Oireachtas Joint and Select Committees

Thursday, 21 February 2013

Joint Oireachtas Committee on Agriculture, Food and the Marine

Pre-Council EU Developments: Discussion with Department of Agriculture, Food and the Marine

9:30 am

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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The purpose of this meeting is to consider our six-monthly report on developments in the European Union, particularly on the Common Agricultural Policy. I welcome the officials from the Department of Agriculture, Food and the Marine: Mr. Aidan O'Driscoll, assistant secretary general; Ms Bríd Cannon, principal officer; and Ms Sinéad McPhillips, assistant principal officer. I thank them for attending to brief us on developments in the European Union over the past six months and on the Common Agricultural Policy.

Witnesses are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by the committee to cease giving evidence in relation to a particular matter and continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or 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 either a person outside the Houses, or an official, either by name or in such a way as to make him or her identifiable.

I invite Mr. Aidan O'Driscoll to make his opening statement.

Mr. Aidan O'Driscoll:

I thank the committee for its invitation to address it today.

Developments in the European Union over the past six months have essentially been dominated by the negotiations on the reform of the Common Agricultural Policy, CAP. My comments will, therefore, focus mainly on how these negotiations have evolved, where they currently stand and how we hope to progress from here. I will be happy to attempt to answer any questions that members may have and to listen to any comments or advice from members on the negotiations.

Before turning to the CAP negotiations, I would like to mention briefly a number of other key issues covered by the six-monthly report. Section 2.7 and parts of section 3 set out the current state of play on some key international trade negotiations. The conducting of these negotiations is, in the first instance, the responsibility of the Commission, but naturally Ireland, like other member states, takes a close interest in the progress and outcome of these talks. The Irish agrifood industry, as a large export-oriented sector, can benefit significantly from improved access to overseas markets, and we also have defensive interests, particularly in regard to the high-value European beef market, to which we are a major supplier. The Minister and the Department, therefore, take a keen interest in the development of both national and EU policy in this area, and we are in a process of near constant engagement with the Commission to pursue our national interests.

I would like to take the opportunity to update the report in one respect. The EU-US high-level working group referred to in sections 2.7 and 3.4 of the report has now reported, and the European Union and United States have agreed to initiate the internal procedures necessary to launch negotiations on what will be known as the transatlantic trade and investment partnership.

In addition to the CAP reform, the Irish Presidency is responsible for a crucial phase of the negotiations on the reform of the Common Fisheries Policy, CFP. The objective of the Irish Presidency is to build on the partial agreement negotiated under Cyprus and to complete, in the first instance, an overall Council position on the three composite elements of the reform package in the coming weeks, followed by a political agreement with the European Parliament and the Commission by the end of June.

As time is limited, I will not dwell on other aspects, other than to draw the committee's attention to the comments in the report on such issues as the food quality package, plant and animal health, forestry and other matters, all of which are active points for the Irish Presidency.

In very broad terms, the challenge for the current round of CAP reform is to deliver, in good time, a Common Agricultural Policy that is fit for purpose, that is coherent with the Europe 2020 strategy for recovery and growth and that supports the twin goals of competitiveness and sustainability. These broad objectives are very much in keeping with the overall theme of the Irish Presidency of the European Union, which is focused on the need for stability, jobs and growth.

The Minister made it clear to the Council, the European Parliament and the Commission at the outset of our Presidency that his primary aim is to finalise the Council position and negotiating mandate by the end of March. This will be followed by inter-institutional trilogues, or three-way negotiations, aimed at overall political agreement by the end of June.

Three conditions need to be fulfilled to meet this very ambitious schedule. First, there is a requirement for a timely agreement on the multi-annual financial framework, MFF, which has now been achieved at European Council level. Second, we need willingness in the Council of Ministers to move quickly to agreed compromises on all outstanding issues in the Council position, which will then allow us to enter negotiations with the Parliament and Commission. Third, all three institutions – the European Parliament, the Council and the Commission – have to be prepared to engage actively in the search for acceptable compromise in the final round of negotiations in the trilogue process. I would like to deal with each one of these in turn.

A significant step forward was achieved two weeks ago when the European Council reached agreement on the EU budget for the next seven years, the MFF. Subject to the consent of the European Parliament, this provides the necessary clarity on agriculture funding that will allow completion of the negotiations on CAP reform. The agreement was generally positive from a CAP perspective. The CAP will still account for almost 39% of the overall budget. It incurred a cut of 3% compared with the figure in the Commission's original proposals, whereas the total EU budget was cut by 7%. This represented a good negotiating outcome in the face of significant pressure from a number of sources for a much higher cut to CAP expenditure.

A second crucial issue is the distribution of CAP funds between member states. The formula agreed by the Heads of State and Government for the distribution of direct payment, or Pillar 1, funds between member states had originally been proposed by Ireland and resulted in a relatively favourable outcome for this country. The result is that the level of direct payments made to Irish farmers has been largely protected, with our direct payments ceiling remaining at over €1.2 billion per year, with a relatively small reduction in order to accommodate new member states and due to the overall cut in the budget.

