Professor Alan Renwick:

The first point related to the growth in numbers and the relationship between suckler and ewe growth. I have to admit that this was before I arrived in Ireland so I can only outline my experience of what happened in the UK with these changes. It was a combination of people moving out of the dairy industry and into suckler cow production. There would have been an increase in numbers but there was also a marked increase in stocking density in both ewe and suckler cows during the period in question. What we found in the UK was that when the relative profitability between sheep and cattle changes, farmers begin to switch between them. This was noticeable after the MacSharry intervention whereby suckler cows seemed to be more profitable. In Scotland, sheep numbers declined while those relating to suckler cows were maintained over the period. There is interchangeability between the systems. Clearly, that interchangeability came about in the context of milk quotas. The abolition of those quotas may well increase the level of interchangeability between suckler cows and dairy.

We did not come up with exact figures or a breakdown in respect of the proportion of the direct payments that emanated from the different potential payments to farms, that is, those which relate to production and those which do not. A question arises as to the price at which this all becomes profitable in its own right. The issue is that we must take into account the fact there is a huge variation in costs of production across the sector. We have been talking about them so far as if they constitute a homogenous group. Clearly, that is not the case, and for some it might well be enough but for others it might not. There is a difference in production costs and systems.

On Pillar 1 and Pillar 2, I am an economist. Economists tend to evaluate things based on the question: "What is the objective?" The real difficulty for us in analysing this is to establish the real objective in the context of direct payments. Some people argue that they are an income support, while others argue they relate to production. Then there is the greening element and whether it constitutes an environmental support or a payment to offset higher welfare sector standards in Europe compared with elsewhere.

We have to be clear about what we want from these payments and then we can begin to evaluate whether we should move one from Pillar 1 to Pillar 2 or vice versa. That is a key issue. When we know that we can say these are our objectives and we can then evaluate the approach adopted as to whether they it will achieve those objectives. That is a key difficulty for us. As economists it is not for us to set the political objectives but it is for us to comment on whether the approaches adopted are the most efficient, effective and equitable way to achieve those. That is a key point. I was pleased to hear John Bryan speak of the association's support for a targeted payment on the suckler side. In Scotland we talked about a contract between the state and farmers. On the one hand, the State will provide support but, on the other hand, farmers have roles and responsibilities. The issue of improving genetics, high welfare and so on are all part of that contract. To tie support to these types of objectives, which I believe society would support, would seem sensible rather than adopting a blanket approach whereby a farmer has cattle and it does not matter what he does he will be given the money in any event. I would support the sensible approach. Those were the main technical questions.