John Browne (Wexford, Fianna Fail)

This was in recognition of the reality that farmers may have to make capital investments and spend money throughout their contracts to bring their farms up to REPS standards. It is a system which proved attractive to farmers and worked well.

REPS 4 operates under different EU regulations from previous versions of the scheme. If applied to the letter, these would mean a departure from the existing practice of paying the farmer at the start of each contract year. My officials explained this situation to the farming organisations and, with their encouragement, looked for the Commission's agreement to continue the existing system.

It was at this point, early in January, that the Commission - out of the blue - suggested we had been wrong all along to pay at the start of the REPS contract year. We were astounded by this, because the Commission had been fully aware of the way we operated. It had been commented on during successive visits by auditors from the Commission and the Court of Auditors. Never before had anyone suggested that we should not be doing this.

At that stage in January, we had already paid more than €6 million to farmers in REPS. Once we knew the Commission was taking this line, we had to put further payments on hold while we set about trying to persuade it to take a different view. This decision was taken extremely reluctantly and there is no question of the Department taking a decision unilaterally. We were aware it would come as bad news to farmers who were expecting their payments. However, when schemes are operated in ways not in line with EU regulations the Commission can, and does, impose disallowances. Ultimately, the taxpayer has to foot the bill. This was a risk we could not take.

Department officials have met the Commission twice in recent weeks about this situation. They argued strongly that the practice of paying at the start of the contract year is well established and one of which the Commission is well aware. When Commissioner Fischer Boel was in Dublin two weeks ago to attend the annual general meeting of the IFA, the Minister for Agriculture, Fisheries and Food, Deputy Coughlan, took the opportunity to make the same points strongly and directly to her. The Minister emphasised the seriousness with which she regards the situation. The Minister and her officials continue to press for a quick and pragmatic resolution to the issue and high-level contacts continue on a daily basis.

We do not welcome this situation. We are making it clear to the Commissioner and her officials that there is a real risk of damaging farmers' confidence in what we can describe without contradiction as the most successful agri-environmental measure in all of Europe. I appreciate that farmers are suffering by being caught up in this uncertainty but I can assure all concerned that the Minister and her officials are pressing the Commission for a quick resolution so that prompt payments can continue to be made as before.

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