Oireachtas Joint and Select Committees

Tuesday, 6 December 2016

Select Committee on Agriculture, Food and the Marine

Estimates for Public Services 2016
Vote 30 - Agriculture, Food and the Marine (Supplementary)

3:00 pm

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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I remind members and those in the Public Gallery to make sure their mobile phones are completely switched off.

This meeting has been convened to consider a Supplementary Estimate relating to Vote 30 - Agriculture, Food and the Marine, which was referred by the Dáil to the committee on 22 November 2016 with an instruction to report back to the Dáil no later than 8 December 2016. On behalf of the committee I welcome the Minister for Agriculture, Food and the Marine, Deputy Michael Creed. I also welcome officials from the Department and thank them for the briefing material that has been circulated to the committee.

The format for today's meeting is as follows: the Minister will give a brief address to the committee after which members who indicate they want to speak will have the opportunity to make a brief response, if they wish. We can then consider the Supplementary Estimate. Is that agreed? Agreed.

I remind members that in accordance with Standing Orders, discussion should be confined to the items constituting the Supplementary Estimate only. I ask members if possible please to indicate the subhead they are referring to when they make a contribution. I invite the Minister to make his opening statement.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I am grateful for the opportunity to present this request for a technical Supplementary Estimate for 2016 in which I am seeking the committee's approval to use savings on the Department's Vote to fund other desired expenditure. As these proposed transfers and expenditure involve significant changes to the original 2016 voted allocations, I believe it is important to seek the committee's input and approval. Specifically, this technical Supplementary Estimate will transfer €20 million of savings in certain areas of the Vote to bring forward expenditure commitments due in 2017 under the World Food Programme, WFP, and also transfer a further €13.9 million of other savings to fund the Strategic Banking Corporation of Ireland, SBCI, agriculture cashflow support loan scheme, which I announced in budget 2017 in October.

The €33.9 million current funds required would be transferred from various subheads where, due to changed circumstances, savings have emerged, most notably in the administrative budget pay and non-pay subheads, the fisheries fleet decommissioning scheme which is not yet in place, the seafood development programme, technical costs associated with the operation of European Union, EU, schemes, the green low carbon agri-environment scheme, GLAS, training, research, the early retirement scheme and the food safety animal health and welfare programme.

In 2015, the Department of Public Expenditure and Reform lifted the moratorium on recruitment and delegated responsibility for managing my Department's human resources to the Secretary General. This removed the numbers threshold my Department operated under during the moratorium and provided flexibility to recruit and deploy resources subject to adherence to specified pay ceilings. My Department's management board continually assesses our critical business needs and our human resources division works closely with our recruitment partners, the Public Appointments Service, PAS, to fill those needs.

The recruitment process has been slower than we would have liked, due mainly to the significant pressure on the PAS system from across the public sector. To date in 2016, my Department has recruited 110 new staff across a range of skills sets. Our aim is to build the Department's resource levels to 3,200 by the end of 2017 with the right mix of skills, experience and competences to ensure we continue to deliver a high quality service. The delay in the recruitment process will give rise to a saving of approximately €13.5 million in the 2016 payroll allocation. A further €1 million will be saved over various non-pay subheads under the administrative budget in the Department.

Our seafood sector is worth in the region of €850 million annually to our economy and I am aiming to achieve €1 billion in sales by 2020. A key driver of this increase will be the €240 million European maritime and fisheries fund, EMFF, operational programme which was officially launched in January 2016. Schemes under the programme will assist seafood enterprises to sustainably grow their production, add value to our seafood exports and create much needed employment in our coastal communities.

I made some €36 million available in 2016 for the EMFF operational programme in the budgets of my Department and its agencies to get the new schemes up and running. However, there are some savings this year as schemes roll out. There will be a saving in region of €8.5 million on Bord Iascaigh Mhara, BIM's, 2016 current expenditure budget primarily because a proposed fleet decommissioning scheme did not start this year.

There will also be some €1.5 million current savings on other EMFF budgets managed by my Department. These savings identified this year will not affect the overall budget available for the seafood sector under the EMFF operational programme as these investments will occur over the later years of the programme. To demonstrate my continued commitment to the EMFF operational programme, I have made available an increased budget of €43 million, up from this year's amount of €36 million, for the EMFF in 2017 across the budgets of my Department and its agencies.

It is also anticipated that savings of just over €2.5 million will be achieved in the animal health and welfare area due to reduced instance of disease. These savings are expected in the tuberculosis, TB, eradication area, where the generally positive situation in TB has been maintained. However, I know difficulties continue in some areas and we cannot be complacent about the future. Expenditure on the control of horses scheme is also lower this year than anticipated

There will be savings of some €2.5 million under the agri-environmental scheme specifically in the training allocation under GLAS and some €3 million will be saved under the subhead for market support and clearance of accounts which covers potential financing costs associated with the operation of common agricultural policy, CAP, schemes and also the costs associated with the land parcel identification scheme, LPIS, upgrade project. Other savings are in the early retirement scheme and research grants where the drawdown of funding following awards made under the most recent research call has been slightly slower than expected.