As part of the MFF, overall EU funding for rural development, or Pillar 2 of the CAP, was reduced by comparison with that of the previous financial period. With a new distribution of funds between member states, this will mean an Irish allocation of approximately €313 million per year in current terms. This includes a special allocation of €100 million, over the full period, negotiated by the Taoiseach in the final stages of the talks. Ireland will also benefit from CAP expenditure on market support measures, but the precise figures will depend on commodity market developments. Taken together, the EU funding to Ireland from direct payments, rural development and market supports will amount to over €11 billion in the seven-year period 2014 to 2020.

The summit also reached conclusions on a number of other issues that are central to the CAP negotiations, including: the use of 30% of national direct payment ceilings to pay farmers for greening practices; the implementation of new ecological focus areas, which will be done in a way that does not take land out of production and avoids unjustified income losses to farmers; the co-funding rates for rural development, where the general rate will be 53%; the capping of direct payments, which will be introduced on a voluntary basis by member states; the option to transfer up to 15% of funding between direct payments and rural development; and provision for an agriculture crisis reserve, which will be funded as required from direct payments.

The MFF now requires the consent of the European Parliament, and this will be an important task for the Irish Presidency. A further good foundation for the CAP reform has been laid in recent months on the second condition to which I referred, that of achieving rapid progress on outstanding issues in the Council of Ministers.

The Cyprus Presidency built on the work of our Danish colleagues, resolving or progressing a range of issues to the point where, in its progress report in December, it was able to identify the 30 or so outstanding technical and political issues which still need to be agreed by member states. That progress report now provides the basis for the Irish Presidency's efforts to reach agreement. Naturally, and this deserves some emphasis, the outstanding issues are those that have been found most difficult to resolve so far.

Our ambitious target is to finalise all outstanding issues in February and March. Under this timetable, a comprehensive Council position would be concluded at the March Council, with the negotiating mandate finalised by the end of March. This would broadly parallel the process in the European Parliament where a plenary vote on the CAP reform package is scheduled to take place in mid-March. The commitment of Agriculture Ministers to meeting this timeline was evident in the course of a very positive Council debate at the end of January, chaired by the Minister, Deputy Coveney. This has been largely reproduced at official level, where a number of outstanding issues have already been agreed by the special committee on agriculture in recent weeks. However, the scale of the challenge remains an enormous one and we are dependent on the ongoing readiness of member states to engage constructively with the compromise proposals we are tabling.

This brings me to the third condition that must be fulfilled if we are to conclude the reform process by the end of June, namely, the active engagement of the three institutions. Again, there are very encouraging signs on this one. The Minister, Deputy Coveney, and Department officials have been in ongoing contact with the Commission at political and technical levels for some time now and we expect this constructive engagement to further intensify over the coming weeks and months as proposals are developed and agreement sought.

There have also been very positive developments within the European Parliament in recent months. Following the reports produced last summer by the MEP rapporteurs on the four main legislative proposals on the CAP, almost 8,000 amendments were submitted by individual MEPs. These were then reduced to a more manageable number of compromise texts in December and the Parliament's Committee on Agriculture and Rural Development voted on them at the end of January. This has cleared the way for informal contacts to take place between the Presidency and Parliament ahead of the latter's plenary vote planned for mid-March which should then provide the necessary mandate for the formal trilogue process between the Parliament, the Council and the Commission to begin in April.

In overall terms, therefore, we are making good progress and we hope that each of these elements will continue to function effectively. However, we are entering a crucial phase between now and the end of March on which much depends. Although our focus as Presidency is to broker agreement among the member states at Council, we have also been endeavouring to resolve satisfactorily the key issues from an Irish perspective. One of these is the important question of how direct payments should be distributed within member states, otherwise known as internal convergence. As members of this committee will know, a large number of member states have difficulties with the Commission's flat-rate proposal. In the case of Ireland and some others, this is primarily because of the significant payment transfers that would result. In other cases, it is because differentiation of payments between sectors or areas is not facilitated. In others again - primarily the new member states - it is because their existing payment structures cannot be accommodated as simply as perhaps was thought earlier. We have, therefore, proposed a set of solutions which endeavour to address all of these difficulties by essentially giving the necessary flexibility for member states to respond to their own conditions while, at the same time, respecting the overall thrust of the Commission proposal.

Similarly, member states have a range of views in relation to how the Commission's greening proposal should be implemented. We, in Ireland, have our own particular issues that need to be resolved. These include our desire to make the greening payment a percentage of a farmer's overall payment rather than a flat rate and the need to adjust the three criteria to suit Irish farming conditions. We have already tabled a proposal that aims to deal with the percentage payment issue and we hope to present a compromise proposal on the greening criteria shortly which will address the main concerns expressed by member states, including Ireland. The same approach will apply in the case of the outstanding issues under the other two main pieces of CAP legislation on market measures and rural development.

We are at a crucial time in the CAP reform negotiations. Good progress has been made at Council level in recent months and the process has been given added impetus by the agreement on the EU budget and the significant steps taken by the European Parliament. However, we need to build on this momentum, because there is still a lot of work to be done and in this regard, the next few weeks will be especially important. The negotiation process will continue to be complex and difficult but we are firmly focused on achieving an agreement that will be to the long-term benefit of Irish and European agriculture.

