were to happen. I am mindful that many farmers, on the basis of their income from direct payments, have made significant investments in their farming enterprises to reach their current levels of production. That investment would not have been possible without the single farm payment, but there are significant debts that must be paid and commitments met. For those farmers who have made significant investments in their farms to see a massive drop in payments in the next CAP round would be disastrous.

A point was made about farmers who had sold young animals and not claimed the extensification payment or any of the subsidies available.

We must bear in mind that the farmers were paid handsomely for that stock at the time.

The Secretary General outlined the importance of the overall budget. The envelope for the country is the key issue. We want the Minister and the Department to have maximum flexibility as opposed to decisions being made in Europe. I acknowledge the work the Minister has put into these negotiations.

On greening, I agree that to move to a percentage of each individual farmer's payment, as opposed to a 30% flat rate, is very important. To refer to the point that Deputy Pat Deering made earlier on sugar beet - the Commission proposes that the sugar quota is ended by 2015 - if the sugar quota remains, it is absolutely crucial that we are a part of the new quota system. What is the likelihood of Ireland being able to access the sugar quota? In some respects one could argue that it might be better for Ireland to have access to a quota rather than to the open market.

If the framework is not in place by the end of our Presidency, would that mean that the new Common Agricultural Policy would not begin in January 2014 and would roll over to a later date? What period is necessary as a lead-in time? I do not think it would be feasible to implement it if the decision was taken after June 2013.

Pat O'Neill (Fine Gael)
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My first point relates to the timescale, as raised by Deputy Heydon, and what will happen if the budget and the CAP proposals are not agreed. What must happen to ensure the CAP payments are implemented by January 2014? We have all heard that the Germans are facing a general election and Chancellor Merkel may not want the negotiations to be ongoing during that time.

The final agreement on the greening process is very important to Ireland. The Minister has outlined at many meetings the effect it could have on Ireland, such as three arable crops. I would like to hear the Secretary General, Mr. Moran's comment on the Minister's proposals and our chances of success in getting agreements on the greening.

I wish to deal with the statement Deputy Éamon Ó Cuív makes in Irish Farming News in the Irish Independent. He states that the IFA only represents 10% of the farmers of Connemara. Whether it is the IFA, the ICMSA, the ICSA or Macra na Feirme, these bodies - similar to Deputy Ó Cuív who, as an elected representative, representing all the people of Galway - still represent all the farmers.

Éamon Ó Cuív (Galway West, Fianna Fail)
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They do not.

Andrew Doyle (Wicklow, Fine Gael)
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We are here to discuss the Common Agricultural Policy with the Department officials.

Pat O'Neill (Fine Gael)
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I am going to make a point.

Andrew Doyle (Wicklow, Fine Gael)
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We still must discuss Food Harvest 2020 and the Common Fisheries Policy. We have heard an outline of where the negotiations are at. Deputy Deering addressed specific questions to Mr. Moran that need to be answered. There are more questions that need to be answered. I ask members to ask questions rather than have a Second Stage debate on the fundamental differences of opinion. The Senator may disagree with Deputy Ó Cuív's assertion on the priorities of redistribution, but I request him to keep it brief and ask questions.

Pat O'Neill (Fine Gael)
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Deputy Ó Cuív is proposing that we cap payments at either €50,000 or €100,000. He states that a payment of €100,000 is too much as there would be no incentive to go out to work; he suggested the figure be capped at €50,000. The reason I do not agree with that, and I ask the officials to take this on board, is that people in receipt of payments of the order of €100,000 or €50,000 went out and were productive. Deputy Ó Cuív's argument, which he contradicts later in his presentation, is that the payments should go to the more disadvantaged areas. This will not increase production and will encourage people not to increase production in those areas. I propose that part of the flat rate payment under the CAP proposals will be used to encourage production, and that we have a coupled payment either through Pillar 1 and Pillar 2. I know we do not want to return to coupled payments, but I think this will increase production in certain areas, be it sheep or beef. With the removal of quotas in 2015, we could have a situation where the beef industry will suffer if milk prices continue to rise on the world markets. There will be male animals from the dairy herd which will have to go through the system. We will reduce the quality of the beef herd. I think we should look at some form of coupled payment for the beef and sheep herds through Pillar 1 or 2. It is important to maintain the increase in the quality of animals in the beef herd. We cannot let that significant progress we have made in the quality of the herd in the past six years slip due to the fact that quotas will go and the emphasis will be on dairy. We must encourage beef farmers to stay in business. I was very alarmed by an article I read in the Irish Farmers' Journal that states that beef will not be profitable in the next five years. What will encourage farmers to stay in beef production when one cannot guarantee prices in world markets but we can guarantee a support through coupled payments? I compliment the Minister on the way he has succeeded in getting so many countries to join us in getting rid of the flat rate payment. We will have to have some flat rate payments, we will also have a "greening" payment, but I think we should have a coupled payment in order to encourage production in certain areas.

