Oireachtas Joint and Select Committees
Tuesday, 26 June 2018
Joint Oireachtas Committee on Agriculture, Food and the Marine
Common Agricultural Policy Negotiations: Department of Agriculture, Food and the Marine
3:30 pm
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Before we begin I ask members, witnesses and those in the Public Gallery to ensure their mobile telephones are switched off.
I welcome Mr. Brendan Gleeson, assistant secretary, Ms Sharon Murphy, principal officer, and Ms Patricia Kelly, principal officer, from the Department of Agriculture, Food and the Marine and thank them for appearing before the committee today to brief the committee and to undertake further scrutiny of the EU proposals relating to the Common Agricultural Policy after 2020, which are COM (2018) 392, COM (2018) 393 and COM (2018 )394, and associated issues.
I wish to draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, 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 or 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 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. Gleeson to make his opening statement.
Mr. Brendan Gleeson:
Last November, we had a discussion on the likely shape of the Common Agricultural Policy, CAP, after 2020. At that time, a reflection paper on the matter had been leaked from the Commission and I indicated that we would need to see the legislative proposals before taking a view. Matters have moved on since then. On 1 June last, the Commission published proposals for three Council regulations covering the essential elements of the CAP in the period 2021-27. Now we have something concrete to work with. Even so, we are just at the beginning of a negotiation on these proposals. There was one discussion at the Council of Agriculture Ministers in Luxembourg last week, and through July, officials will engage on a detailed, article-by-article discussion at working group level. Ireland is still evaluating the proposals in detail, and this is a work in progress. The draft regulations are long and detailed and, therefore, what I present here will necessarily be summarised to a significant extent. I will try to touch on some of the main points and then we can have a discussion
There are three published regulations. The first is a document referenced COM (2018) 392 final. This preserves the basic structure of the CAP, in particular the division between Pillar 1, direct payments, and Pillar 2, rural development. It includes the main provisions on member state strategic plans, the Pillar 1 direct payments schemes and the rural development schemes under Pillar 2. It consolidates regulations on direct payments and rural development, which are separate under the current configuration. The previous regulations are repealed. This regulation will be of most interests to members and I will come back to it.
The second proposal is referenced COM (2018) 393 final. This includes technical provisions for member states. It defines paying agencies and other bodies required to administer the payments systems. It also establishes rules relating to finance, control and accounting. This repeals the previous regulation.The proposal also modifies the current crisis reserve provisions at EU level. The proposal here is to establish a crisis reserve of €400 million annually, the unspent balance of which will be rolled over to the following year. Currently, these unspent balances are returned to farmers the following year.
The third proposal is referenced COM (2018) 394 final. It deals with the Common Market organisation. This is the instrument that lays down provisions for market supports such as intervention and aids to private storage, APS, protections for geographical indications, marketing standards and other provisions regulating the market. This is an amendment to previous regulations.It does not repeal them, which is significant. When I was before the committee last November we had a significant discussion on the importance of existing market support arrangements such as intervention and APS as a safety net in times of market crisis. These provisions have not been changed at all in the current proposals; they remain intact.
Turning to the main draft regulation, we spoke last November about issues such as a shift from compliance to performance based analysis, greater environmental ambition, inter-generational change and the distribution of direct payments. We also spoke about the relationship between Pillar 1 and Pillar 2 funding, about overall funding for the CAP and about the definition of genuine farmer. This proposal touches on all of these matters.
I will briefly outline what is provided for in the national plan. Member states will be required to submit a national plan covering both Pillar 1 and Pillar 2 interventions no later than 1 January 2020. This is essentially an extension to Pillar 1 of the type of planning arrangements previously applicable to Pillar 2 only. The plan must be approved by the Commission. The plan must include a SWOT - strengths, weaknesses, opportunities, threats - analysis, an assessment of needs, an intervention strategy, an ex anteevaluation and a strategic environmental analysis. It must also include output and results targets against which performance will be measured as implementation proceeds. Member state interventions will not be defined at the same level of detail as currently, leaving some room for discretion, and eligibility conditions will be defined at member state level.
Turning to direct payments, there are a number of significant modifications in the direct payments provisions. These touch principally on environmental commitments, support for young farmers and the distribution of payments. The new regulations provide for mandatory basic payment as well as mandatory redistributive and young farmer schemes. At least 2% of the direct payments envelope must be provided for the young farmer scheme. Beneficiaries will be required to ensure their land complies with good agricultural and environmental conditions and statutory management requirements, and some of these will replace the current greening requirements. We are examining this conditionality carefully. Member states will also, for the first time, be required to establish a specific scheme for climate and the environment in Pillar 1. This will be available to farmers who are willing, on a voluntary basis, to go beyond baseline statutory requirements. It will also be possible for member states, on a voluntary basis, to couple payments, but only for vulnerable sectors and up to a maximum of 10% of the Pillar 1 envelope, with some exceptions. There will also be an option for a small farmer payment instead of the basic payment.
Member states will be required to progressively reduce payments in excess of €60,000 and there will be a mandatory reduction of 100% in payments in excess of €100,000. That is effectively a cap of €100,000 on direct payments. By 2026, member states will also be required to apply a maximum payment per hectare. However, member states are required to deduct the cost of salaries and the value of unpaid labour from a farmer's direct payments before these reductions are applied. There will also be mandatory internal convergence. By 2020, all farmers in Ireland will have a payment per hectare equal to at least 60% of the average payment under the current dispensation. By 2026, these proposals would bring this up to at least 75% of the average payment per hectare.
Pillar 2 is rural development payments. This provides for EU co-funded aid for measures under a variety of headings. These are broadly similar to the current headings. They relate to environmental, climate and other management commitments, natural or other area specific constraints, investments, measures for young farmers and new business start-ups, risk management tools, co-operation and knowledge and exchange of information. Member states have some latitude in defining measures under these general headings. There are significant changes to the rural development provisions. For example, member states are now required to include measures for risk management in their national strategic plans. They were voluntary up to now. They can include, but are not confined to, support for insurance premiums or for the establishment of mutual funds. There is also more of an emphasis on the environment. At least 30% of the Pillar 2 budget, excluding areas of natural constraint, ANCs, must be reserved for environment and climate change measures, and the competent authority for the environment and climate change must be involved in drawing up the national plan.
The maximum rate of EU financial assistance for environmental and climate action has been increased to 80% of total support. The provisions on financial instruments are more comprehensive than heretofore. These can now extend to investment and working capital, and can be used to complement grants.
I now turn to the funding elements. On 2 May 2018, Commissioner Oettinger published proposals for a multi-annual financial framework for the period 2021 to 2027. These proposals came against the background of budgetary pressures arising from the departure of one of the EU’s largest net contributors, and new policy imperatives, including migration and defence. These proposals referred to an overall cut of approximately 5% in the CAP budget compared to the current envelopes for 27 member states. Against this background, the CAP proposals outline the member state envelopes for Pillar 1 and Pillar 2. For Ireland, the annual Pillar 1 allocation is approximately €1.164 billion. This amounts to €8.148 billion over the period. It compares to a final year envelope for Pillar 1 in the current period of €1,.211 billion. That is a loss of just over €47 million per annum in direct payment receipts. The annual Pillar 2 allocation is €264,670,951. This amounts to almost €1.853 billion over the period. The annual allocation compares to a final year allocation of €312,485,314 in the current period. That is also an annual loss of just over €47 million in Pillar 2 receipts. For Pillars 1 and 2 together, we are talking about a reduction in receipts of approximately €94 million per annum.