Overall, these current expenditure savings amount to some €33.914 million and these savings, with the committee's approval, will be transferred to the World Food Programme area. The additional €20 million provided for the WFP in this Supplementary Estimate represents an advance payment of next year's commitment under Ireland's strategic partnership agreement with the WFP. This earlier disbursement is at the request of the WFP’s executive director, who has written to inform me that this funding will make a significant contribution that will enhance the WFP's capability to plan its interventions and better address the many growing humanitarian crises around the world.

My Department leads on Ireland's engagement with the UN's World Food Programme. The WFP is the largest humanitarian agency fighting hunger worldwide and is funded exclusively from voluntary contributions. It is responsible for the delivery of food assistance to the poorest and most vulnerable people in the world and feeds 80 million of the most malnourished people in 80 countries. It works in partnership with other UN and international organisations, non-governmental organisations, NGOs, civil society and the private sector to enable communities and countries to meet their own food needs.

The WFP also plays a significant role in the UN's global campaign for zero hunger, and is at the forefront of dealing with the migration crisis. This contribution will help save lives and support food security and nutrition and rebuild livelihoods in fragile settings. Ireland has a strategic partnership agreement with the WFP which doubles Ireland's core annual multilateral contribution to the WFP to €20 million for the years 2016 to 2018. This follows a commitment that Ireland made at last year's Expo Milan event to support WFP. This funding, while generally targeted at the WFP's emergency and protracted relief operations, is provided on an un-earmarked basis which gives the WFP the flexibility to plan and target this funding in the most strategic, efficient and effective manner.

While this increased commitment is provided on an un-earmarked basis for the reasons I have outlined, it represents a key element of the Government's enhanced and increased response to the ongoing refugee crisis associated with the conflict in Syria. In particular, it is a significant part of Ireland's contribution to the EU's response to this refugee crisis.

This contribution enables life-saving assistance for people living on the front lines of hunger, conflict and climate change and reaffirms Ireland's role as one of the World Food Programme's most engaged partners. Ireland's multi-annual commitment facilitates effective assistance for hungry and malnourished people, particularly in regions devastated by war.

Some €13 million of savings identified will be used for the agriculture cash flow support loan scheme that I announced on budget day. In September this year, in response to market difficulties being experienced by milk producers and farmers in other livestock sectors, the European Commission made a package of exceptional adjustment aid measures available to members under Regulation (EU) 2016/1613, including an allocation to Ireland of just over €11 million. The €13.9 million of the Vote savings identified will be used to provide additional funding for loans for livestock sectors and a parallel product to be made available under de minimisstate aid to all other farmers, particularly those involved in tillage and horticulture. This innovative scheme will primarily provide loans to enable farmers to pay down expensive forms of credit, such as merchant credit and other short-term credit facilities like overdrafts, improve management of their cash flow and reduce the cost of short-term borrowings. The Strategic Banking Corporation of Ireland, SBCI, aims to make these loans available in the market by the end of January 2017. The scheme, with total funding of €150 million, will support highly-flexible loans for up to six years for amounts of up to €150,000 at an interest rate of 2.95%. This rate will represent a significant saving for farmers when compared with other forms of unsecured short-term finance currently available. The loans will be flexible, with interest-only facilities of up to three years. Normal lending assessment criteria will apply, although as the loans will be unsecured, it will facilitate a more straightforward application process.

I announced earlier this month that the SBCI had invited financial institutions to take part in the agriculture cash flow support loan scheme and a number of applications were submitted by the closing date of 25 November. These will now be the subject of a formal approval process to be completed in the coming weeks, with the outcome to be announced at the start of the new year. I encourage farmers to consider their cash flow and borrowing position now, and if appropriate to their circumstances to be prepared to apply for these loans when they become available.

This is a technical Supplementary Estimate and the savings outlined will be used to fund both the World Food Programme and the SBCI agricultural cash flow support loan scheme. I earnestly recommend this Supplementary Estimate to the committee for support. I am happy to respond to any questions members may wish to pose.

Photo of Jackie CahillJackie Cahill (Tipperary, Fianna Fail)
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It is grand that there is spare money available. I will make two points to the Minister. "Underspend" would be the wrong word to use regarding the tuberculosis scheme, with €2.5 million saved as a result of the lower number of reactors. I raised this matter recently with the Minister. In the dairy sector in particular, a couple of depopulations have occurred. By the time these farmers repopulate their herds, on foot of the changed environment in dairy markets, the price of replacement stock will be greatly increased in comparison with the price at the time of depopulation. A herd may be fully depopulated at the end of October, when cows are at the end of the lactation year and a farmer must repopulate in March and April, when dairy cow prices are at a premium. People in this position would probably see a differential of between 30% or 35% when it comes to repopulation. This would amount to €400 or €500 per cow and when a herd has been fully depopulated, it would create financial hardship.