Susan O'Keeffe (Labour)
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I will try to be brief given the time constraints. There have been various queries about the timeframe. I know the Department officials have a range of experience as many have been involved in the negotiations on CAP in previous occasions. From the briefings I have had from officials it seems that the negotiations on the CAP have been awfully slow. It seems to be slow to the point of almost stopping. Issues that were raised in the Secretary General's address today are matters that do not seem to have shifted in the past six to nine months. That alarms me, although perhaps it is because the Secretary General is not in a position to detail progress because it is too sensitive. If that is the case, will Mr. Moran so indicate? On the approximation, the five member states have been member states for quite a while. Yet Mr. Moran goes on to say that he believes the principle of flexibility will ultimately be supported. Why is Mr. Moran prepared to go that far, given that we still have five and we had five some months ago? I also wish to query the figures on flat payments and that the payments to 55,000 farmers would fall and some 75,000 farmers would benefit. Clearly the 75,000 farmers who will benefit might find it acceptable, although Mr. Moran has used the word unacceptable. What modelling has been done in the Department to show the impact that would have on Harvest 2020, were we to go down that road? I am assuming the officials have done the modelling. Are those figures available?

Andrew Doyle (Wicklow, Fine Gael)
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I now call Senator Colreavy, Deputy Barry and Senator Brian Ó Domhnaill.

Susan O'Keeffe (Labour)
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The Chairman means Senator Michael Comiskey.

Andrew Doyle (Wicklow, Fine Gael)
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I beg your pardon, the same county but I used the incorrect name.

Susan O'Keeffe (Labour)
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The same county but a different person.

Michael Comiskey (Fine Gael)
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Thank you, Chairman. I have been called the incorrect name at home.

It has often happened in the local papers too.

I thank Mr. Moran for his presentation and thank his colleagues for attending today. The most important thing is that the budget is agreed. After that there will be discussions regarding how the money will be distributed, but getting agreement on the budget is vitally important. It is also important that young farmers are looked after, but we must not forget those farmers who are not so young and who have farmed since the last agreement without any single payment. We meet such farmers regularly at meetings and must not forget that they did not gain from the last agreement. There are some farmers who built up very high entitlements in the past, sat back in their armchairs and did not farm. That must also be dealt with. Such farmers drew down their payments but did not farm to the extent that was expected of them.

It is important that pillar two is agreed and that we know what it is. I agree with my colleague, Senator O'Neill, on the need for a coupled payment in the future. Perhaps payments under the suckler cow scheme and the sheep scheme could be coupled in some way to encourage farmers in those sectors to continue farming. We should discourage people from building up payment entitlements and then not engaging in farming. Finally, it is important to know what is being done with regard to the reference year and what it is likely to be.

Tom Barry (Cork East, Fine Gael)
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I thank the Secretary General and his officials for their attendance today.

With regard to the greening aspect of CAP reform, an interesting issue is cropping up in the tillage industry. Let us say, for example, that a 50-acre farm comes up for rental next door to a tillage farmer. If that farm is in permanent pasture, the tillage farmer cannot rent it but a dairy or beef farmer can. If a farm comes up for rent that is in stubble or tillage and is put into grass for long-term lease, it becomes permanent pasture and moves out of the realm of the tillage farmer. Essentially, over time, the greening proposals will result in a gradual reduction of our tillage industry. Tillage farmers will lose out vis-à-vis stock farmers and land will become harder and harder to acquire because it will be deemed to be permanent pasture. This is a very serious matter for the tillage industry and perhaps a compromise can be reached on this. It would be no harm to have some degree of rotation, given that we are blighted with wild oats, land is being worn down and organic matter is decreasing. A compromise could be reached whereby certain lands that are deemed to be permanent pasture could be taken out of that classification but returned after a certain period of time for rotation. There would be natural benefits for grassland under such a system because it would reduce compaction, which is an enormous problem in grassland farming. It would also help with wireworm and other pests, which could be removed from the soil.