Ireland is part of a coalition of member states calling for the restoration of these cuts, but not all member states agree. This will ultimately be decided by Finance Ministers, by the European Council and by the European Parliament. On budgetary matters, it is also noteworthy that member states have the flexibility to transfer up to 15% of the direct payments allocation to rural development, and vice versa. An amount transferred to Pillar 2 may be increased by up to 15% provided it is being used for environmental and climate change objectives.
I want to conclude on the same point we concluded on last November. The Chairman asked then about the definition of "active farmer" and I predicted that discussions would be as difficult this time around as they were in 2013. The new proposals coin a new phrase - the "genuine farmer". They provide that, "genuine farmers shall be defined in a way to ensure that no support is granted to those whose agricultural activity forms only an insignificant part of their overall economic activities, or whose principal business activity is not agricultural , while not precluding from support pluri active farmers." The definition allows for income tests and labour input measurements. It is certainly the case that the Commission has worked hard on this definition, but I fear that from an Irish perspective it is not satisfactory. Frankly, the prospect of applying income or labour input tests prior to making direct payments is unrealistic, and so, we must continue in our quest for an appropriate definition.
The Minister has announced a public consultation on the new regulations to take place on 4 July. The committee will be represented and it will provide an opportunity for a further reflection on the proposals. We are just at the beginning of negotiations on a complex set of proposals, and our thinking on many of these issues will evolve as we penetrate the detail of the regulations through the working group process. In the meantime, this is a good opportunity to consider some of the issues arising. I look forward to addressing any questions the members may have.
Charlie McConalogue (Donegal, Fianna Fail)
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I thank Mr. Gleeson for his presentation, which was comprehensive and enlightening. Could he bring us through the process and timelines from here on in respect of how the Commission's proposals will be dealt with at national and European levels? The issue of the budget is still to be resolved and it is the biggest concern overall. Mr. Gleeson has outlined clearly how it will amount to a 4% cut for Pillar 1 payments domestically as well as a 15% cut for the rural development programme. That, of course, is before inflation. When we factor in inflation over a seven year period, the cut is significant. Many of our beef and sheep farmers are 100% dependent on CAP payments. If the budget stays as proposed, has the Department assessed the impact it would have on the sustainability of many of those enterprises? Our top priority has to be trying to ensure that the budget is not cut; rather, we need an increase to ensure inflation is factored in. That has to be our core national objective over the next period.
Mr. Gleeson indicated that there is a coalition at European level seeking to increase the budget. Do all member states accept the Commission's proposed budget at its current benchmark level? Is it the case that the only debate at this stage is seeking consensus on having it increased?
On the capping of payments under Pillar 1, Fianna Fáil took the position early on that they should be capped at €60,000. I would be interested in further detail from Mr. Gleeson about his assessment of the Commission's proposals with regard to the factoring in of labour, what sort of labour can be factored in, and the impact of that at European level. What is his view of the flexibility we have at domestic level in approaching those criteria?
An optional environmental scheme will be mandatory under Pillar 1. What is Mr. Gleeson's assessment of the proposals put forward so far in respect of how onerous that scheme will be and how accessible it will be to farmers across the board? I refer particularly to those who farm intensively. Will they be able to avail of it? The fact that it will comprise up to a third of the payments under Pillar 1 means it will have a significant impact on them.
Jackie Cahill (Tipperary, Fianna Fail)
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I thank Mr. Gleeson and his officials. We will all raise the concerns Deputy McConalogue has raised. Every time we talk about the CAP, we talk about simplification. However, Mr. Gleeson's submission did not indicate that any simplification coming down the line. If anything, it is becoming more bureaucratic and complex.
As Deputy McConalogue said, in real terms the budget will drop significantly for farmers. It is a huge percentage of their income. The €400 million crisis fund that was paid back every year will be taken out of the bottom line as well. That is another cut to what was available to be redistributed in the single farm payment. Every time we see something happening, it is reducing the pot for both Pillar 1 and Pillar 2. There will be agreement around this table that we have to fight on our backs to maintain the budget at its present level at least. Could Mr. Gleeson outline the political background to the member states that are not in favour of additional contributions to maintain the budget? What possibility is there of political pressure ensuring changes to that?
A total of 2% being set aside for young farmers. It is hard to disagree with that as we have to attract young people into farming. However, that will result in a cut to other individual farmers' payments. How is it proposed to distribute that? The ceiling on single farm payments, in the way it is worded and designed, will have no impact on the amount that will be available to redistribution to other farmers. There will be loopholes and, therefore, it will have no financial impact whatsoever.
There is a strong case to be made for a stricter ceiling to put on payments when the budget is under such pressure. That is something that we as a country should seriously look at.
On the environmental side, we were greening the last time round and now we will have a mandatory environmental scheme. I would make the same point as Deputy McConalogue. Will intensive farmers qualify for that? At the end of the day, the point should not be lost that the intensive farmers are more than likely farming full time and if obstacles were put in front of them in assessing their single farm payment, it would have serious implications.
Is APS and intervention to remain as it was? In 2018, a change was made whereby there was no skimming power purchased into intervention at a fixed price. Will that be reversed? Can we be guaranteed that that will not be interfered with going forward?
The active farmer will work out at the same as the ceiling. There will be nothing put in there that will have any financial impact on farmers receiving their single farm payment. I do not say it is easy. It is hard to put a wording in place because one could have a person with a small acreage who is farming it effectively but who has to have other income to survive and the fairness of disallowing him or her would be hard to question. However, there are many big outfits in this country and to allow them access the single farm payment in the same way as smaller operations has to be analysed and questioned. We have some big units now and when a budget is under pressure like this, we have to examine whether it is fair that some can access significant payments and operate under different companies and everything else. It is all going into the same bucket but it will come under different rules. If there is a financial impact, we must be more stringent in our definitions.
Michelle Mulherin (Fine Gael)
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I would like to ask about the proposed environmental scheme under Pillar I. I understand the officials do not have specifics. I am wondering what the general thinking is on such schemes. To what extent does the drive towards more environmentally friendly emissions-friendly farming recognise the realities that on the other hand we want farmers to produce food cheaply with traceability to high standards? Is there a proper interface in this regard? I understood early in this new CAP process that there was a strong environmental and green lobby. We all want to be green, but I wonder is it being grounded in reality - the Department would advocate for that - and how might such a scheme look. There are two ways we can approach living sustainably. One is we cut back and say that we want to live like we lived in the 1950s. The other is to say that in the future we will use new technologies and new thinking because there is no point in telling human beings to stop doing what they are doing. We have to be more clever about how we do it, especially as we are paying farmers to produce this food. There seems to be tensions there where farmers could come out the worse of it, especially if the green lobby is the most dominant.
My other concern is relates to the definition of "genuine farmer". Part-time farmers on marginal lands should be protected. It is an issue I raised with the Commissioner, Mr. Hogan, when he addressed the Seanad. His attitude was that such farmers should be protected because if we do not protect them, we will not have any farming in areas such as the west. Mr. Gleeson flagged concerns about the proposed definition, but I wonder where will it go from here. Is the baseline that we will protect these farmers and that will not be in doubt? If these farmers could get more out of the land, they would and if they could work full-time on the land, they would, but the land does not yield and it does not allow that. They would be in poverty if they did not work outside of the land. We want rural development and we all know the domino effect and the desirability of maintaining people in rural areas, and what it adds beyond economics.