When a person's herd is fully depopulated and is out for a period of four to six months, for example, and there is a market discrepancy when animals are being bought, there should be some mechanism for compensating that farmer. When the scheme was introduced, the principle was that if, for example, 120 cows were lost, the farmer would be able to replace them like for like when restrictions were lifted. At the back end of this year, dairy cow prices were at a low ebb, valuations were done and farmers whose herds have been depopulated received a certain price. I am not saying that the valuations were wrong but when the farmers involved seek to repopulate their herds in March, they will be seriously out of pocket. As there is an underspend, could the issue of restocking farmers' herds be considered? Could there be some equalisation in respect of the valuations received by these farmers?

We all know the hardship endured by grain farmers as a result of the 2016 harvest. Before this meeting, I met a group of dairy farmers with a proposal seeking €3 million in compensation for the hardship endured due to the loss of crops and straw. To underline the scarcity of straw in this country, prices have doubled in the past month. Farmers are worst hit only in December but by the time March comes around, straw will be as scarce as a hen's teeth. We have spare money and although the World Food Programme project for which it is earmarked is worthy of investment, could some of those funds be diverted to these farmers? As a result of the exceptional circumstances with the weather, they only salvaged part of their crops and lost all their straw. They have suffered significant losses. They are looking for €3 million for 400 farmers, which works out at €7,500 per farmer. It would do something to ease their cash flow crisis. We have the money so should we not look at allocating some of it in the way I am suggesting? We have done it before for horticulture farmers and it was done when there was wind damage to forestry as well. With the Russian export ban, the European Union put much money into eastern Europe. The €20 million is spare in the budget so could €3 million be allocated to grain farmers. It is not much when we consider the hardship they have suffered.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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It is clear that the position regarding grain farmers is one of great concern. Not alone have farmers lost all their crops but the Minister knows that since approximately 2012, more than 100,000 acres has been lost from the grain sector. That trend is likely to continue in view of what happened in the past year, with negative margins prevailing. Everybody has lost €150 to €200 per hectare or even more if we add in the loss of straw, as described by Deputy Cahill. As everyone lost straw, there will be much demand for the limited straw that is available, meaning the prices will increase. Some farmers lost up to 50% of their yield and some individuals even lost more. The farmers in the western seaboard counties of Mayo, Galway, Kerry, Donegal, Longford, Roscommon and Cork were affected. In my county, approximately 14 or 15 farmers were fairly significantly impeded.

I know that these farmers are seeking a particular direct aid scheme and the Minister will probably look to work through the scheme he has devised for the SBCI. The loans with rates of less than 3% applying would be a huge help when it comes to merchant credit and short-term financial facilities. It is of some use but it is far down the line. The applications for the cash flow support loan scheme must be evaluated and I hope the process will not be slow. It should not be as there are only four or five applications. I worry about the bureaucracy as people might not be happy with the i's being dotted and the t's crossed; they go back to rerun the show in a circular fashion. This better be done by January. The Minister gave some very eloquent presentations, which I acknowledge. I know the mushroom industry will be covered by the SBCI scheme but it is a case of live horse, get grass. The mushroom industry has been under pressure for the past three months. Most mushroom farmers want to get over the hump now and know if they do, they will survive to be competitive in future.

Brexit will not last forever, notwithstanding that my original view was that it would take five years. That might now be a conservative view, which highlights the uncertainty. The Minister's proposal regarding the SBCI is a good idea. Some of this money will create further capacity. Am I correct that he will use it in that regard? If it only took €3 million to help grain farmers, they would be in big trouble otherwise. I appeal to the Minister to do something with greater immediacy than what is planned with the SBCI income cash support.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I thank the Deputies for their questions. With regard to Deputy Cahill's question about the TB compensation scheme, the savings will be €1.5 million, not €2.5 million. Those savings are as a consequence of the fact that we made provision on the basis of trends and expectations and, fortunately, the incidence of the disease reduced from 3.25% of herds to 3.18%. Though the number of herds is down, there was a slight increase in the overall number of TB reactors. The provision made for drawdown has not been reached and that is something to celebrate. The scheme is working well.

The Deputy asked about individual farmers and the compensation scheme. I understand his point and we have discussed it both formally and informally, but the problem is that the scheme was designed in consultation with the farming organisations and modifications to it only took place recently. I cannot vary the terms of the scheme for an individual holding but I take the Deputy's point. It depends on timing. We face into a spring in which the indications are milk prices will increase and, as a consequence, the price of spring heifers dairy cows will increase. I accept that will make it more costly for somebody who has been depopulated to re-enter the market. The scheme was devised in consultation with the farming organisations but it comes up for review. It is not written on tablets of stone but, unfortunately, the most recent modifications were only signed off in the early days of my tenure. It will be up for review again and, by that stage, the individual whose circumstances the Deputy has raised will have moved on but my Department keeps the scheme under constant review and the issue will be raised in consultations with the farming organisations.