9:40 am

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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I thank Mr. O'Driscoll.

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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I welcome the delegation from the Department of Agriculture, Food and the Marine. Will Mr. O'Driscoll give us an update on where the Council and Commissioner are in regard to the proposal by Commissioner Cioloş that we move to a flat rate payment? Will he outline what their position is as opposed to the Minister's one and whether they have moved from the position they had that the payments would move to a flat rate payment by 2019? That would include the greening payment and the core element.

Mr. O'Driscoll spoke about the amount of money that was received. Will he confirm that when one takes inflation into account, one is talking about a 10% decrease in real value terms over the seven-year period in the value of the Pillar 1 payments and an 18% - an almost 20% decrease - in the Pillar 2 payments and that, in fact, it is a very bad deal? Every other time the CAP money increased but this time it is a very significant decrease in real purchasing power and that decrease will have a major effect on farmers.

Mr. O'Driscoll said the capping of direct payments will be introduced on a voluntary basis by member states. Is he saying each member state can voluntarily create its own cap or is this the European Union cap which is not a cap at all - it is an irrelevant cap in the Irish context? If it is the European Union cap, has the Minister tabled alternative proposals to cap the maximum payment a farmer can get? In line with his seeking flexibility in regard to how the Pillar 1 payments are distributed, has he sought flexibility for member states to impose a national cap on Pillar 1 payments? If, for example, the Commissioner's proposal was to win out against the Minister's one - it looks as if it is 22:5 - one would get some very unusual distortions because one would get farmers with a lot of land getting enormous payments as well as what is happening at the moment where farmers with very good lots of land get enormous payments. One would also get farmers with marginal amounts of lots of land getting very big payments. I do not believe either group should get huge payments at the expense of the 98% of farmers who get very modest payments. In fact, 90% of farmers get under €25,000.

Mr. O'Driscoll did not mentioned whether coupling is on the table at 5% or 10%? I understand that in Ireland's case, it was only on the table at 5%. Has there been progress in regard to coupling and a firming up? Will it be uniform across the European Union, in other words, the same for every country? There was a provision in the original proposal for areas of natural constraints. Mr. O'Driscoll did not mention whether that is still on the agenda under Pillar 1.

We keep hearing the statement that Ireland is concerned that the proposal to move to flat rate national or regional rates would cause very significant transfers of resources between farmers and that much of this movement is proposed to be front-loaded. What objection does the Department have to a more equitable distribution of the money? Why does it resist moving away from something that is totally based on a historic fact - that is, 2001 and 2002 which by 2020 will be 20 years out of date?

Why do they keep saying that would, by definition, be a bad thing if the right prescription was found? I do not agree with the proposal from the commissioner or the Department's approach. I think the front loading approach would be best because it would also deal with the issues of high intensive small acreage farmers who are a huge number of the farmers in the country. In regard to the low intensity farmers, the Department of Agriculture, Food and the Marine and the National Parks and Wildlife Service appeared before the committee and they mentioned the need for significant compensation for farmers engaged in high nature value farming. The only way of compensating them is across the board because they cannot be compensated under REPS because good agricultural and environmental conditions, GAEC, mean they will have all the work done under Pillar 1 and there will be nothing left to do under Pillar 2 and in any case Pillar 2 is decimated having been reduced by 18%. Will the witnesses explain how farmers will be compensated for GAEC in the areas about which the Department is concerned - abandonment of land and the ecological disaster that would follow? It was made clear to us that without farming these areas will not survive. How does one square that with a policy of campaigning strongly against them getting a decent payment in view of the ecological service they provide to the State and the European Union? There appears to be a contradiction in that case.

I note what the witness said about the greening payment. It is consistent with everything that is being said. It appears the witnesses want it paid on an individual farm level whereas the Commission wants it done right across the board. There appears to be a desire to freeze Irish history in 2000, 2001 and 2002 and regardless of whether one is farming now or at whatever level that one keeps one's 2000 payments and that the historic issue goes on and on. No doubt if the same Government is in office in seven years time it will pursue the same policy of trying to preserve things in a historic context. We will get to the year 2100 and we will still be paying people in respect of what they did in 2000 even though nobody will be left from that period. The Department's policy is to preserve not what farmers are doing, or why they are doing it, or the constraints on them but history irrespective of what they are doing at present. I ask him to explain the logic behind this as it does not appear to encourage people to farm actively; in fact it is the opposite. It means that if one is lucky enough to get the payment that one can sit back and do virtually damn all and continue drawing the money.

In regard to Pillar 2 payments there is an 18% reduction. Will the witness please clarify two issues? When I take the total package of Pillar 2 or the total rural development programme and the national finances added to Pillar 2, how will the next Pillar 2, based on the MFF and taking the national contribution into account, compare to the last rural development programme? In other words, does the figure include the national money? Do we know what the national finances part of the Pillar 2 pool will be? Will he confirm that forestry payments will not be paid out of European Union funds as that would have a huge effect on Pillar 2 payments? Will he confirm that the Department will not try to save money by transferring 100% forestry payments out of Exchequer funding into a mixture of European Union and Exchequer funding? If that were to happen it would have a disastrous effect on Pillar 2 payments.