Willie Penrose (Longford-Westmeath, Labour)
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I thank Mr. Gleeson and his colleagues. I do not envy them their job. They are coming in here in the midst of negotiations and they are doing their best, similar to the Brexit scenario. All they can do is their best because this will change. They are only giving us the current position.
The newly proposed CAP has a number of seminal and worthy objectives, including the old objectives of supporting viable farm incomes and achieving food security, but I concur with Deputy Cahill that we all want to see the position of the farmers in the value food chain. There arises the question of how the distribution of payments can achieve the objective of ensuring that smaller and medium-sized farms are saved and sustained in the future. Such farms are critical in rural Ireland. It is hard to justify large corporate farmers getting significant sums when they are the ones who can release cattle onto the market when it suits them and depress prices at a critical time. I constantly raised the reduction of farm payments up to €60,000. Of course, we were deemed Communists in the Labour Party for suggesting this but now the more mainstream Fianna Fáil are-----
Pat Deering (Carlow-Kilkenny, Fine Gael)
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It is not often Deputy Penrose gets accused of that now.
Willie Penrose (Longford-Westmeath, Labour)
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When I said it a few years ago, I got fairly whipped. I am fully in agreement with the capping of payments in excess of €100,000. That is a significant sum. On this labour cost aspect, it is self-evident that costs more, but how will that be measured and taken into account in achieving a fair distribution of payments? That will be some headache for Mr. Gleeson and his colleagues and anybody else who is involved. I am sure Mr. Dillon and his colleagues will be delighted with all this arriving on their desks, and I do not envy them one whit. Deputy Cahill has put a nail in it. This is bureaucracy in the EU manufacturing super bureaucracy to obscure what is a clear objective and I am worried that the Department will be left in an awful mess with it. As it stands, 30% of the direct payments are allocated for greening measures. Where will the content of the new environmental architecture go and how will that be achieved? This is all worthy but it reminds me of putting a significant set of objectives in place and then not knowing where we will end up.
We all subscribe to subsidiarity and flexibility and we need the targeted support for family farms with the emphasis on higher support for smaller farmers, etc. With a limited budget, that is where our focus should be. However, in regard to the focus on modernisation and simplification of CAP where up to now 20% of farmers received 80% of payments, that will not achieve this. I would love to see how this subsidiarity will work. I am worried that very often when a member state gets a hold of a measure, it can be as woolly in bureaucracy as anybody else. That is why we are off to appeals and various other mechanisms. There are none better to construe a document or a regulation than our own bureaucrats. I cannot see how this simplification will work. Will it mean the continuation of the form-filling exercise that we have on an annual basis? Surely we can get to a system where a card is used and, when there is a change, the farmer notifies the Department and it reflects that rather than going through big reams of forms on an annual basis.
Talking about bureaucracy, there are people in this country who do not use computers and the Department is now expecting them all to come along and utilise those. Not everyone is into that.
There should be greater emphasis on climate action and a significant increase in environmental ambitions.
I hope there is a renewed emphasis on generational renewal for young farmers. There will not be any big shouts in Europe about this but the squeals of the farming organisations will be heard on the Rock of Cashel from here when this starts. They will only pay lip service, however. I support Macra na Feirme unequivocally on this issue and the European Commissioner, Phil Hogan, is clear on this. The farming organisations will have to get their act together and support it rather than paying lip service. Young farmers must have some way of getting into this game. I get angry when I hear one cannot touch this because it is a basic thing. How does a farmer expect his son or daughter ever to get on the pitch? I urge our officials not to give any leeway on this issue.
I do not know what risk management means. This is one of the great measures. One can bring up the Safety, Health and Welfare at Work (General Application) Regulations 2007. When one is stuck, one refers to sections 19 and 20. They cover risk management, hazard analysis and the devil knows what. I do not know what this means. The best of luck to our competent officials dealing with that one.
The emphasis will be on the continuation of direct payments to be fully financed by the EU budget. However, between €10 billion and €12 billion will be gone from the budget after Brexit and it will not be easy. Ireland will not be found wanting when it comes to an increased contribution to the EU budget. The problem is that at least five member states are pulling the rope a different way and are not interested. As I have said previously, we need to be plain with the Irish people that we are going to demand extra money from their taxes. We have to tell the truth to achieve this objective of getting extra tax money. Other countries will have to step up to the plate because we cannot fill the €10 billion gap unless every other member state makes a similar proportionate contribution. We should start telling that, not just to the Irish public, but to some farming organisation leaders who may be misleading their own members by claiming the Government can do this. It can do its part but this is a jigsaw and the other 27 member states better come carrying little packs of money on their back similar to a leprechaun bringing money to shore. It is important we are straight and honest with the people, particularly with the farming public.
Mr. Brendan Gleeson:
Deputy McConalogue asked about the timeline from hereon in. The Commission published a tentative outlook. The intention is that there will be a debate in the European Parliament and the Council on the CAP proposals towards the end of this year. There will be potential agreement on the next multi-annual financial framework, MFF, by Heads of State and Government in spring 2019. The potential adoption of the next CAP by co-legislators, namely Parliament and Council, will be by spring 2019. Then we are into European Parliament elections in May 2019. The intention is for the entry into force of the new CAP in 2021.
In practice, that means officials will work through the detail of this over the next month in working parties. The Council then will come to a general agreement on the shape of it. If that is to go through the European Parliament before spring 2019, the Council needs to have agreed on the general shape before the end of this year or early in 2019. Then it goes to the European Parliament. I was involved in the 2013 amendment to CAP and there were many thousands of amendments to the Council proposals which came from the European Parliament. It was a difficult process.
If this is to happen in time for 2021, realistically, we need agreement in the Council and European Parliament in the spring of next year before we get into the parliamentary election cycle. It is a tough timeline. I will not comment on whether it is possible, but it will be difficult.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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If it is not possible, is it rolled over automatically?
Mr. Brendan Gleeson:
I am not sure if this has happened before. It would roll over. Considering that post-2020 we will not have the UK's budgetary contribution, if it is rolled over, there will be a reduced budget. That is another issue we will have to manage as well.
Then one would have multi-annual schemes such as GLAS. We would have to consider how long the next partial programme rolls on. Would existing contracts be extended or a new cycle entered into? There would be many complex decisions to be made. It would be a new issue to manage.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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That is where subsidiarity comes into play.
Mr. Brendan Gleeson:
Perhaps.
The MFF is a matter for Finance Ministers, meaning there is a wider issue about gross national income, GNI, contributions and own resources. We are talking about the proportion of the budget attributable to the CAP. Over the past several months, we have been visiting member state capitals trying to persuade people that retaining a strong CAP is a necessary objective. Several weeks ago in Madrid, six member states agreed that the cuts should be restored to the level of funding for the EU 27 in the previous financial perspective.
Jackie Cahill (Tipperary, Fianna Fail)
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Which were the six member states?
Mr. Brendan Gleeson:
Ourselves, France, Spain, Portugal, Greece and Finland. Since that time, we understand 18 Agriculture Ministers have signed up to the principle that the budget for the CAP should be restored. At the previous committee meeting on this, we had a discussion about the statement from the French President, Mr. Macron, on the future of CAP and dispensing with the old taboos and there was concern about the implications that might have for the budget. Since then, France has unequivocally come out and said it supports a strong CAP budget.
On the other hand, at least three member states have publicly stated they are not putting another cent into the budget, namely, Sweden, the Netherlands and Denmark. The Germans are a bit on the fence on this issue.