Both Deputies raised the issue of grain farmers. I am acutely conscious of this because I have met them in my own constituency. I have met farm organisations representatives also in counties Donegal, Sligo and Leitrim and I understand the points they have made. I concur with Deputy Penrose regarding the scarcity of straw. There is little feed value in any straw as a consequence of the weather. There was a perfect storm in many respects in the endeavours to get in the harvest. When this issue was raging in the autumn, I undertook post-harvest to convene a stakeholders meeting. All the relevant bodies were represented, including the farm organisations and the millers. One of the interesting issues raised by the farmers and the merchants, in particular, was access to affordable finance. One of the startling observations made by a miller was that 80% of spring barley is sold on merchant credit, which is one of the most expensive forms of credit that farmers use. This issue was raised by every farm organisation in the context of the recent budget. We faced a scenario where we had €11.1 million in funding coming from Europe as a result of the July package, which was available for livestock both in the dairy and beef sectors. We felt that if we spread that between 100,000 livestock farmers, it would make no meaningful or significant contribution to the difficulties they faced.

Given the common thread among all organisations, including those representing tillage farmers, was access to affordable finance, we examined how we could provide matching funds. We put more than matching funds by providing €14 million to extend the availability of the loan scheme not just to livestock farmers, but to the tillage sector as well. The product with a €150,000 maximum loan, low interest rate and other terms is not available anywhere else and that is well documented. We extended the scheme under de minimisstate aid rules to the tillage sector because there is a framework under which we are permitted to put assistance from the Exchequer into a particular sector. We availed of the maximum liberty available to extend the scheme. Where somebody avails of the maximum loan, that is the equivalent over three years of the €15,000 threshold available under state aid rules. That is not the solution for everybody who faces this difficulty but it will help some farmers in making decisions. I appreciate time has moved on and most of them have made decisions to plan for winter barley or spring barley. The scheme will make that more affordable.

There are other significant issues in the industry, not least the fact that 50% of the crop is grown on rented land, which is a major cost and which is questionable in the context of the viability of these enterprises. Farmers are paying top dollar and that land is being chased by other enterprises, particularly grass and dairy farmers. Individual farmers have to weigh up the affordability issue. The grain sector is critical. I would hate to see people exiting the sector in droves because the herd is expanding, particularly in the dairy sector, which will bring its own demand for ruminant feed. However, the sector has to be based on a solid economic rationale. One of the many issues is access to affordable finance and we have done something that is allowed under state aid rules. I have extended the knowledge transfer programme, which was only available to the beef and dairy sectors previously, to the tillage sector. I will announce in January the detail of the tillage TAMS. I am open to keeping this issue under observation but limited resources are available and, equally, there is a legal framework which I cannot breach in respect of state aid rules. I have exercised some of the discretion we have in that regard through the SBCI lending scheme.

In response to Deputy Penrose, Mr. Nick Ashmore attended a recent meeting of the Beef Forum where he confirmed that the January date for the scheme is still on target. The call for partners, including the pillar banks which have responded, went out recently to roll out the scheme. As the Deputy said, it will be made available to the mushroom sector.

This will help the mushroom sector, but Brexit produces very difficult circumstances. Some businesses have gone to the wall already. In the budget, we also increased the funding available under the capital grants scheme run by my Department for the mushroom sector and we fund the mushroom producer organisations.

I think that addresses some of the questions raised.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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I thank the Minister and his officials for attending. I apologise for the delay in my arrival. I have a few points to raise. I am conscious that I missed the Minister's opening statement, but regarding his identification of the €33 million he is reallocating, the second largest reallocation seems to relate to Bord Iascaigh Mhara. Proportionally, the amount involved is quite large in terms of Bord Iascaigh Mhara's budget, at 21%, and he is now proposing to reallocate it by means of the Supplementary Estimate. I ask him to elaborate on the 21% reduction in the figure for Bord Iascaigh Mhara. A fleet decommissioning that is due to take place has not yet started but it seems to form part of the figure. Is that the entirety of it? If not, what else is involved?

My colleagues raised with the Minister the issue of the tillage sector and the pressure under which it finds itself, but it is particularly important to re-emphasise this. I have raised the matter in the Dáil with the Minister and the Taoiseach. Unfortunately, at Question Time last week, the Minister indicated very definitively that there will be no crisis fund for the tillage farmers. It is very much a minority of tillage farmers, but many among that minority have lost a significant proportion of their crop and are in a very difficult financial position as a result, particularly on the back of the past three years when the sector was not profitable. This is a real issue. The Minister indicated that those affected will be eligible for the SBCI loan fund. However, this simply does not meet the needs of that identified minority of tillage farmers. The Minister and the Government need to reconsider this matter and find funding which can be used to support those who are in dire need and experiencing cash flow pressures. The committee will meet representatives of the tillage sector later but this issue is of the utmost importance now.