9:50 am

Photo of Martin FerrisMartin Ferris (Kerry North-West Limerick, Sinn Fein)
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I thank Mr. Aidan O'Driscoll for his presentation. The renegotiation or review of CAP is long overdue. I do not think it has been distributed equitably enough to keep the maximum number of people engaged in agriculture or on the land. Given that the conversation and negotiation are ongoing there is an opportunity to deal with the small and medium-sized family farm which is gradually being eroded from the landscape. Mr. O'Driscoll said he hoped to send a compromise proposal on greening criteria shortly. Can he enlighten the committee on the compromise proposals from an Irish perspective?

In regard to the cap on payments, Sinn Féin and other parties are advocating a cap on payments. We suggested €100,000 with a gradual reduction to €50,000 over 50 years. What are the views of the witness on that issue over four years? What is his assessment regarding other European Union countries in respect of a cap on maximum payments?

In regard to an article in the Irish Farmers' Journal re minimum payments, what is the definition of minimum payments? Has any consideration been given to the payment of a percentage rather than a flat rate on a holding up to X number of hectares, either coupled or decoupled historically from thereon? In regard to flexibility for member states the witness mentioned that we would respond on our own conditions. How realistic is this? Ideally we would like sovereignty over how we distribute our funding? How rigid is the commissioner's position regarding flexibility being allowed to member states?

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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I thank the Deputy. Deputies Martin Heydon, Senator Michael Comiskey and Deputy Tom Barry wish to contribute. As I have just been informed that we must make the room available for another meeting at 10.45 a.m., that means we have 37 minutes remaining.

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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I thank the officials for appearing before the committee. Before touching on the CAP, I wish to question the EU-US high-level working group and the agreement to initiate internal procedures to launch the negotiations for a transatlantic trade and investment partnership. What impact could this have for exporting Irish beef to the US? Is there a timeline on those trade negotiations? What is the Irish dimension? I presume beef is the issue which would be of most interest to this committee.

In regard to the CAP, the MFF and the overall budget, that the total budget was cut by 7% while CAP was reduced by 3% is as good as one could have hoped for in the circumstances. Deputy Éamon Ó Cuív said it was the first time there was a reduction in CAP but it also the first time there was a reduction in the overall budget. Given that the CAP reduction was not in the region of 7% but was less than half that is progress and we have to make do with the situation.

The witness said the implementation of new ecological focus areas will be done in a way that does not take land out of production and avoids unjustified income losses to farmers. Perhaps he would expand on that issue. As with all negotiations, much is probably done at the end, in the heat of battle, late at night. He mentioned moving on to the trilogues process. How will the Parliament be represented in that process? Mindful of the fact that at one stage there were 8,000 amendments which were trimmed down to about 3,000, that was more manageable. Perhaps the witness would let us know how he sees that as it could end up being unwieldy.

In regard to the desire to make the greening payment a percentage of a farmer's overall payment rather than a flat rate and the need to adjust the criteria, the witness said a proposal has been tabled.

Can the representatives of the Department expand on what the proposal is? The option to transfer up to 15% of funding between direct payments and rural development was mentioned and might be expanded on slightly also.

10:00 am

Photo of Michael ComiskeyMichael Comiskey (Fine Gael)
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I thank the witnesses for the presentation and welcome them to the committee. We must acknowledge that progress has been made. The budget is agreed and there has been a cut of 7% overall and 3% for CAP. We did not fare too badly in difficult times and must move on with what we have and distribute it fairly. It is very important that active farmers get the payment and that we do not have a situation where farmers can sit back and draw down significant payments. We have seen this a little in the past when farmers built up significant payments. It was the advice they were receiving. They would then sit back and not farm to the extent of farmers with lesser payments.

Is the capping of overall payments being considered? It was touched on earlier. Will there be front-loading? That is important. I am also interested to know about Pillar 2, which includes environmentally disadvantaged areas, suckler schemes and sheep schemes, all of which are very important. It is important to fund schemes to encourage people to return to farming those areas that have natural restraints, including commonages, which were discussed by the committee last week.

Photo of Tom BarryTom Barry (Cork East, Fine Gael)
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I thank the witnesses for attending. Can they develop some points on questions I asked previously on greening? Has anything been done in respect of the situation in which tillage farmers find themselves at a disadvantage with the screening proposal and the ploughing of permanent pasture? I remind the witnesses of the important example I gave previously in which, if a farm comes up next to a tillage farm and is put into permanent pasture for five years, it is taken out of the system. We will lose tillage land at a terrible rate if we do not provide some mechanism for permanent pasture to be taken out and rotated. We must be really careful or we will not have a tillage industry.

In the context of greening and tillage, is it possible to introduce protein crops? There is a huge deficit of protein in Europe. When I spoke to the Secretary General for agriculture in the EU, he said that was one of his concerns. I was surprised that he raised the matter. We are well capable of growing protein here. Perhaps we do not have the expertise we had, but it might work if it were introduced under the blanket of greening.

I do not like the transfer of 15% from Pillar 1 to Pillar 2. How will that work out? I do not have any urge to drop 15% of my payments into Pillar 2. In the CAP legal framework proposals that came out a few months ago, there was mention of a diversification grant for alternative enterprises. Have they been developed any further and are they embedded into Pillar 1 and Pillar 2, or are they separate? Emergency funding was also mentioned. Is that going to be taken out of Pillar 1, or will there be a separate fund for emergency reliefs?