From our perspective, the Taoiseach said that Ireland is prepared to put a greater proportion of GNI into the budget, but only if it contributes to measures that are of core importance to the European Union. He has specifically name-checked the CAP as one of those possibilities. We could agree to put more into the budget with no guarantee that it would be put into matters of interest to us. Our position is unequivocal. We have a strong group of member states which are in the same position from the point of view of the CAP. The budget, however, is decided unanimously.
Jackie Cahill (Tipperary, Fianna Fail)
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Why are the Danes and the Dutch opposed? One would have thought with their agricultural industries, they would be in favour of increased funding for the CAP.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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It is because they are net contributors to the EU budget.
Mr. Brendan Gleeson:
Yes, that is precisely the point. We have been net contributors since 2014 and we are among the highest net contributors per person in the EU, a point which is not widely understood.
Sweden, the Netherlands and Denmark are also net contributors. They have done a calculation in the cold light of day and have considered it is not in their best interests to put additional taxpayers' money into the budget if it is going to be spent on the CAP.
Willie Penrose (Longford-Westmeath, Labour)
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How much of an additional percentage of GNI would have to be forthcoming?
Mr. Brendan Gleeson:
That is not a question for this Department. I do not know is the short answer. The longer answer is that the MFF proposals are based on a 10% increase in the overall budget, which requires the proportion of GNI to increase to 1.11%. The member states which do not agree with this have said they do not want to give any more than 1% of GNI. GNI will increase, hopefully, over the next several years and, therefore, even if one does not increase the GNI contribution, the overall contribution to the budget will increase.
The other factor is what else this money will be spent on.
Another question is how much money will be provided for defence, migration and other political imperatives. That is not much of an answer for the Deputy, but it is not a simple question. To be honest, it is not a question for me but one for the Department of Finance.
Jackie Cahill (Tipperary, Fianna Fail)
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Mr. Gleeson said the agriculture Ministers of 18 member states had agreed on this. Does that mean the 18 finance Ministers have agreed too?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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They are wise in that way.
Charlie McConalogue (Donegal, Fianna Fail)
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The Netherlands, Denmark and Sweden have made a calculation that it does not make sense for them to give additional funds to the CAP because they will not get them back. What are our calculations on that? We are a net contributor overall. If we were to make additional contributions to the European budget, how much would we get back? Would we get back as much as we put in?
Mr. Brendan Gleeson:
Right now, on the basis of a proportional breakdown, we are still significant net beneficiaries of the Common Agricultural Policy. A total of 80% of the EU funds that Ireland gets come from the CAP. Unless we put additional money into some other fund from which we are equally the beneficiaries, we would become a larger net beneficiary if we had a smaller CAP. Again, that is not a very precise answer but it is clearly in our best interests, for a variety of reasons, to support a strong CAP, including the cold hard financial reason.
That picture will change as the next perspective changes. This is a moving target. In any case, as of now, our position is unequivocal from the Taoiseach to the Minister for Finance to the Minister for Agriculture, Food and the Marine. There is a clear position on the restoration of the CAP.
On the previous occasion, we spoke about capping as well as distribution. Significant proposals have been produced. Committee members asked about the detail. The proposals provide that for payments over €60,000, there is what is known as mandatory degressivity. This means there is a proportionate cut in payments as they increase beyond €60,000. The minimum degressivity above €60,000 is 25% where the payment is between €60,000 and €75,000, 50% where the payment is between €75,000 and €90,000, 75% where the payment is between €90,000 and €100,000 and 100% where the payment is more than €100,000. This effectively means payments are capped at €100,000 and a progressive series of cuts are applied to payments above €60,000, but these are minima.
The last time around there was a similar configuration but the top figure was €150,000. The last time around we applied 100% degressivity to payments over €150,000. I am simply saying, without making any predictions about what will happen, that it would be possible under this configuration to apply a maximum cap of €60,000 if we applied 100% degressivity above €60,000. That is the first part.
The second part is the deduction of salaries and unpaid labour from the direct payments figure before we apply the degressivity. This is one proposal we have clearly come out against for two reasons. The first is that it completely undermines the proposal if we have to deduct salaries. In theory, if I was on €60,000 and I paid myself a salary of €60,000, then there is no cap. The second reason is that we have developed an efficient system for getting payments out to people at a time of the year when they need them. We make direct payments on 16 October and in December. Between those two dates we get more than €1 billion out to farmers. We have developed a good system for doing that. Frankly, if we had to do income tests and try to establish the value of unpaid labour on the farms on individual applicants, it would be most difficult. I echo what Deputy Penrose said in that I would not like to be on the side of the table trying to calculate that. Even if it was desirable, it is not a practical proposition. We are dealing with proposals; that is all they are.
Charlie McConalogue (Donegal, Fianna Fail)
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Is that a requirement for each state under the current proposal, regardless of whether it wants it?
Mr. Brendan Gleeson:
It is mandatory. We could see a landing ground where this might become voluntary for member states. Some member states have former collective farms. There are big farms supporting ten or 12 families. We can see how in those circumstances a different dynamic is at play. The idea that we would cap a payment at €60,000 but not make allowance for the fact that five, six or ten families are working on a farm might not work in those places. There is a legitimate basis for including this provision. I believe it was substantially to satisfy some of the concerns of the relevant member states. From an Irish perspective and even from a practical perspective, I do not believe it will work. That is the position on the question of capping.
Reference was made to the optional environmental scheme. This is a new measure under Pillar 1. The question was whether it would be onerous or suitable for farmers who are farming intensively. The answer is that there is no detail in the Council regulation on this. I imagine this is an area where member states have a significant element of discretion. They must have a scheme in Pillar 1 that is open to farmers. I imagine it would probably have to be open to all farmers. The way we configure the scheme might influence the type of farmers who apply for it.
There are two issues. The first is that right now we are examining a regulation. We are trying to ensure there is nothing in the regulation to stop us from doing things we might want to do in future. We also want to ensure there is nothing in the regulation to require us to do things that we do not want to do. The second question is how we configure our national policy when these regulations are ready to go. It is a matter of what we put into our national plan. In a way, these are related but separate questions. The question of what we put into the environmental scheme in Pillar 1 is probably a question for phase two of the exercise. The second question is what we put into our plan and what it will look like. Obviously, we want to ensure the proposals do not confine us in a way that prevents us from doing things. We can have another discussion at some point on how we configure the new policy, but the question now is around what we do with this regulation. That is the position on the optional environmental scheme. It is for member states to determine.
Deputy Cahill asked about simplification. As I said at the previous meeting, this was easier said than done. This policy pays out €54 billion or €55 billion to 8 million farmers throughout Europe. It is a big beast and it is not easy to make it simple. There is always a tension between ensuring there is proper accountability and the money is well spent, on the one hand, and simplification, on the other hand. We have to have appropriate systems of accountability in place. What the Commission has done is perfectly reasonable. It has pushed some of the discretion back on member states. That does not obviate the need for member states to ensure that farmers do what they are paid to do. There is a need to manage expectation about what this will look like when it is done. I suppose I agree in the sense that we are not especially good at simplification, but it not easy either.
A question was asked about the crisis reserve. The reserve is an honourable endeavour to ensure that when there is a crisis, for example, a weather crisis, a fund is available at EU level that will help out farmers. The fund amounts to €400 million per year and is deducted from the direct payments envelope at the start of every year. From Ireland's perspective, it costs approximately €13 million. The idea is that if there is a crisis, however defined, during the year, the fund will represent a collective endeavour by European Union member states to give back to affected farmers. It has not been effective for multiple reasons. One is that it is difficult for member states in practice to consider that money attributable to their farmers is given to issues that do not affect them. That is a consequence of having a crisis reserve.