Regarding the updated Estimates published last week, at that stage the Department was €222 million behind profile for the year. A significant proportion, €177 million, of that was recurrent and €45 million was capital. A significant part of this seems to be due to the fact that GLAS payments have not been processed. Can the Minister elaborate on this? I received a number of calls from constituents who have not got their GLAS payments and who have been informed-----

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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We are dealing specifically with the matters raised in the Minister's address and the subheads before us.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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Yes, but discussion on the overall Estimate and the amount of funding that may be available is an appropriate opportunity to ask the Minister about this issue. Regarding a potential additional underspend, can the Minister indicate whether there will be - or, at this stage, whether his Department envisages there to be - an underspend at the end of the year in respect of his Department's Vote? If so, what will be the amount involved? As already indicated, last week the amount stood at €222 million. What does the Minister project the figure might be at this point? How much of this is due to the processing of payments being delayed as a result of IT or administrative difficulties within the Department?

Regarding the SBCI fund in respect of which the Minister has submitted this Supplementary Estimate today, can he elaborate further on exactly how this will work in terms of the State and EU allocations? To what purpose exactly will the €24 million be put? Will it be loaned directly to farmers or is it there to insure the risk for the banks? If the latter is the case, does the Minister expect that a significant proportion of the €24 million may not be spent but will simply be there as insurance and that it may be recirculated at a later date for further use? Exactly what is the structure of this and how will it work?

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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Will the Minister outline exactly what the 3% reduction in the research and training fund involves? I would have thought that extra funding would be required for research and training in light of Brexit and at a time when we are seeking to access more and more markets and when increasing numbers of students want to enter third-level education? Does the reduction relate to a different fund or is it to this fund?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I will respond to a few of the points raised by Deputy McConalogue first. Regarding his persistent line of prosecution that we are underspending on the rural development programme, the reality is that we are behind profile on it. As a result of the fact that GLAS payments are made in December, we will have our spending under GLAS on target by the end of the month. All those awaiting GLAS payments know that they are issued in December.

Regarding the crisis fund, I appreciate the points the Deputy raises in respect of the tillage sector. As I said earlier, I met the chairman of Donegal IFA while on a visit to the county and I understand the issues raised. However, even if I had an open amount of resources, I am legally constrained by state-aid rules in the context of what I can do. Given that access to affordable finance was a common thread in the views expressed at the stakeholders' forum and in all the pre-budget submissions we received from farmers' organisations and others, we thought it a reasonable proposition to use the de minimisprovision that exists under state-aid rules to leverage the €150 million loan fund at much more affordable interest rates than previously. We have used the latitude we have under state-aid rules, that is, the de minimisprovision. If somebody draws down the maximum SBCI loan over a three-year period - I appreciate that not everybody will do so - he or she will avail of the maximum de minimisprovisions available from the EU.

Deputy McConalogue also made the point that the €7.5 million relating to Bord Iascaigh Mhara, BIM, seems to be the largest savings figure. He referenced the decommissioning scheme. The €7.5 million is significant to BIM and does relate to decommissioning. There is a saving of approximately €500,000 in pay in BIM. Overall, however, the largest headline saving in my Department, interestingly, is on the administrative side, at €13.5 million, on the basis of intended recruitment of additional staff because of the embargo for several years and voluntary redundancies on top of that. We have a number of emerging gaps in the skill set required in the Department. Due to the fact that - within a controlled framework - some latitude was granted to State agencies and Departments to hire additional staff last year, the Public Appointments Service was busier than usual. Therefore, anticipated recruitment of additional staff in 2016 did not take place and there is a saving of about €13.5 million as a result.

Regarding the SBCI and the purpose of the €25 million, which consists of €14 million in Exchequer and €11 million in EU funding, it has gone into leveraging the fund. There is approximately €100 million in European investment funding and in the region of €50 million in SBCI funding.

The sum of €25 million is in the context of a subsidy to the interest rate that farmers will pay and a guarantee against first losses. The provision makes the fund more affordable for anyone who avails of it. The purpose of the €25 million is to make sure that the product is more affordable.

The reason for the scheme is evident when one considers the Q1 Central Bank report of 2016 as it made reference to the cost of finance in Ireland relative to other EU member states. The report clearly shows that other countries had access to more affordable finance. If I recall the detail correctly, Austria led the way with products available at 2.2% and Ireland had a significantly higher rate. The provision of €25 million does something to address the matter. I hope, as a consequence, it will force more competition in the market not just from the pillar banks but from other players to make finance more affordable for farmers.

Recently Deputy Cahill and I attended a meeting in Limerick with the ICMSA. On that occasion a farmer said that the KBC Bank was offering a product at the same interest rate. I do not know whether he or she compared similar products. If it is the case then the step is welcome.

I ask the Chairman to repeat his question.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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What does the 3% reduction in the research and training fund entail?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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My understanding is that it is something we anticipate will be spent in 2017. The drawdown just has not materialised in that area.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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Is it a financial cut down or reduction?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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No. We have made allocations for research funding available to various institutions. We have appointed successful tenders for the funding but the drawdown has not commenced yet. We are not holding back. The funding is triggered by the approved beneficiaries.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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Deputies Cahill and McConalogue can ask supplementary questions.