I recognise that we all come from different sectors, but I do not consider that levying out payments and providing them all over the country is going to make better farmers of people who get payments. Quite frankly, I bought my entitlements. Many people were delighted to sell their cattle. They got the 22-month and slaughter premiums paid up front and it worked for them. Those of us who had to take the risks are still farming actively. While I can understand the urge to level out the payments, doing so will affect productive agriculture. We must be aware of the production potential of land. There is no point in sending money up to the top of a mountain where no production is going to take place.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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I apologise for being a bit late. Like previous speakers, I welcome the MMF agreement in the last number of weeks. It is a positive step and we can move on now to negotiating the real issues that affect us. The reference year is an issue that has affected us but we have heard very little about it recently. What is the situation with that? It is having a detrimental effect on the price of conacre. There must be some stability and certainty brought to that soon.

The age profile of farmers here and across Europe is very high. There have been suggestions about incentives for young farmers. Has there been any talk of incentives to move older farmers out of the system and to get younger farmers back in? It must be a two-way process. There is no point in having younger farmers come in if older farmers are still in the system. There has to be an incentive in both directions.

It was suggested in the earlier part of the negotiations that we would be doing away with bureaucracy. Will greening introduce an extra element of bureaucracy? It seems to involve a great deal more paperwork. We need a more simplified system. The inspections regime irritates most farmers. We have recently seen a great deal of talk about the horse burger issue and the reported lack of an inspections regime in that context. At farm-gate level the inspections regime is very rigid. Will it be as rigid in the future if there is going to be a simplified system?

Photo of Brian Ó DomhnaillBrian Ó Domhnaill (Fianna Fail)
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Today's briefing is important in light of what has transpired with regard to the budget. One could argue that it is perhaps the best deal we could have got, but it represents a cut to many farmers across the country. We must take the 3% cut, inflation and the increasing costs faced by farmers into account. The average single farm payment in Ireland is approximately €10,000. The cut will be approximately €333 per farmer. In addition, the new crisis fund that is being established involves a further 3.5%. If that is the case, the average farmer is set to lose more than €700 in his average single farm payment. That is a substantial cut, bordering on 10%. While it is suggested that a farmer will get the money back if there is no crisis, I cannot see it being returned if it is taken away. It is a difficult problem in light of increasing costs and the weather situation. It is something that needs to be addressed. I do not think the average Irish farmer can bear the brunt of that, whether he has a small or large enterprise.

The Irish allocation for rural development is €313 million. There is a 15% shift whereby one can transfer from the rural development fund into the single farm payment and vice versa. A great deal has been said about the smaller farmer being protected and looked after under Pillar 2. When one can transfer up to 15% of funds from Pillar 2 into Pillar 1, what will be left under Pillar 2? I am not clear about the €100 million that was negotiated for people under 25 years of age across Europe. The presentation referred to it as a special allocation over the full period. Is this the €100 million for unemployment? Maybe I am wrong; this might be clarified. What will the €100 million be used for?

I agree with what has been said about the reference year. It will have a knock-on effect on conacre pricing, but it will also present a great difficulty for younger farmers who will start farming after the reference year. What will be done, for example, to protect the interests of someone who is starting this year or may have started in the past 12 months because he or she has a right to obtain payments under the single farm payment scheme also? He or she should not have to look for entitlements from the national reserve. That would be totally wrong because he or she is as entitled as anyone else.

The Commission's proposal vis-à-visIreland's proposal and those of other member states gives member states flexibility to make up their minds about how they want to spend the budget. There is a notion that we must protect production, which is fine. We all subscribe to this and support the Food Harvest 2020 plan. There are approximately 123,000 single farm payment recipients, of whom 2,000 receive over €50,000. That means there are 121,000 getting less than €50,000. Protecting production is fine, but there will be no production unless small farmers on marginal land producing lambs can produce enough for export and the live trade within the State. There are two sides to the argument. The use of reference years to divide the single farm payment in the next seven years is wrong. I know farmers in my area who have obtained single farm payments in excess of €100,000. They will draw down the same amount this year and do not have any stock. They get it because they were entitled to it in the reference year. There is a neighbouring farmer, a young man who is trying to buy his way into agriculture, but he receives no single farm payment because of the way it is carved up. An element of fairness must be introduced. What steps is the Department taking to examine this issue and has there been a critical analysis carried out of the importance of small farmers feeding into the overall productive cycle of agriculture in the economy? Has any work been done on this issue? Some farmers have bought their way into payments, which is a fair argument, but the smaller guy cannot buy his way into them because he is not in receipt of the larger payments.