I am delighted to hear Mr. Moran express support for the sugar beet industry, about which I feel very passionate. I would love to see the industry return to Ireland and I wish the officials the best in that regard. As public representatives, we will certainly work with the Department to try to make that happen. There are a number of very good proposals on the table at present but none of them will go anywhere if the policy is not correct.

I do not want to comment on the capping of payments because it is being done on a European basis and it will not swim in Europe. I would like to know what the officials think about coupling. I would prefer to see coupling going past 10% and am interested in the view within the Department on that.

One issue is key and everybody here has alluded to it. Approximately 77,000 people will have their payments increased by 85%, while 55,000 will have their payments decreased by 33%. Let us get behind the fallacy here. I have farmed quite a lot of land in my time, and many people similar to me are now facing a situation in which the lands we once farmed are now being farmed by the individuals who own the land, in theory, although in practice they are not farming the land but are map farming. There is no point in putting our heads in the sand on this issue. Maps are being advertised in every newspaper in the country. It is so commonplace now that it is not even being concealed. The problem here is that a large proportion of the 77,000 people who will get an increase in their payments will get an increase not just of 85% but of 100%. Such people have had no payments to date, so any payment they receive will be a bonus for them.

In the past, when land cost €150 per acre, area aid was quite close to that. To acquire land, one paid the equivalent of the area aid to the landowner and then collected the area aid because one was in production. Now, landowners are being paid up to €220 per acre to farm the land but they are keeping the maps. We need to find out who is actually farming the land. This is a serious problem because it is crippling progressive farmers. They are losing land because people are afraid that rights on land are going to be set up for many years to come. I am proud to say that I farmed a lot of land when the last system was put in place. However, when I asked how much of the single farm payment I was entitled to for that land, the answer I got was "zero". I had a quasi-share farming agreement but I was not entitled to any payment. Before we start taking money away from the 55,000 productive farmers, we must make sure we are not giving it to those who are not producing anything. I agree that there are many small farmers who would like to get up and running but that is only one section. There are many who have no intention of farming their land. In that context, we should look at ways to tie proof of farming to payments, and including a penalty for those who are not actively farming would help greatly.

Brian Ó Domhnaill (Fianna Fail)
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I welcome the officials here as it is an opportune time to discuss the CAP reform proposals.

At a European level, it is critically important that there is a tie-down, as quickly as possible, on the availability of funds for the programme. There are many excellent proposals coming from the Commission which must be supported. In particular, I welcome the proposals for young farmers. What work is being done by the Government to introduce a retirement scheme in tandem with the proposals for young farmers? This is particularly relevant in view of the fact that 5 million farmers across Europe will retire during the lifetime of the new CAP. Incentives must be created to enable young people to get involved in farming. It is not enough to have a programme for young farmers without having a retirement programme in place as well.

Much has been said here about rates of payment, and it is fair to say that those rates are historical, based on 2000, 2001 and 2002. A farmer who was 26 in 2000 would have invested an enormous amount of money in bringing his or her farm up to standard and buying in stock. That same farmer will be 40 in 2014 but will not qualify for the young farmer incentives under the CAP. That should be looked at again. Some degree of flexibility should apply for those who can prove they were farming actively in the reference years.

Much has been said about the levels of payment in the media, and rightly so, because it is taxpayers' money. The money comes from Europe but is essentially taxpayers' money. If €1.25 billion is being spent in this country to promote agriculture and the agri-food sector, it is right that questions are asked, such as why 40% of the money coming into Ireland goes to only 10% of farmers, why the top 2% of farmers are in receipt of 10% of CAP payments and why 70% of Irish farmers receive less than €10,000 a head. These are legitimate questions. If we are to be honest with ourselves we must admit there are farmers in the west of Ireland who are producing lambs and calves and sending them on without receiving single farm payments to which they should be entitled.