There are also sectoral issues. There could be a crisis in the dairy sector. A fund such as this requires solidarity from farmers in the beef and other sectors to give funding when needed. In practice, the €400 million reserve has not been used. The Commission has been looking at solutions to this because it thinks it a good idea to have a crisis reserve, although that is an arguable point. It proposes that the crisis reserve roll over from year to year and increase rather than the money being given back to member states. Some €400 million would not be not very much in the event of a dairy price crisis, for example. Two tranches of €500 million were found in the EU budget to deal with the most recent dairy crisis. The crisis reserve was not used. This is an effort to modify the existing rules such that the crisis reserve would roll over from year to year and get larger and be more effective. However, it would mean that the €13 million paid by Irish farmers into the crisis reserve would not be paid back on an annual basis. Rather, the unspent balance would be rolled on. Irish farmers might be the beneficiaries of such reserve on some occasions but not on others. That is the difficulty with a crisis reserve.
I was asked about the political background to the budget and I think I have deal with it. A group of member states have stated they are in favour of maintaining the budget.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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On the point regarding member states, Mr. Gleeson mentioned that Germany is sitting on the fence.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Is there a perception that Germany is sitting on the fence because it may hold the Presidency when this deal is done?
Mr. Brendan Gleeson:
I am reluctant to attribute motivation to member states but a more precise summary of the German position is that it is prepared to give more but believes it would be required to give an unfair proportion of additional funding. That is a more precise and, no doubt, inadequate explanation of its reasoning. I am unsure whether its Presidency is a factor but it is a significant net beneficiary and would have to give substantially more money to make this happen. Those are some of the considerations but I do not speak for the Germans.
Charlie McConalogue (Donegal, Fianna Fail)
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Mr. Gleeson earlier indicated that some countries have indicated they are willing to put an extra 0.1% of GNI into the budget rather than the 0.11% on which the Commission proposals are based.
Mr. Brendan Gleeson:
I stated that three member states do not wish to give more than 1%. I am unsure of the position regarding the preparedness of other member states to contribute and how much they would contribute. However, at least 18 member states - possibly 20, according to some journalists - have stated they wish the Common Agricultural Policy, CAP, to be kept at its current level and to restore the cuts. However, I am unclear what that means in terms of their willingness to contribute more because that could be achieved in a number of ways, such as less funding for other measures.
Charlie McConalogue (Donegal, Fianna Fail)
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To clarify, the Commission's proposals were based on a figure of 1.1%.
Charlie McConalogue (Donegal, Fianna Fail)
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Some 1.11%.
Charlie McConalogue (Donegal, Fianna Fail)
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Mr. Gleeson has stated that three states only wish to give 1%.
Charlie McConalogue (Donegal, Fianna Fail)
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If they do not change their position, the Commission's current proposal of a 4% cut in Pillar 1 and a 15% cut in Pillar 2 will have to be increased.
Charlie McConalogue (Donegal, Fianna Fail)
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Those three countries have not agreed to the current proposals of the Commission.
Charlie McConalogue (Donegal, Fianna Fail)
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It is not only that they are not agreeing to any further points.
Mr. Brendan Gleeson:
No country has agreed to any proposal. I should make that clear. However, I am not qualified to calculate the effect on CAP over seven years if member states were to reduce their gross national income, GNI, contributions. Deputy McConalogue's general proposition that three countries have not agreed to the proposal of the Commission as they think it too generous is correct.
On the young farmers scheme and how it will be funded, it is a 2% linear cut to direct payments. A separate provision in the rural development provisions, RDP, allows for some insulation aid. There is reference in the RDP regulations to a payment of up to €100,000. A minimum of 2% of the Pillar 1 budget is to be used for a kind of top-up for the direct payments but measures will also be available in the RDP for young farmers. The 2% cut will be linear across all farms.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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On young farmers, representatives of the European Court of Auditors appeared before the committee some months ago. They strenuously made the point that the top-up or the scheme for young farmers did not work in this CAP term and that something may have to be done at the other end. Generational renewal is a major issue across Europe, particularly in Ireland, as Mr. Gleeson is aware. Is some kind of incentive needed to encourage older farmers to exit the business along with measures to bring more young farmers into the system?
Mr. Brendan Gleeson:
In a way, the Chair is asking me a policy question but it is a relevant consideration. Some young farmers may wish to get into the sector. There are impediments such as the price of land and other considerations and some older farmers are reluctant to hand over their farms. A policy response may need to address more than one of those issues but I point out that there is one pot of money and it is not easy to make decisions on the distribution and effective use of that money. The Chair raised a legitimate question.
Jackie Cahill (Tipperary, Fianna Fail)
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The pot of money is diminishing.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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The more schemes there are, the less money for each.
Jackie Cahill (Tipperary, Fianna Fail)
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There is money for the main scheme.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes. I apologise for interrupting Mr. Gleeson.
Mr. Brendan Gleeson:
There is an emphasis on the new programme. We need a new farmers strategy as part of our national plan. Under the previous CAP, we exploited the potential in the regulations to the maximum when it came to helping young farmers but all present know there are multiple factors in young people's decisions on what profession to follow.
Aids to private storage, APS, and interventions have not changed. There was a change for 2018 in the way that skimmed milk powder, SMP, was to be purchased. In response to the very large quantities of SMP that were in stock, it may only be purchased by tender. The Commission has begun to get rid of that stock. Another 23,000 tonnes went this week. It is being well managed and wound down without any dramatic impact on price. There is no change in the new regulations.
Jackie Cahill (Tipperary, Fianna Fail)
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There was no effect on price. Skimmed milk powder is trading at €300 to €400 per tonne under the intervention price.
Mr. Brendan Gleeson:
It was trading at a low level at any rate. There is an imbalance between butter prices and skimmed milk powder prices. As Deputy Cahill is more aware than I, having over 300,000 tonnes of SMP in storage has a potential impact on the market. It is a weight on the market. At some stage, it must be wound down but that must be done carefully to ensure it does not imbalance the market. I agree with Deputy Cahill in that regard.
I have dealt with capping. We can cap at €60,000 but there is an issue in regard to the deduction of salaries and unpaid labour such that it is not practical.
Senator Mulherin raised the issue of the balance between food production and the environment. Critics of the Commissioner's proposals on CAP - who do not include me - point out that he went back to protect the Pillar 1 payments, which are the essential components in protecting farm incomes.
In terms of the balance of the budget, there is a 3.9% cut in direct payments and a 15% cut in rural development payments. We do not want any cut, but we were anxious to protect the direct payments because they are the basic pillar of farm incomes. Some member states, Austria for example, are up in arms about the cuts in rural development payments. They have a different balance of payments, about which they are more concerned. Under the new regulations, there is flexibility to move 15% of the budget in either direction. It would be possible to take 15% from the direct payments and move it to pillar 2 measures if one wanted to do so.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I would say it would be very popular.
Mr. Brendan Gleeson:
It would. It would be possible to take 15% from pillar 2 payments and move it to pillar 1 measures. However, in either event we would be bound by the overall requirement to have a proportion of the budget for environmental and climate change measures. I imagine that in the context of the overall argument on the MFF, it will be a critical part of any case made to maintain the CAP budget. I think that is inevitable.