Photo of Jackie CahillJackie Cahill (Tipperary, Fianna Fail)
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I have a question on research and training. Harvest 2020 included a target of 100 specialist dairy farm managers per year to graduate from a Teagasc scheme but only 25 entrants per year apply for the scheme. To elaborate on a point made by the Chairman, surely we should increase the training fund rather than have an underspend.

The Minister mentioned that State aid rules prevent him from giving a specialist allocation to grain farmers following the grain crisis. How did we get over the same problem for the horticultural group? When forestry was savaged by high winds a significant payment per hectacre was given to the owners of the forestry. The EU provided €450 million to farmers in eastern Europe when the ban on exports to Russia was introduced. How were we able to get around the State rules for the horticultural and forestry sectors but cannot circumvent the rules now?

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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I shall make a couple of follow-up points in terms of my previous questions. I ask the Minister to clarify whether there will be an underspend in his Department's projections come 31 December in terms of budget 2016. We have debated the rural development programme a number of times, particularly the overall envelope for the seven year cap for GLAS.

I wish to specifically refer to the Department's 2016 budget. The Minister has stated that the current underspend will be reallocated into the Supplementary Estimate. Aside from that. Does he expect all funds to be spent by the end of 2016? Do the Department's figures show an underspend at this point?

In respect of the Strategic Banking Corporation of Ireland, SBCI, funding and the €24 million that Europe and this Supplementary Estimate is putting towards the €150 million loan fund, the Minister has indicated that the €24 million of EU and domestic funding will go towards two aspects. First, interest rate amelioration or funding part of the reduced interest rate that farmers can avail of and, second, the funding will ensure against first loss. I ask the Minister to flesh out how these initiatives will work. What proportion of the €24 million has been dedicated towards reducing the interest rate? Will the banks receive payment from the €24 million to provide a lower interest rate? I ask the Minister to explain the matter and the insurance part.

I have another question on the €24 million. Once the loan fund is finished and runs its course - and if there are no significant losses to be borne by the State or banks do not have to be recompensed due to no guarantee being required from individual lenders to the banks, if there are not sufficient losses to be covered - will a good proportion of the €24 million be returned to the State for further use? If so, will it fund further financial instruments afterwards?

I support the point made by Deputy Cahill about the de minimisrule. The Minister has given the impression that tillage farmers and farming organisations did not ask for credit or a crisis fund. He took the main theme to be that they wanted loans. I got a different reaction from the farming organisations. I remember that they asked for a crisis fund when the crisis took hold. The farming organisations quite clearly called for a crisis fund. I ask the Minister to clarify the matter.

As much as €20 million of the Supplementary Estimate will go towards the UN World Food Programme that is not due until next year. Does that mean that the €20 million the Minister planned to spend on WFP next year will be available in the 2017 budget for other purposes? Is the money in addition to what will be spent next year?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I thank the Deputies for their questions and I shall first respond to Deputy Cahill. We are not talking about savings in the Teagasc budget in terms of the Supplementary Estimate. The savings on the research side do not have anything to do with Teagasc. They are calls that the Department makes for funding it has available for various research projects. Once it makes an allocation or contract to the successful bidder for the funding the drawdown is then in the hands of the successful applicant, subject to certain terms and conditions. As I have identified here, the successful applicants have not triggered the drawdown yet but the allocations have been made. The funding has been made available under what is known as the Food Institutional Research Measure, FIRM, and the Research Stimulus Fund, RSF, allocations. They are not savings in the Teagasc budget.

On the issue of circumventing State aid rules, if it is an EU initiative as it would have been in other schemes then State aid rules do not apply. The Commission has made allocations previously. In terms of the SBCI fund we have invested €14 million of Exchequer funding and availed of the latitude available under the de minimisrules to include a sector that was not included in the July package when the Commission made €11 million available to the livestock sector.

I can quote Deputy McConalogue chapter and verse as proof that all of the farming organisations raised the issue of affordable finance. One of the farming organisations would have preferred if the €11 million was ring-fenced entirely for a specific subset of the livestock sector. We took the view that it was not-----

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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I talked specifically with tillage farmers about what they want.

Photo of Jackie CahillJackie Cahill (Tipperary, Fianna Fail)
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They talked about their successes.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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In terms of the proposal for credit, I specifically mentioned that farming organisations called for a crisis fund to be made available to the tillage sector. The Minister seemed to dismiss the fact that the request was made and claimed they wanted to be included in the low interest rate fund.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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The point I am making is that I am constrained in what I can do by state aid rules. I have exploited the latitude I have under them by providing for this loan scheme. The €14 million provided under it has not gone exclusively to the tillage sector. It is available to the tillage, mushroom and livestock sectors.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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If the Minister had made a request to the European Union, would it not have been possible to secure flexibility to have a crisis fund? I understand the French authorities have made specific requests to be allowed to support French tillage farmers.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I have heard this. There are no proposals from the French authorities or the Commission that we have not supported, but we have not seen any prospect of a Commission rescue package for the tillage sector emerging at European Council level. I ask the Deputy to believe me what I say we would be in the vanguard if such a package were to be made available. It has been suggested we are not supporting a French initiative in this area for some reason, but that is not the case. There is no substance or truth in that suggestion. A specific provision of €11.1 million has been made for the livestock sector within the €150 million loan scheme fund to be administered by the Strategic Banking Corporation of Ireland. A further €4 million has been ringfenced for the non-livestock sector, including tillage. We have to monitor its drawdown to ensure each sector will receive the appropriate amount. We have to ensure there will be no breach of entitlement in any sector.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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The Minister has outlined that the fund will be allocated proportionately to different sectors. Will specific amounts be ringfenced for the tillage, dairy and beef sectors?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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As I said, €11.1 million is available to the livestock sector, while €4 million has been ringfenced for the non-livestock sector. Approximately €25 million, comprising the €11.1 million I have mentioned and the €13 million-----