Let us take for example, during the reference years, a farmer with an entitlement of 400 ewes or 60 livestock units. He or she would get a single farm payment of approximately €11,200. Another farmer with an entitlement of 100 heifers or 60 livestock units would receive approximately €8,000. Now let us take another example, which baffles everyone, of a farmer with an entitlement of 100 bullocks or 60 livestock units. He or she would be entitled to a payment of €31,000, which is almost four times the payment received by the heifer owner. I do not see the logic or fairness in that. Why should payments over the next six or eight years be based on historic privilege in 2000, 2001 and 2002? I do not see the incentive in that for any young person to enter farming, to develop an enterprise or to stay at home and help a parent or uncle and to inherit the farm at a future date. We must change the current rates of payment. I know hundreds of young people from farm families in Donegal who are leaving to go to Australia and Canada. If the option was available to them to get a higher single farm payment to make the enterprise more viable they would stay at home. They would add to the production sector and would add to the objectives of Food Harvest 2020. There are a number of farm enterprises in places like County Meath where individuals are directors of farming companies and are receiving over €500,000 in payments. That is not right and it is not the best or fairest way to allocate our money.

The Minister for Agriculture, Food and the Marine is supposed to represent all farmers, not just the elite, not just those who could afford to develop their enterprises over the past six to eight years because they were in receipt of higher single farm payments than others. Farmers who are in receipt of very high single farm payments can rent land for five times the going rate and are ultimately preventing smaller farmers from renting additional land. According to EU state aid rules, that is a distortion of the market but that is exactly what is happening with the current single farm payment structure. It would not be allowed in the private sector, if, for example, Enterprise Ireland gave a grant to a retail outlet to set up in competition with a similar outlet across the street. We must be very careful here. We need to go back to the drawing board and really think this through. If we continue going in the current direction we will drive thousands of individuals who live along the western seaboard off the land. We will end up with marginal land being abandoned. That is not what the Commission wants and the Commissioner has been been very clear about that. We often question the Commission and its motivation but we must take a very close look at what is being proposed. It is not good enough to simply support the proposals because some of the farming organisations support them. There are farming organisations which support the Minister's stance and they have a legitimate right to do so. However, I believe they are wrong in doing so. They are letting down the small farmers who are members of their organisations. We must go back to the drawing board.

It is my view that the funds that were available to this country under pillar 2 have not been utilised effectively. The rural development fund, under Leader, is under the remit of the Department of the Environment, Heritage and Local Government but the governing Department, in my view, is the Department of Agriculture, Food and the Marine. Why has a large proportion of the funds available to this country, which have to be drawn down by the end of next year, not been drawn down yet? There are two reasons, the first of which is the eligibility criteria attached to those funds by the Department of the Environment, Heritage and Local Government. The second is the lack of flexibility given to Leader companies across the country. We are going to end up in a situation where a couple of hundred million euro will not be used, even though it is available to this country and to small indigenous businesses. That money will go back to the European Union. What steps, if any, have been taken by the Department of Agriculture, Food and the Marine to liaise with the Department of the Environment, Heritage and Local Government to ascertain why those funds are not being drawn down and who is responsible? Is the European Commission at fault here and, if so, what steps have been taken to consult with the Commission? How many meetings have taken place and how can we rectify this situation in time to allow those funds to be drawn down and to be available to rural businesses all over the country which are currently struggling for cash? We could create hundreds of jobs if individuals were allowed to draw down those funds. I have spoken to many representatives from local rural development companies who have told me that they have many applications for funding on their books but they are not allowed to approve funding because of the criteria linked to the scheme. Something should be done about this promptly. An extensive campaign should be fought, up and down the country, to ensure that people apply for the available funds and that such funds are released.

I wish to ascertain from the Secretary General the view of the Department regarding any upper cap that might be imposed on the single farm payments. Is a figure being knocked around in the Department? Has the Minister indicated a figure which might be acceptable?

Andrew Doyle (Wicklow, Fine Gael)
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I thank members for their contributions. The Secretary General is probably aware that there is some division on what is the best way to proceed in the negotiations on CAP reform from an Irish perspective. Some people are more in favour of a flattening of the rate than others. Statistics, simplistic as they may be, indicate that this is required.

The Cypriot Presidency is coming to an end and a dossier has been produced. What has been agreed, other than the proposal to reduce the overall MF by €50 billion and to reduce the CAP by 2%? Is it the Cypriots who are seeking a sign off on Pillar 1, without having the whole package agreed? Is that their significant achievement during their six month Presidency? Will that be the measure of their achievement? We need to know this.