There are many small farmers on the western seaboard, the vast majority of whom are in receipt of single farm payments of less than €50,000. They would love to expand, but they do not have the resources to buy or lease land because the neighbour up the road or 50 miles away has a massive single farm payment and is able to outbid him or her in buying or leasing land. That is not fair. Certain farmers use the single farm payment, perhaps through no fault of their own, to compete for land available on the market and prevent smaller enterprises from expanding and developing. That is happening in certain cases and I can easily give examples of where it has happened. Any auctioneer who deals in farm land would say the same. There is a need for balance to protect production and investment but also to allow small farmers to grow and expand their enterprises and ensure those who are ecologically restricted on commonage or poor land are compensated because of the biodiversity side of the work in which they are engaged. There is a balance to be struck. I do not see anything in the Department's script to suggest it is looking for that balance. I am reading that the Department is happy with the status quo. I would appreciate the delegation's thoughts on that issue.

10:10 am

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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Mr. O'Driscoll did not refer to or define active farmers in his brief. This is central to some of the core issues that cause concern about productivity, production and access to entitlements. It is a key issue because of the historical practice whereby if one has these entitlements but is not engaged in production, one can hold on to them. Many of the concerns that cause what appears to be a difference of opinion can be addressed if that issue can be dealt with properly.

Mr. Aidan O'Driscoll:

I thank Senators and Deputies for their many well informed questions. I will try to deal with all of the points raised as quickly as I can, but first I will make some general points.

It is very important to understand the kind of proposals Ireland has been pushing for as a state and is now making as President are about giving member states flexibility to do certain things. The member state must then decide what it wants to do. That is a key point. It is a question of ensuring national sovereignty in decision-making. Each country is different and the agricultural circumstances as between Cyprus and Finland, or Ireland and Hungary, Romania and Bulgaria are very different. We believe in providing as much flexibility as is reasonable within a common policy and that affects our approach to the distribution of funds and greening.

I will deal with the points as they were made. On the outcome of the MFF negotiations, the reduction, as against the Commission's proposal, was approximately 3% in real terms under the CAP. That was a good outcome. In negotiations we have to deal with the proposals in front of us. The Commission has a big influence on all negotiations by virtue of the fact that it has the sole power of initiative in the European Union. If it places a proposal in front of us, that is the proposal on which we negotiate. We have to move forward or back from it. We wanted to maintain the full CAP allocation as proposed by the Commission, but it ended up being cut by 3%. This is in the context of a cap on the overall EU budget which was cut for the first time ever. Therefore, we have to be realistic. There may sometimes be confusion between comparisons with the percentage reduction in what was proposed by the Commission as compared to the percentage reduction in the last round, which gives two figures. There is no doubt that in comparing it with the last round it would be a bigger cut, but that would be true of the entire EU budget.

The issue of capping was raised several times. We do not yet know the outcome. As part of the MFF decision, the European Council decided that capping would be voluntary. It is a very short sentence in the conclusions and does not expand on what precisely it means. That is something Agriculture Ministers will have to consider in the reforms, but we have not yet reached that point in the negotiations. In early March we will commence discussion of the consequences or fall-out from the various decisions made by the European Council. We needed that little gap for people to reflect on what was decided in the European Council and exactly what it meant.

Deputy Éamon Ó Cuív asked whether we would table a proposal to provide for flexibility in capping.

During our Presidency, we must consult all 27 member states, see what is the centre ground and ascertain what the Commission has to say about European Council conclusions. From an Irish perspective, we believe there should be flexibility for member states in where to place the cap.

The issue of coupling was discussed in the Council during the Cyprus Presidency. The European Parliament has also been discussing it, proposing some increases in the provision for coupling. The Council discussion under Cyprus was closed with the existing Commission proposal in place. That will go into the trialogue negotiating process and we will have to see what comes out of that.

There is the issue of areas of natural constraint, formerly known as less favoured or disadvantaged areas. Unfortunately, there are multiple names. The issue was mentioned on a number of occasions. What is important is how one decides what qualifies as a disadvantaged area, to use the Irish term. The Commission has put forward new proposals on the determination of disadvantaged areas, including a series of objective biophysical criteria such as stoniness, slope in the soil or wetness. They are used to determine exactly what qualifies as an area of natural constraint and there is continued provision for it under Pillar 2-----

10:20 am

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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My question specifically related Pillar 1.

Mr. Aidan O'Driscoll:

I was just going to mention that it will also continue to be provided under Pillar 1.

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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Is it still there?

Mr. Aidan O'Driscoll:

Yes. The key is the determination of what constitutes such an area, and that is where the negotiating is concentrated.

I will make a point regarding our proposals and those of others on internal convergence. Any suggestion that the Irish proposal involved retaining the historic model is simply untrue; it involves a very decisive and significant large move away from historic rates of payment. It is nevertheless not as big or radical as the move proposed by the Commission, which is proposing a flat rate for everybody, regardless of land type, what is being done on the land or environmental benefits. It would be a crude flat rate for everybody. It is true that we do not believe this makes sense and that we have tabled an alternative proposal that involves limiting, to some extent, the level and pace of convergence of payments. It will involve a very significant convergence in payments, with very large increases for those on low payments and significant cuts for those on very high payments, with more moderate raises and cuts for those in the intermediate groups. It is important to understand that. Our proposal, as tabled, provides that this is the minimum to be done. In other words, it creates the space for a member state to use the same methodology but to do more should it wish to do so. We have also tabled a proposal providing for the possibility of a minimum and a maximum payment per hectare as part of that measure. As has been correctly mentioned, the Minister has spoken on the possibility of a minimum being introduced publicly.