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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That money cannot go anywhere other than the tillage sector.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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Some €4 million has been ringfenced for the non-livestock sector. Approximately €10 million is flexible, depending on the take-up.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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Okay.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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Deputy Charlie McConalogue asked about the overall picture within the Department. What we are reallocating is current expenditure in 2016. As we have flagged previously, there will be an underspend in other areas of capital budgets such as TAMS. We issued TAMS approvals and farmers applied in good faith. This has been a particularly difficult year for those involved in some of the schemes, including on the dairy side and in the livestock sector. The profile of claims for grant approval coming through suggests much of the work has not been done in 2016 for prudent financial reasons. Obviously, these entitlements will be honoured in 2017. For example, there are some savings on the Haulbowline remediation project, a legacy issue for the Government that landed in the Department of Agriculture, Food and the Marine. The funding provided for Cork County Council for the project from the Department's capital allocation has not been drawn down. The expected drawdown has not happened in some other areas of the capital funding scheme, including TAMS. The complete profile on the capital side will not be apparent until the end of the year, but we will make it available when we have it.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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I hope the dead hand of the Minister for Transport, Tourism and Sport, Deputy Shane Ross, is not reaching into the Public Appointments Service to block recruitment to the Department of Agriculture, Food and the Marine.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I assure the Deputy that it is not.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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He has done enough damage in his own Department without putting his hands on others.

I am somewhat perplexed about what happens when a limited and defined sector like the tillage sector has a particular problem associated with an unanticipated event. It could not have anticipated it. In 2015 there were big yields but low margins in the tillage sector. That covered a multitude. However, there has been a total collapse in 2016, particularly on the western seaboard, from Deputy Charlie McConalogue's county down. It has even stretched to County Longford and across the midlands. Surely it is not beyond the Department to make a particular case to the European Commission. The case that needs to be made is that this problem requires an input and the Commission should play a role in that regard. The impact of weather events on our potential means that they rank among the extraordinary force majeureevents. If farmers in the sector have lost on average €25,000 per annum, or €100,000 in the past four years or so, where is this going to go? Will there be a grain sector? This will have huge knock-on effects on other areas also. I refer not only to the cattle, beef, sheep and milk industries but also to those involved in malting, etc. Can we not claim exceptional circumstances in this context? I understand the Minister's point about working capital. Certainly, a rate of 2.95% is an awful lot better than what has been available. It is a little over one third of what was being charged by some of the commercial banks for a while. We had better be careful to acknowledge that it is helpful. Can the Minister not stretch it? I made a similar suggestion when I was looking for something different for the mushroom industry. Like Deputy Charlie McConalogue, I understood the farming organisations were looking for a particular crisis fund of up to €15,000 per farmer that could be distributed. Perhaps I was wrong in that understanding. Perhaps they have two ways of submitting things. I might have been wrong in how I interpreted the matter.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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When I received submissions from farm organisations in advance of the budget, they asked for an affordable finance product. To be fair, all of them have raised with me the specific issue in the tillage sector. Unfortunately, I am constrained on two fronts. First, I do not have an endless amount of resources because I used what scope I had to invest in the loan fund. Second, I am legally constrained by the de minimisrules in the aid I can provide. Although the tillage sector is important in the context of our agricultural activity, we are a relatively small player at EU level. There has not been a clamour from the major grain growing states, particularly France, Poland, Hungary and Romania, for a rescue package. If that happens, we will certainly hitch our wagon to that momentum. There is no evidence, however, that a realistic campaign by the major grain growing countries for a compensation package is under way. I appreciate that there has been a very difficult global tillage scenario for a number of years. The bumper harvests that have been accompanied by downward pressures on prices are having a spillover effect.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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I ask Deputy Charlie McConalogue to be brief because we need to wrap up.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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I asked the Minister whether the provision of €20 million for the World Food Programme meant that we would not have to provide €20 million for the programme next year. I would also like him to clarify specifically that no direct payments to the banks to cover the cost of the reduced interest rate will be made from the €24 million being provided for the Strategic Banking Corporation of Ireland fund. In addition, will he clarify clearly the restraints imposed on the tillage sector by the de minimis rules? How much leeway is available to the sector? Is it available to the sector as a whole? Are there limits to the support that can be given to each individual tillage farmer? I understand the Minister's point about resources, but I remind him that €20 million which was due to be paid to the World Food Programme next year is now to be paid this year. My guess is that this €20 million will not have to come out of next year's budget. I suggest it could potentially have been used this year to support the tillage sector. Will the Minister crystallise exactly what the de minimisrule restraints are in this regard? Why is flexibility not being shown on a crisis fund specifically dedicated towards farmers who have lost crops?