Commissioner Cioloş got agreement in the Commission on the maintenance of the budget on the basis of producing as much food as possible within the EU, doing so sustainably while protecting rural communities. That is the foundation for his justification of the budget and everything else revolves around that. Mention was made of reference years and young farmers but the definition of an active farmer is in effect coupling, without actually going to a coupled number, per head or per acre. If the single farm payment money follows food production, in simplistic terms, then that should achieve coupling and should ensure that payments are only made to those who produce in the future. If they do not produce, they do not get paid. In a scenario where land is either rented or leased, neither the landowner nor the lessee should have a dominant position. They are mutually dependent and should be treated as such. That is the nut that has not been cracked. If we can achieve that, it would be real progress but I am very fearful that next June, at the 11th hour, a flawed system will be devised, agreed and signed off on. That will undermine everything else that is done on greening, on redistribution and on flexibility.

I respect what Senator Brian Ó Domhnaillsaid. As far as I know, Macra na Feirme is supportive of the thrust of the negotiating tactics. I understand the definition of permanent pasture is land that is in grass for more than eight years. This was looked at during the Danish Presidency, from the point of view of offering two crops, with one crop being under eight years old and permanent pasture being defined as pasture in place for longer than eight years, which would allow for two crop on grassland. Is that correct?

Will Mr. Moran give us an overview of Food Harvest 2020 because they are interlinked? We can publish his contribution as providing additional information.

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.

Andrew Doyle (Wicklow, Fine Gael)
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Has any progress been made on the definition of an active farmer? The description proposed in the original document by the Commissioner was crude. I believe he accepts it is one that will not be agreed at the end.

Mr. Tom Moran:

Good progress is being made in the discussions on that among the working groups and at the Council. The danger with defining an active farmer is that we could tie ourselves up in such bureaucracy, by linking it to income and so on, that it would make a nonsense of it. One idea is that there would be a negative list excluding airports, golf clubs and so on, but that is at the extreme of the madness. It would exclude certain activities. If we can get to a position at which we have a negative list and a reasonable approach to the definition of an active farmer, it is something that will work well.

Andrew Doyle (Wicklow, Fine Gael)
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We also need to define "active". I would go back to the person who keeps the maps and also the person who is striving to become operative. The last thing we want to see is a situation in which, if a young farmer gets a 25% top-up - I am only talking about young farmers - it would get transferred to the landowner. That is what I mean by "active". I do not mean excluding airports or multinational companies; I am talking about being active in terms of the land and activity, as opposed to an active farmer. I might be talking in riddles but Mr. Moran knows what I am trying to say.

Mr. Tom Moran:

I know exactly what the Chairman is saying and I could not agree more. To refer back to the 2020 strategy, one of the difficulties for Irish agriculture is the structural rigidity and the fact that young farmers are prevented from coming in and getting a run at it. That can be tackled on a number of fronts. It can be tackled at an EU level with the 25% top-up, which we are driving hard. We can also prevent what the Chairman is talking about, if possible. We can also do what we did in the last budget to incentivise transfer through a range of mechanisms. That is something we are actively pursuing.

Andrew Doyle (Wicklow, Fine Gael)
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I must apologise as I have leave to attend a meeting of the Working Group of Committee Chairmen. I will ask Deputy Deering to take the Chair. Does Deputy Deering want to ask a question before doing so?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Mr. Moran mentioned that the Cypriots would be hanging up their boots shortly. To return to the question I asked earlier, in the event that it comes down to the wire and Ireland does not get a deal, would we be better to move this on to the next six-month term or try to force a deal at the last minute? What would be the consequences of our not getting a deal during our Presidency?

Mr. Tom Moran:

If there were no deal during our Presidency the Commission proposal would still stand and run on to the term of the next holder of the Presidency, which is Lithuania.

Andrew Doyle (Wicklow, Fine Gael)
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They had a change of government last week.

Mr. Tom Moran:

That is correct. I think the Minister with whom we had a very good relationship is now gone.

Andrew Doyle (Wicklow, Fine Gael)
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He was due to go.

Mr. Tom Moran:

His team, hopefully, will still be there. The proposal would run on to the term of the Lithuanian Presidency. We are getting close here to the idea that the date would have to be rolled on and that would bring us to the possibility of rolling on the existing system as far as we can.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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That would remain there.