On genuine farmers, when the Commissioner was here, he gave an absolute assurance that under no circumstances would part-time farmers and marginal land be excluded. Again, I am not allowed to talk about policy, but I take the Commissioner at his word. We had CAP consultation meetings around the country and the issue of genuine farmers came up a lot. Everyone was able to say who was not a genuine farmer, but nobody gave us a definition of a genuine farmer. In some instances, it centres on people who may be retired and renting out land - people who worked on the farm all of their lives and are now getting an income from the land. There are very emotive issues about the definition of what is a genuine farmer.
The difficulty with the definition is that it is full of legal uncertainty. I do not know what is a negligible proportion of somebody's economic activity. It also provides for things like income tests and asks someone to look at value. I do not know how one would do that. From the point of view of running a practical payments system, it would be immensely burdensome - I would think impossible - to check such things. It ended up with people coming up with a negative list and everyone knew who was not a genuine farmer, but it was not too easy to define who was a genuine farmer. I would not be too surprised if we were to end up in a similar position this time around.
Deputy Willie Penrose asked about redistribution. I think I have dealt with that issue. He also mentioned online applications. It has been an extraordinary success story and is the to credit of farmers who have applied online. It is also to the credit of the Department which has made an enormous effort to engage with officials. It has been a tremendous success. In time it will lead to a smoother system with fewer delays in payments.
The Deputy asked about risk management. The traditional definition of risk management is that it is a subsidy for insurance premiums to cover income or perhaps stock losses, or some contribution to a mutual fund farmers would set up. It is to manage risks such as losses in income, price losses and perhaps weather related events. The last time around it was available to member states. It would require us to take a pot of the pillar 2 money and decide to use it to help farmers to obtain insurance or set up some mutual funds to help farmers in the event that there was a crisis. We decided not to do that the last time around for a variety of reasons. However, this time around it is mandatory. The regulation specifically refers to insurance and mutual funds, but it does not confine it to them. As a general proposition, we are not enthusiastic about mandatory risk management, but that is not to say we would not be prepared to consider it. It is something we have to consider, given the vagaries of the weather and the things that happen from year to year. However, we really need to penetrate the detail to decide whether we will do it. I do not think we will be too enthusiastic about a mandatory risk management requirement in the regulation, even if we decide to do it afterwards.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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When we were in Paris, we found that the French were very much in favour of having an insurance-type scheme. Would this be a pot of money that would be taken away and might never come back? Insurance is something that one pays but from which one may never benefit. Would it be the same idea with a percentage being taken from the money for pillar 2 measures and being put away for an insurance-type scheme from which one might never gain an advantage?
Mr. Brendan Gleeson:
That is possible, but it depends on how it would be set up. I am not an expert on insurance, but some insurance policies pay out some dividend at the end, even if the catastrophe does not happen. The positives are that people need some cover in some circumstances. The negatives are that it might impose a significant administrative burden and that some of the money might leak to administration costs, the insurance company or whatever else. It is something that needs to be considered, but I am not sure if we want a regulation that will insist on us doing it.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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In the next round of questions we have Deputy Marcella Corcoran Kennedy, Deputy Martin Kenny, Senator Tim Lombard and Senator Paul Daly.
Marcella Corcoran Kennedy (Offaly, Fine Gael)
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I thank Mr. Gleeson and the other officials for the presentation. Mr. Gleeson talked about the difficulties in accessing the crisis reserve. How often have we been able to access it? If recollection serves me well, the answer is not too often. Would making it more accessible form part of the negotiations?
On the national plan, from what I can gather we have only 18 months and a significant amount of work is required in the SWAT analysis, the assessment of need, the intervention strategy, the evaluation, the strategic environmental analysis and all of the rest. How far along the process are we? It seems to be enormously detailed work. Will the consultation on 4 July form part of it?
Mr. Gleeson said the interventions would not be defined at the same level of detail and that there would be some room for discretion. How will we have that discretion and how will it apply practically on the ground?
We have all heard plenty from young farmers on the supports they consider are important to help them to get into farming. I note that Mr. Gleeson has said the Department is examining the condition carefully. Is that a loaded statement in terms of it being a positive or a negative?
My other question relates to the so-called genuine farmer. Please excuse my ignorance of legal terminology, but what is a pluriactive farmer? One would nearly need to have a degree to interpret it.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I am sorry that I missed the beginning of the presentation. I thank the delegates for being here.
Pillar 1 payments are based on reference years. At the end of this process it will be 26 or 27 years old. That does not mean anything to anyone at this stage because it is so much out of date. How is it envisaged that that problem will be overcome? Will there be some method by which it will be done?
On the notion of front-loading certain ranges of hectares for pillar 1 payments, while I understand it would be neither appropriate nor probably possible at this stage to set out payment rates here and now, about what ratio are we talking? For instance, would the figure be three, two or one on the remainder and would the farmer then would work out how many hectares he or she would have in each of the brackets in order to make it work? Is that the proposal?
From memory, I think the figure for pillar 1 payments comes to €1.4 billion. Is that right?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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It is €1.2 billion.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Does it include the greening aspect?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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If it were cut, would it be more appropriate or possible for the Government to top up pillar 1 payments directly instead of the State sending money to the European Union and only getting back 70% in the CAP budget?
The next issue I wish to raise was being discussed when I entered the room. Through the capping of payments, a scaling back to a figure between €60,000 and €100,000 is envisaged. Do I understand correctly that the scaling back only needs to be significant if we so choose under the proposals? Scaling back would still be something we needed to do, although, it is "shall" rather than "may" according to the communication.
The proposal sets out that, while actions would be taken by the farmer, particularly under pillar 2, the outcome, rather than the actions, would be measured. Deputy Marcella Corcoran Kennedy made a similar point. Do we have the details of how this would be done? The Commissioner used to say we did not want to be going around counting people's posts, how many metres of hedge they had planted and so on. If so, what are the practical means by which the outcome would be measured?
Tim Lombard (Fine Gael)
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As much has been said, I will not keep the delegates long.
According to Mr. Gleeson's presentation, the average payment was to be 60% and could increase to 75%. Realistically, will the actual payments decrease to a base payment per hectare? Will the Department propose that the payments be lower than 75%, given that the budget will be decreasing? Instead of increasing, the figure will probably stay at 75% or similar.
If there was an extension by, for example, two years owing to political instability in certain quarters, how would issues such as TAMS and grant aid projects be affected? Would they be grossly affected?
Paul Daly (Fianna Fail)
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I will be brief, as most of the topics have been covered. I thank Mr. Gleeson, in particular, for his comprehensive responses to the first round of questions. He covered a multitude.
I have a couple of simple questions. Deputy Jackie Cahill mentioned that the two buzz words since day one had been "simplification" and "subsidiarity". As the Deputy who has more experience of negotiating CAP deals than me stated, whereas simplification always used to be the key item on the table, it seems to have moved in the opposite direction. That also seems to be the case from our deliberations today. I do not know why the word keeps being used. We should give up on the idea of trying to make matters simpler, given that they are becoming more complicated.
I have some questions on subsidiarity. Mr. Gleeson stated each nation would have to make its proposals to the European Union by 1 January 2020 for its approval. Will that scrutiny become more complicated for countries in organising their CAP systems? How do we overcome the input of other nations with what the Department might decide to subsidise or support under the CAP? Under state aid rules, one country might believe the policy being adopted by the Irish will promote our mushroom growers and give them an unfair advantage because that country had decided to invest its money elsewhere. Will this process make reaching a solution more complicated?