With regard to Pillar 2, there were a number of questions from Deputies and Senators on the 15% transfer rate. I do not want to cause undue alarm. This is an optional aspect that has come from the European Council, with the possibility of transferring 15% in either direction. There are some countries that find it very difficult to spend rural development funds, with some completely failing to do so, leaving significant savings. Some of those countries - mainly new member states - want to transfer the money to Pillar 1. In addition, there are older member states that believe Pillar 2 is much more effective than Pillar 1 and want to transfer funds from Pillar 1 to Pillar 2. Both of these have been accommodated within the proposal, which is completely voluntary and for national decision.

Deputies Ferris, Heydon and others raised the question of greening. I am not really in a position to outline our compromise proposals at this stage but they will be tabled in early March. In the initial stages of the greening debate, there was a good deal of talk about what was called a menu approach, giving much flexibility to member states in structuring greening. In the latter stages of the debate, that has been less evident, although there is more talk of introducing some greater flexibility within the Commission's proposal. The three criteria would be retained but applied in a way that is more flexible at a member state level, particularly with regard to equivalence. If there is an agri-environment scheme under the Pillar 2 allocation that delivers the same kind of benefits as greening, the farmer may qualify automatically. That is one way to do it.

Another option is a national certification scheme. This scheme, which would not come under Pillar 1 nor Pillar 2, would deliver at least the same benefits as greening, with the farmer conceivably qualifying under that. This mirrors an aspect of the Commission proposal that has not got much attention, although it creates an interesting precedent. The Commission indicated that organic farmers are automatically green, and member states are expanding that somewhat.

I will not go into the three criteria for greening in detail, as members know them. There is a good deal of work ongoing in making those a bit more flexible. For example, Deputy Barry mentioned the issue of moving land from tillage to permanent pasture, which is an important point from an Irish perspective. The key issue is that the Commission proposed that a permanent pasture requirement should apply at an individual farm level. Ireland and other countries have taken the view that it should apply at a national level, allowing much discretion at individual farm level. I cannot say exactly what will be in our proposals on greening before we table them but members would not be significantly surprised with what may be tabled in the area.

I spoke about flexibility. The issue of beef exports to the US was mentioned. The key factor blocking Irish beef exports to the US is the BSE provision. The US blocks Irish beef from entering the country because of concerns about BSE, although the United States and Ireland have exactly the same status with regard to BSE. The blockage has no merit in our view, and we have been very active in pressing the United States to lift the barrier. Some progress has been made and there is an expectation that what is called the BSE rule might be published this year. We are continuing to exert much pressure to get that done. Members asked about the timeline for the US trade deal, which will take longer. These trade deals sometimes take two years, for example, to negotiate. Nevertheless, we will be pressing the BSE rule issue in advance of that, as it is a key matter.

There was mention of the sentence about ecological focus areas in the European Council conclusions. There is a good deal of discussion about what exactly that means. Deputy Barry mentioned the growing of protein crops. How does one get a farmer to set up an ecological focus area but not reduce production? One idea is to get the farmer to grow crops that fix nitrogen in the soil, if that can be regarded as ecological focus. It has been the Irish position for some time that this should be regarded as ecological focus. There is a question of what can be contained in the greening proposal. The Commission has major concerns that this could be seen as coupling, but we will have to work through that issue.

We hope the plenary session of the European Parliament will give the European Parliament Committee on Agriculture and Rural Development, COMAGRI, a mandate to negotiate in mid-March. That would mean in the trialogue process the Parliament will be represented by the chairman of the agriculture committee, Mr. Paolo De Castro, and individual MEP rapporteurs on the different regulations, Mr. Capoulas Santos, Mr. La Via and Mr. Dantin.

A question was asked about capping and front-loading. If Senator Comiskey means by front-loading what we now call the redistribution of payment or payment on first hectares, which has been sought by a number of member states, it is part of our proposal. I have already dealt with capping, which will be there in some shape or form, although it is not yet clear what exact shape it will be. He also asked if Pillar 2 will have scope for payment on disadvantaged areas, with issues such as animal or suckler cow welfare. The answer is "Yes," and it is again up to a member state to make a national decision on this. Pillar 2 gives much national discretion.

The crisis reserve or emergency funding was also raised. There may be some misunderstanding with regard to the figures, as the crisis reserve will amount to approximately €400 million per year over the entire EU, and the Irish share of that will be approximately €12 million. The members are correct in that it is a rolling allocation and it will be extracted from direct payments and repaid at the end of the year if it is not used. It is not on the scale that was feared.

The reference year issue was mentioned a number of times by Deputy Deering and others. It has been an issue in Ireland but, as I said before, this has not been raised in any other member state. We continue to tell people not to make decisions on the basis of proposals, and I will not go into the proposals again. There is a reference to having had a payment in 2011, and in the Council proposal it has been expanded to having had a payment in either 2010 or 2011. In any case, the issue remains as it was with the change in the Council position. All of this will go to a trialogue negotiation between the Parliament, the Council and the Commission. We again warn people not to assume that what is there is a final outcome. That is the best that can be said.