Mr. Tom Moran:

It would be easier to do that under pillar 1 than under pillar 2, which is a five-year programme - that would get complicated - but, equally, we would want to make sure that the Heads of Government had signed off on a MFF to make sure there is sufficient money to roll it on. However, as footballers would say, we are not contemplating that. I presume we will be back before the committee in the earlier part of next year and we will have a better perspective on this.

Andrew Doyle (Wicklow, Fine Gael)
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On a point of information, the sectoral agricultural session will take place on 10 and 11 March and, up to that point, the committee considers that it has a role to help in the negotiations by having discussions with colleagues in other member states to reiterate the position. We started off a year ago in Poland listening to people say they wanted a flat rate across Europe and not gradual convergence. It was perceived that the countries that would benefit significantly would be better off, and they might be for a year or two, but inevitably costs track income and generally they do not fall as quickly as they increase when they track up income; in the reverse that does not work so well. That is a point that was made here in the context of internal convergence.

I will ask Deputy Deering to take the Chair. I apologise for having to leave. I thank Mr. Moran for his time and I know the discussions on the Common Fisheries Policy have yet to follow.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Does Deputy Ó Cuív wish to make a comment?

Éamon Ó Cuív (Galway West, Fianna Fail)
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On the definition of "active farmer", as the Secretary General will know, a complaint made to the Department of Agriculture, Food and the Marine and the Department of Arts, Heritage and the Gaeltacht regarding farmers in large parts of the west coast, and even along the south coast and in Waterford and Wicklow, was that they produced too many sheep, which was not sustainable in the long term. When there were coupled payments there was huge growth in the number of female animals on the hills. Now, farmers have been made less active than they used to be and the Department is taking another swipe at them and saying they do not have enough stock any more.

Food Harvest 2020 was a policy produced to develop Irish agriculture. To implement Food Harvest 2020, we must encourage all farmers to produce the maximum amount possible from their farms, taking into account land quality, environmental constraints and so on. If, say, 70% of farmers who are considered to be non-productive were to be eliminated in this respect, the targets under the strategy would not be achieved. There is an idea that there is a small percentage of very highly productive farmers, but many farmers are forced to be non-productive, although they do many other things that contribute to the national and international good, such as maintaining the ecology which people who come here on their holidays can enjoy. Will Mr. Moran accept that a fair definition of where we should be going in this respect is that everybody should produce the largest amount that is possible on the land, taking into account the quality of the land? In other words, we do not want there to be over-utilisation of land, as that would not be sustainable. We also need to take account of factors such as age and health, which will always come into play regardless of where one lives. Would that fit in with the Department's definition of how to maximise output, or does Mr. Morgan believe that one sector should increase output and the remainder should stay as they are?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I will ask Mr. Moran to complete this section.

Mr. Tom Moran:

We have moved on to Food Harvest 2020. I take it the statement I had can be taken as read-----

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes. That is in order.

Mr. Tom Moran:

-----unless the Vice Chairman wants me to read it?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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That is okay.

Mr. Tom Moran:

Deputy Ó Cuív has raised an interesting point. I would have no particular difficulty with that, except that I would not see the Department as having a role in determining which sector increases or reduces output at the expense of another. It is not that kind of approach.

Éamon Ó Cuív (Galway West, Fianna Fail)
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Everyone would produce up to the maximum possible.

Mr. Tom Moran:

One of the targets in the 2020 strategy is a 50% increase in milk production. It is an obvious one because quotas will end and there had been repressed capacity for years. The question is whether that will happen at the expense of another sector. It could, but it would not be fully at the expense of another sector. It will come to down to individual actors in the sectors making their own decisions at that stage. They will be free to produce milk, beef, sheep or whatever. The aim of the Department is to maximise the possibilities, to ensure there are markets and to make sure possibilities for smart, green growth - to cite the three words that are used - are open to producers. We will then use whatever supports and systems we have to help that, including pillar 2-type schemes under a new CAP. For example, we are using the TAM scheme, under pillar 2, to increase the output of milk, its storability and the ability of producers to increase and develop their output. We also are funding areas identified under the beef activation group within the 2020 process in which there are gaps in beef production with regard to on-farm profitability, better breeding and improved use of information. The suckler cow scheme is a case in point. A key tenet of this was to pass on breeding information in order that the ICBF, through its structure, could make available the best bulls for breeding. What I am saying, probably in a roundabout way, is that we are not determining which sector grows or does not grow; on the contrary, we are asking where is the potential and which are the areas that need to be developed in our entire agri-sector, and then we want to incentivise them towards development.