As was mentioned, this is just a draft and negotiations are ongoing at official and ministerial levels. What input do we have into those negotiations? What is our angle of attack? What specifically are we looking to have changed in the draft recommendations? How much change will there be before the recommendations go to the Council of Ministers, the European Commission and the European Parliament?
Charlie McConalogue (Donegal, Fianna Fail)
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I have a couple of follow-up points. Regarding the objective under the Commission's proposal to redistribute some funding towards small and medium-sized farmers, will Mr. Gleeson flesh out the options and requirements? I am interested in hearing his perspective on the two ways in which funding under pillar 1 can be distributed - entitlement and average payment per hectare. What are the pros and cons of both?
Are changes proposed to area of natural constraints, ANC, scheme payments? How will the ongoing review at European level feed into this process and what percentage of Irish farmers in receipt of ANC payments are expected to remain on same as a result of the review?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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As happened at a different committee five years ago, the genuinely active farmer has been discussed a great deal today. One question that has arisen before and will do so again is that of the productive farmer versus the not-so-productive farmer. It is a broad discussion. If the productive farmer is not incentivised, our very ambitious 2025 targets might not be achieved. What is Mr. Gleeson's view on same?
Mr. Brendan Gleeson:
Deputy Marcella Corcoran Kennedy asked about member states' access to the crisis reserve. The difficulty is not with access but with member states not allowing it to be used. It has approximately €400 million, but whenever there has been a crisis, member states have called on the Commission to provide money from somewhere else because every member state wants to give the €400 million back to its own farmers the following year. To be frank, it has not been an effective mechanism because member states have not allowed it to be used.
The Deputy also asked about the national plan. It is a major job. We must have a detailed national plan with ex anteappraisals. We have done this before but only in respect of pillar 2. The last time, it took 18 months. We must then get our plan through the Commission. From our perspective and that of the Commission, we are concerned that, even if we were to start today - we have not - we might have a document prepared and ready within the timeframe but we would also have to get it through the Commission. Bear in mind that we would be preparing the document without the regulations. We might have a fair idea of what shape they would take, but we would be flying a little blind if we were to start today. The Commission would subsequently have to approve the documents.
There is significant simplification from the Commission's point of view, in that it wants one national plan for every member state. This was tried with rural development plans, but some federal member states constitutionally had to have a plan for each of their areas. For example, it means 16 plans from Germany and three from Belgium. The Commission had to approve more than 100 such plans. If it succeeds now, it will only have to approve 27, which should accelerate the process. Nevertheless, we are, according to the Commission, looking at a document that is "only" 300 pages long. Committee members can see that it is a large and detailed exercise.
A question was asked about the factors affecting young farmers and the difficulty every member state had in encouraging farmers. There are many elements, for example, the level of income in the sector and alternative professions.
We have to try to protect farm income. That is the number one incentive for young farmers to get into the sector. We also have to encourage education and training and we have to make farms more efficient. If young farmers are taking over economic enterprises, it will be more of an option for them. We have spoken about the genuine farmer.
On the reference years, this is something that is fairly significant in the public narrative. There is a valid point here. We decided on payments based on what happened 20 years ago. While I accept that is the case, we have moved away from that. We have been in a process of redistribution of money since 2014. By 2020 we will have moved €100 million from the highest-paid farmers to the lower-paid farmers. This regulation will continue with that process through the redistribution mechanism. There is an option in here however. We could go to a flat rate payment. It is a policy option. We could dispense with entitlements and say that every hectare of land gets the same flat rate. That is a possibility. There are pros and cons. I do not want to get into the policy debate too much but even the proposals in here will involve a significant amount of churn in funding. Money will be moving from many farmers to many other farmers. That is the reality. There will scarcely be a farmer unaffected by what is already proposed here. Moving to a flat rate would increase that churn effect. We have not modelled it. One of the things we will have to do with all of this is to come up with a few comprehensive models that show how these proposals will affect people, who will be affected, how many will be affected, what the cuts will be, and what sectors will be affected. We need to do all of that modelling.
The Chairman mentioned the idea of the productive farmer. I assume the point he was getting at is the need to encourage efficient and productive farms. That argument can also be brought to bear when it comes to reducing direct payments. There will be those who would say that a flat rate payment gives the same reward to farmers no matter how productive they are. If one looks at the profiles of farms at the moment and at where production is happening, it is still happening in the same places it was happening 20 years ago. That is the reality. I am not making an argument for or against any of these things. I am simply saying that there are options in the regulations. They are difficult because they involve moving money around. There could also be broader policy perspectives to be brought to bear such as the question of how to encourage the more productive farmers. I am not making a policy statement at all. I am just saying that option is there. Deputy McConalogue asked about getting away from entitlements and so on. That can be done under this regulation.
Charlie McConalogue (Donegal, Fianna Fail)
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The system is based on entitlements at the moment. Were it to move to a flat rate payment per hectare under the Commission's proposal, what would be the options for assessing that flat rate payment? There are a couple of options related to agronomics in terms of land type in the proposal. Could Mr. Gleeson flesh out the range of options?
Mr. Brendan Gleeson:
Yes. I hope the Deputy will forgive me if I am not absolutely familiar with that provision, but there could be differences by region based on agronomics, as the Deputy has mentioned. That could be done but Ireland is a small member state and has always been regarded as a single region for the purposes of direct payments and most of these schemes. Certainly we have identified areas of natural constraint and that sort of thing. There could be a differentiation based on regional differences but it would make what is a simple system for farmers and administrators like me pretty complicated. It would be a really dramatic step but it is possible to do it under the new regulations.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Would the front-loading assist that? Would it put a sense of balance back into it?
Mr. Brendan Gleeson:
There is no detail in the proposals as to how the front-loading is required to be done or how much money should be put into it. I am not sure if it is one of those articles on which there will be further secondary legislation to define how it will be done, but it would allow hectares on a farm to be picked without them necessarily being the first ones. For example, one could choose a higher level of payment for between ten and 30 ha or for between one and 20 ha. Everybody, including bigger farmers, would get that front-loaded payment but it would obviously shift the balance towards smaller farmers. I would see that operating as part of the overall convergence. In other words, the objective here is to get everybody to 75% of the average per hectare payment by 2026. That is the objective outlined here. The front-loaded payment, which is a mandatory requirement, would contribute to that overall convergence. That is the idea.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Would that also create more bureaucracy?
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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It is very complex as it stands. Every different farmer has a different rate per hectare. At least there would be a set amount per hectare.
Mr. Brendan Gleeson:
Again from an administrative point of view, a flat rate per hectare would be simple. We have a system that works pretty well at the moment but a flat rate would certainly be a simplification. I am not sure it would be a simplification that everybody would embrace with open arms.
Tim Lombard (Fine Gael)
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I get the impression that Mr. Gleeson thinks this system is very good.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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On that general point, from Mr. Gleeson's point of view, would substantial change mean reinventing the wheel as regards payment structures and IT? Would it mean basically starting all over again?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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There are always teething problems as well.