The young farmer incentive is in the proposals and it is voluntary for member states. The Minister has made it very clear that he intends the incentive to operate in this country. The question was asked as to whether greening brings about extra bureaucracy, and if I am completely honest, the answer must be "Yes". We made a counter-proposal in the very early stages that it would be better to roll greening into cross-compliance and apply this to the whole payment. That would have made things more simple. Ireland and Austria were the only parties to propose that at the time and I can say without a word of a lie that I have been approached by people from a number of countries who have said we were right. The idea did not fly at the time. We are still trying to minimise the amount of extra bureaucracy, and that is very much in our minds in making the proposal. I would be giving an untruth if I said there was no extra bureaucracy. If the extra €100 million had not been allocated, our total allocation for rural development over the seven years in real terms would have been €100 million less. Taking the amount spread over seven years and adjusted for inflation, one gets the additional sum. It was a significant addition in the final lap.

There were a number of references to internal convergence, with Senator Ó Domhnaill touching on the issue. There may be an impression abroad that our proposal favours larger rather than smaller farmers. Considering our proposal and all of the payment categories, including those with low, middle and high payments, farm size is roughly the same in all. It does not favour larger farmers. There are both small and large farmers who would be significantly affected by a major cut in rates. Where a distinction between farmers arises is in stocking rates, as those from whom payments will fall have significantly higher stocking rates; on average, they are double the stocking rates of those on lower payment rates. That is coming from 2010 data.

It is true that the payments are based on historic data but as we all know, things change more slowly in farming. Our data shows very clearly that those on higher payments have significantly higher stocking rates, roughly double the rates of those on low payments. That holds for small and big farmers. The Chairman made a related point and we are trying to ensure there is not an unreasonable cut in the payments for the most active and productive farmers. We are not trying to hit farmers, and that is a misrepresentation of what we are at.

The Chairman referred to other possibilities within the regulation regarding active farmers. The active farmer proposal is limited and within the definition in article 4 of the direct payments regulation is the possibility for a member state, on certain types of land, to impose minimum activity and stocking levels. There was mention of a farmer with no stock who is on very high payments, and that would be an interesting case. I have covered most points but I apologise if I have missed any.

10:30 am

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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I have a question on co-funding. What about the total Pillar 2 pot next time, based on the multi-annual financial framework and the forestry issue?

Mr. Aidan O'Driscoll:

These matters will be for national decision once the flexibility is there in the regulation. When the rural development regulation is agreed in the CAP reform, we must draw up a rural development programme. We are already engaged in a very extensive consultation process and we are undertaking an ex ante appraisal. We have already commenced work on the new rural development programme.

Ultimately, the Government must make policy decisions on what it will want to include in the rural development programme, including whether it will include forestry or fund it as it currently is nationally. It must also decide how much funding it will put into the rural development programme.

As Deputy Ó Cuív correctly notes, in the last rural development programme we put in not only the money required for the co-funding but also additional funding. That was subsequently cut back but nevertheless, additional funding was put in. The issue will have to be decided when we reach that point in the national decision-making process, and we are some way from that yet.

10:40 am

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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That is a detailed presentation and response to the extensive range of questions posed by members of the committee. I thank Mr. O'Driscoll, Ms Cannon and Ms McPhillips for coming before the committee. The witnesses probably have a copy of the document we submitted in December. I will keep saying that if the objective of a new CAP is, as a Commissioner said at the outset, to produce as much food as possible within the EU sustainably and to protect rural communities, Ireland would have no problem with it. The key first principle of flexibility is for the member state and we will take ownership as much as possible.

We have accepted a move towards convergence and pace and extent is probably the issue to be decided. The same logic applies to greening. These are two issues pertinent to active farmers, and they hold the key to many other issues, such as reference years and flexibility. If the national reserve works properly, it can be used to facilitate young farmers.

To that end, as Chairman of the committee I will host on 11 March as part of the Presidency a meeting in Dublin Castle of all the chairmen of these committees across EU member states. We will deal with the CAP, the Common Fisheries Policy and the young farmer issue. Our statistics mirror those in the wider EU with regard to the number of farmers under 35, with the rate at 7% or 8%. It is not just an Irish issue. We probably have more farmers over 70 than in other member states but we have the same number under 35. If we are going to produce food in the outlined manner, we need young trained professionals at the helm in managing the land, although not necessarily owning it. That is a hang-up that we in Ireland have had in particular. There was mention of reference years and because of our conacre system, there is a specific challenge that goes beyond CAP negotiations. It goes to the core of the manner in which we allow people to rent land. That has been alluded to by Senator Barry and others. The challenge will go beyond this discussion but we should be mindful of it.

We have gone over our time but I thank the witnesses. We look forward to ongoing briefings and the next couple of months will be crucial from an Irish perspective. We wish the witnesses, the Minister and all the officials and MEPs the very best in the ongoing negotiations.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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As we are heading to a very intense stage in negotiations, would it be appropriate to have a similar briefing within the next six weeks?

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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These are the six-monthly rounds but it will be over in six months. I accept that. Perhaps during the trilogues we will have some negotiation. We would welcome back Mr. O'Driscoll.

The joint committee adjourned at 10.55 a.m. until 2 p.m. on Tuesday, 26 February 2013.