Deputy Ó Cuív was right in what he said. When ewe premiums were being paid, ewe numbers rocketed; I think they increased to around 7 million. The number decreased as soon as there was no longer a subsidy. That was a logical response to a decoupled mechanism, but now they are increasing again. The reason the number is increasing and there is increased confidence in the sector is not the existence of a subsidy but the perception that there is a market for the product, which there is, and there will continue to be one. One of the fundamental points under the 2020 strategy is the underlying increased demand for food. We are constantly saying that food demand throughout the world will increase. The demand for meat in Europe will increase. We have capacity in this area and that is why we want to do this.

Tom Barry (Cork East, Fine Gael)
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I will make a brief comment on Food Harvest 2020. I have always gone along with the philosophy that every acre must earn for this country to reach its optimum. I would like to make the Department officials aware of a presentation by the Teagasc tillage stakeholders' group tomorrow on a report that was put together with the help of Teagasc and many of us in the industry in regard to tillage. We hope it will be bolted on to Food Harvest 2020 because many of us in the industry felt that tillage did not get due attention at the time the strategy was produced. That is not the fault of anybody; they were not sufficiently organised. It is a document to be disentangled and examined and it certainly puts forward the arguments for the tillage sector. If any of witnesses have time tomorrow it would be great to see them there.

Pat O'Neill (Fine Gael)
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The Food Harvest 2020 targets are an aspiration. I would not say they are a dream but they are what we would all strive to achieve because that can only be good for jobs. There is confidence in the food sector; we have seen the investments being made by the Kerry Group and Glanbia. What are the implications in terms of greenhouse gases and carbon footprints, in the context of the Kyoto agreement, if production here increases to the targets set in Food Harvest 2020? Where would we stand in terms of carbon credits and carbon footprints? What are the implications for the country if we drive production to the targets set in Food Harvest 2020?

Brian Ó Domhnaill (Fianna Fail)
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The Food Harvest 2020 strategy is crucial to the agri-food industry in general and to increasing our exports. The targets contained in it are achievable. The Minister is on record as saying at this committee and in the Seanad that they are not only achievable but surpassable, and I agree with that view. Deputy Ó Cuív referred to this point but I would go further and ask why there should be a disparity between one group of farmers, be they young or old, simply because they live on marginal or poor-quality land, and another group of farmers who have large land holdings and the support of a large single farm payment and are in a position to rent land to farmers with smaller holdings who are not in a financial position to rent the land, thereby increasing their stocking rates and levels of production of lambs, sheep or cattle. Would Mr. Moran agree with that? Is that creating a disparity between farmers or ripples in the market? Does the Department agree it is an issue? It is an issue on the ground and I would be surprised if the Department has not picked it up.

At Carndonagh livestock mart in Donegal last week, farmers who engage in fattening lambs bought 600 lambs produced locally from small hill farmers with marginal land. Would Mr. Moran agree that those small farmers were playing a role in fulfilling the objectives of Food Harvest 2020? Had those lambs not been available in north Donegal - the same would be the case in the west where there is marginal land - the objectives of Food Harvest 2020 could not be met. The CAP budget is about more than agriculture alone; it is about a rural way of life. It is about keeping people in rural Ireland. If we are to sign up to that philosophy, will Mr. Moran agree that it is important that small farm holdings be supported? If Ireland has come up with the proposals for younger farmers to get a 25% top-up, why would we make the advantages pertaining to the young farmer scheme in the CAP budget exclusively available to young farmers who can afford to develop their agricultural holdings or are further incentivised by large single farm payments? Small farmers in counties with low single farm payments are at a considerable disadvantage in increasing their stock and buying or renting land. That is not right. Why should a farmer with a single farm payment of €300 per hectare rent or buy land around a farmer with a single farm payment of €50 per hectare simply because that farmer is not able to rent or buy the land that is down the road from his farm? That is not right. We have to level the playing field if we are to achieve the objectives of Food Harvest 2020. Will Mr. Moran agree that everyone should be on the field working together rather than pulling against each other? Will such disparity, with farmers working against each other, not endanger our reaching the Food Harvest 2020 targets?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I will ask Mr. Moran to answer those questions and to give a summary of where we are now in terms of Food Harvest 2020.