Mr. Brendan Gleeson:
There are teething problems. There are sometimes even problems after teething. I was asked about the budget and how things such as TAMS will be affected if we do not have a multi-annual financial framework, MFF. There will be a budget. Even if there is not agreement on an MFF there will be an annual budget. On any commitments made for TAMS in the current MFF, there is a rule called "n+3". This means that if a commitment is made in 2019 it can be paid up until the end of 2022. Contracts and grant approvals would be honoured. There would be a budget even if we did not have an MFF, but it would be a budget rolled over, minus the UK contribution. I am not sure what that would look like. I am not sure it has ever happened before. I think it would be new territory. It would certainly be new territory for me, but it might also be new territory for the European Union. There would be a budget, however, as there would be here in the event of a constitutional crisis or something. There would be a budget the following year but it would be limited in some way.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Deputy Martin Kenny asked whether topping up at a local level is possible. Can a scheme be topped up at local level? Was that the point the Deputy was making?
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Yes.
Mr. Brendan Gleeson:
The Deputy also mentioned Pillar 1. The Deputy's basic proposition was that we might be putting more into the overall budget than we would be getting back. That is not true because we are a significant net beneficiary of the Common Agricultural Policy. When we put €1 into it, at the moment we get something like €1.70 back. That will diminish over time. It is not going to be possible to top up Pillar 1 but it will be possible to decide on a national contribution to Pillar 2 based on the domestic budgetary situation. There will be limits to that but there is a flexibility in the amount that can be put into Pillar 2. Co-funding for Pillar 1 has been ruled out by everybody however. At the moment everybody gets paid Pillar 1 payments on the same basis. There is a slight concern that the Single Market might be subverted a little bit if wealthy members states could top up the payments when other member states could not.
Mr. Brendan Gleeson:
The areas of natural constraint, ANC, review is under way and based on biophysical criteria. The experts are speaking with the joint research centre in the Commission and this must be done by the end of the year. It is critical that farmers know where they stand before making their applications next year. The applications next year will be made some time in the middle of February and we must have a position before then. I was asked about the final result but even if I knew it, I would prefer not to comment. I do not know and the exercise is under way. We must wait and see what it produces. It is something we are required to do and it is based on objective criteria. The Chairman asked about productive farmers and we have had a bit of a chat about that.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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The witness mentioned how the plan is to bring everybody to 75% of the average payment.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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How far off that 75% figure are we?
Mr. Brendan Gleeson:
By 2020, everybody will be on at least 60%. The convergence process through this multi-annual financial framework has been to bring everybody to at least 60% of the average payment. The next time around, everybody will be brought to at least 75% of the average payment. That will require some people to pay and some people will be beneficiaries of that redistribution.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I imagine that with that calculation, the capping mechanism will come into play. The average is based on what everybody gets and if a small number gets a very high payment, that average is skewed. If payments are reduced, the average would be reduced. That would mean people's payments would not have to be increased by much. That is a twist.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Will anybody see increased payments?
Mr. Brendan Gleeson:
If we capped at €60,000, which is an option, although we have much modelling work to do, our estimate is we would save approximately €12.5 million. There are only approximately 600 farmers involved. I do not know what impact it would have on the overall average but I would not say it has much impact. It will not skew the distribution in a major way. It would not be enough to pay for the kind of redistribution proposed here that would require front-loading and other movements of entitlements as well. These are calculations we must do and we must do much of it to consider the impact.
Charlie McConalogue (Donegal, Fianna Fail)
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On that matter, in what years was money being taken off those above the average? Was it front-loaded in the first three or four years? Are those being brought to the average having it done in a gradual way to the same amount each year? What way is it working?
Charlie McConalogue (Donegal, Fianna Fail)
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What is happening on the upper side? Is there a maximum amount that one can be over the average?
Charlie McConalogue (Donegal, Fianna Fail)
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There is no maximum in terms of the value of an entitlement.
Mr. Brendan Gleeson:
There is but it is quite high. It is €700 per hectare. We have a small number of farmings, some on very small holdings. When we consider redistribution like this, the outcome is not always what we think it might be. Sometimes it affects small farmers and sometimes it is bigger farmers. Sometimes it affects neighbours in the same region. There is a perception that this will involve a flow of money in one direction but when the modelling is done, there are all kinds of complex effects. That is why it is so important to do it and understand the impact. We will have much work to do on that.
Charlie McConalogue (Donegal, Fianna Fail)
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People will be brought to the 60% of average payment in five equal steps. Is the money being taken off those on the other end in five equal steps as well?
Charlie McConalogue (Donegal, Fianna Fail)
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If there was a movement to a per hectare entitlement payment, is there a particular sector that, on balance, has a much higher entitlement than others? The witness mentioned some would get €700 per hectare. They would see the most impact from a move to a flat rate payment.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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As Mr. Gleeson knows, the committee has made a number of submissions and contributions already. We were in the process of putting together another one. When should we submit another contribution in view of where we are in order to be helpful to the process?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes. That will be next week.
Mr. Brendan Gleeson:
People will be invited to that event next week and will be allowed to speak. There will be two people from the Commission who will go through the regulations in detail and we will then break the meeting into a number of discussion groups. We will have a rapporteur for the meeting and the discussion from various stakeholders. There will not be any effort to spew conclusions or anything like that but rather reporting what people had to say about these regulations. Negotiation is ongoing and if it is to happen in the ambitious timeframe proposed by the Commission, we will all have to move pretty fast. With the committee's contribution, it would be the sooner, the better. There are two separate matters. The first is how we look at this regulation and making sure it allows us to do the kinds of things we want. The second question is what we want to do. It is a more in-depth policy discussion for some time in the near future. It is kind of a separate exercise.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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We should bear in mind that this is a proposal. If we compare this with the process five years ago, it probably changed much before getting to where it finished.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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The ongoing problem with the previous gap involved forgotten farmers, old and young farmers and the different small sectors. We all know there must be rules and these groups found themselves on the wrong side of the rules somehow or other. On balance, will this resolve much of that?
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Deputy Kenny is referring to farmers who would have been set up even before the previous negotiation.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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There is "young" and "new".
Pat Deering (Carlow-Kilkenny, Fine Gael)
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They are at it ten years at this stage.
Martin Kenny (Sligo-Leitrim, Sinn Fein)
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The same problem could arise again.
Mr. Brendan Gleeson:
Whenever a rule is defined, people will be included or excluded. From a public policy perspective, it is designed to promote change and make something happen. I am not making any policy pronouncement. People might feel hard done by but a payment might not change anything. These are the elements to be considered when we come up with a definition. If something is done for young farmers, older farmers will be excluded. There will always be people excluded from any scheme. That is without prejudice to the sincere concerns of people affected by such issues.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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Are there any other questions?
Charlie McConalogue (Donegal, Fianna Fail)
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Deputy Martin Kenny referred to the old young farmers who have farmed for more than five years and are excluded. Is there potential for their inclusion or is it exactly as Mr. Gleeson has outlined?
Charlie McConalogue (Donegal, Fianna Fail)
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Does the current regulation state "newly established for the first time"?
Charlie McConalogue (Donegal, Fianna Fail)
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Many of these farmers will continue to farm as they are relatively young.
Charlie McConalogue (Donegal, Fianna Fail)
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This section of farmers have been hard done by. It is important that flexibility is shown and something is done for them.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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As there are no further questions I thank Mr. Gleeson and his officials for coming here at short notice. I thank him for giving us a very detailed insight into how things stand at present. I am sure that we will have many discussions on CAP-----
Pat Deering (Carlow-Kilkenny, Fine Gael)
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-----before we reach our final conclusions. I remind Members about a conference that is scheduled to take place next Wednesday morning.
Pat Deering (Carlow-Kilkenny, Fine Gael)
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A conference on the consultation process will be held at The Keadeen Hotel, Newbridge, County Kildare. I am sure everyone is looking forward to the event.