Why could the Minister not have used some of the €20 million this year to support those farmers who were in an awful financial way as a result of the year they had?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I will try again to explain this. As a general rule, there is a prohibition in Europe on a state bailing out any particular sector or giving it an advantage relative to its other competitors across the EU. Whether it is dairy, beef or tillage, we could not, even if we had the resources, give a specific capital injection or assistance because it would be deemed illegal under current EU trading regulations. That is the general rule. We cannot offer that state aid. There is an exception to that in certain circumstances, referred to as "de minimus" provisions whereby one can provide a certain amount of it. Under the SBCI loan scheme, a farmer drawing the maximum loan would reach the de minimusthreshold of assistance the State can give over a three-year period.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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If there was a crisis fund and a farmer availed of it, he or she simply would not be able to avail of the loan fund as well. Therefore, under de minimusrules, the Minister would not be prevented from using some of the underspend in this year's current budget to provide a crisis fund to the tillage sector.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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We cannot provide it twice.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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Yes. The same farmer just would not be able to avail of it twice. A farmer in crisis because he or she lost the crop who avails of the crisis fund would therefore be debarred from availing of the loan fund. Just to be clear, my view from what we have just teased out is that there is nothing under the de minimusrules which prevents the Minister from providing a crisis fund to the tillage sector. The only condition for anyone who avails of such a crisis fund is that he or she would not also be able to avail of the loan fund.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I took my decision based on the engagement I had at the stakeholders' forum after the harvest and what the ask was. In terms of the limited resources we have, we have put some €14 million into the loan fund. I based it on the basis that this was one of the asks. I appreciate that there were a whole host of things, but I do not have an endless supply of funds, so I availed of what was there. I have engaged with the farm organisations and they have asked post the budget for something to be done on the tillage side. We have specifically made provision that some of them will avail of in the context of the SBCI loan fund. They have also asked, to be fair, on the beef side for €200 per suckler cow, which is a €200 million bailout. There is no shortage of asks. There is an ask for a further bailout on the horticulture side. There are limits on the de minimusaid we can provide and we took the decision to go down the loan fund route.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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The €20 million being front-loaded into next year's budget for the World Food Programme means €20 million less out of next year's budget will go into that programme instead.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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As the Deputy is aware, however, we have prepared our budget for 2017 and brought forward that commitment which allows us to do other things. For example, one of the new initiatives of budget 2017 is a €25 million sheep scheme.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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Has the Minister factored in that €20 million for the 2017 World Food Programme? Back at budget time, had the Minister factored in that €20 million would not be spent next year but would, instead, be taken out of this year's current spend?

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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We had indications that we would have underspend in certain areas. We did not know the scale of it. Where we had underspend, we tried to meet some of the demand for 2017 by bringing forward payments.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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To be clear-----

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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Very briefly. We need to move on.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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The Minister could make the choice to put €15 million of this year's current budget underspend into the World Food Programme for next year and top that up next year with €5 million out of the €20 million which has been allocated in budget 2017 to put towards that programme next year anyway. He could use the €5 million freed up to put a crisis fund in place this autumn for tillage farmers, which is more than Teagasc and the farming organisations estimate is required to support those in the tillage sector who have lost crops. That choice is open to the Minister from a funding point of view because of this Supplementary Estimate and underspending in the current budget this year. However, the Minister is making the choice not to do that.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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Deputy McConalogue is ignoring the constraints I am under legally in terms of state aid rules.

Photo of Charlie McConalogueCharlie McConalogue (Donegal, Fianna Fail)
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No, I am not.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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The Deputy is.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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I ask the Minister to conclude.

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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I appreciate that the Deputy consistently raises the issue but I am constrained by state aid rules and have exploited the de minimusprovisions to the maximum extent possible to facilitate the tillage sector. I appreciate that the sector has faced a difficult harvest, not only this year but for a number of years. Not only have we done this, but we will launch the TAMS programme for tillage in January and we have extended the knowledge transfer initiative to tillage farmers as well. Notwithstanding all of that, I appreciate the difficulties the sector faces. However, there is a limited amount the State can do. In terms of the ask set out by farm organisations and at the tillage stakeholders' forum, this was a priority issue for them.

Photo of Pat DeeringPat Deering (Carlow-Kilkenny, Fine Gael)
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I thank the Minister and the members of the committee. That concludes the consideration of the Supplementary Estimate for public services for the year ending 31 December 2016 and of Vote 30 - Agriculture, Fisheries and Food.