Mr. Tom Moran:

I will do that. I will deal first with the easy point. We are aware of the Teagasc event tomorrow morning.

We will be represented. It is an excellent endeavour. The point about climate change is an excellent one because in an expansionary phase, looking at a climate could be seen as putting a cap. That has to be an issue and is being considered.

The Food Harvest 2020 high level monitoring group which is working extremely well has commissioned an environmental impact statement on the effect of the targets. What it means is that we will not be reducing output but will increase the carbon output from the sector. Therefore, there will be a greater demand for mitigating measures to be introduced. The key point is that there is a direct correlation between high productivity and efficient production and the output of carbon. That means that the more efficient one becomes the lesser the carbon output. If Food Harvest 2020 appears to be driving towards greater efficiency it has inbuilt in it a positive carbon element. It does raise that challenge. We would put that challenge firmly side by side with the other great debate. The climate debate cannot be divorced from the food output debate. I am absolutely adamant about that. That is a view that has been expressed firmly by the Minister at an informal Council meeting in Denmark. One cannot be divorced from the other. If the population increases, as it will, and the figures are daunting, demand for food will increase. That issue has got to be addressed in the same context as the carbon issue.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Will the monitoring body produce a report?

Mr. Tom Moran:

We have it already. The next meeting of the high level implementation group will deal with that issue and we will make the report available. It will be interesting. The question on the climate and carbon can be steered into a consideration of sustainable intensification and development of agriculture. It is in that context that I would have a look at the original green approach. Through that approach we are linking efficient carbon emission agriculture to increased output of agriculture and using that as a marketing tool to differentiate and sell the additional product. It is a coherent approach to that debate rather than dealing with them singularly.

Senator Ó Domhnaill made a point which is fundamental and goes back to the earlier debate on the single payment. The Department holds the strong view that the contribution to Food Harvest 2020 is not limited to a farm of any particular size. Nobody is suggesting that Ireland go down the road of New Zealand on milk where there are herd sizes of 300 and 400 and there is no room for anybody else. The family farm approach in Ireland is the one that best suits the development and growth of rural Ireland. There is nothing to say one cannot develop towards the Food Harvest 2020 targets which we are already doing and still maintain the family farm structure. There is plenty of capacity in all the sectors for that to happen. The Senator mentioned the lambs bought at Carndonagh livestock mart. The Food Harvest 2020 target for lamb was a growth rate of 20%. As we are already at the 10% level we are close to achieving the targets. As we are very much on track, there is a good deal of optimism in the sector.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I call Deputy Ó Cuív for a brief point before we conclude on this section.

Éamon Ó Cuív (Galway West, Fianna Fail)
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One of the big constraints to expansion in dairying is the issue of getting the land near the milking parlour and the need to make it easy for farmers to swap land. I am given to understand there are a number of financial, fiscal and tax initiatives around such arrangements. Is the Department getting the full co-operation of the Department of Finance to ensure a tax system is in place that encourages farmers to swap land, in order that the fields are near the milking parlour with a view to expanding dairying in a sensible way, and so they do not end up paying capital gains tax? If I sell a field to Deputy Deering and he sells one to me, in order that we both have land nearer operations and do not have out farms, we do not want to end up paying capital gains tax.

Mr. Tom Moran:

The answer to that question is "Yes". We are working well with the Department of Finance and will continue to work with it on this issue. One of the positives of the Food Harvest 2020 report is that it has been accepted right across Government and Departments and we are getting good co-operation from the Department of Finance. For example, in 2012 stamp duty was reduced from 62% to encourage that type of transfer. Everybody knows the dairy farm must be near the milking parlour.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I asked the Department of Finance if some farmers had availed of it and it could not tell me.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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That will be for another day. I thank Mr. Moran. We shall move on the common fisheries policy.

Mr. Tom Moran:

Does the Chairman mind if I change team?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I will give Mr. Moran a break.

Éamon Ó Cuív (Galway West, Fianna Fail)
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We are finishing with this and not going on to the Estimates?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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No, we are not.