Séamus Kirk (Louth, Fianna Fail)

I am grateful for the opportunity to make a few observations in this important debate. Food exports from Ireland grew last year by 11% and were valued at approximately €8 billion. The Government's target is grow this figure to €12 billion by 2020 under the Food Harvest 2020 report goals. At this point it would be appropriate to pay tribute to the former Minister responsible for agriculture, former Deputy Brendan Smith from Cavan, who was primarily responsible for the introduction of this projected growth potential for the Irish agricultural policy.

When the Common Agricultural Policy was developed, there were six main aims and objectives to be achieved. It looked to increase productivity by promoting technical progress and ensuring optimum use of the factors of production, including labour. It sought to ensure a fair standard of living for the agricultural community, stabilise markets and secure availability of supplies for the consumer community, providing consumers with food at reasonable prices. The aim of the Common Agricultural Policy is to provide farmers with a reasonable standard of living and consumers with good quality food at fair prices while preserving rural heritage.

Ireland has benefited enormously from the Common Agricultural Policy, with the agricultural food sector in Ireland contributing a value of €24 billion to the national economy, generating €6.3 billion in gross value added and over 7.4% of national employment. Agriculture provides 60% of employment within the agrifood sector. CAP reform is an essential part of sustaining that arrangement.

In 2004, Ireland received a net income of €1.4 billion from the EU and in 2010 this declined to €500 million. CAP reform forms the bulk of income received by Ireland from the EU budget. Direct payments for farming in 2009 averaged €17,109, accounting for 36% of gross output and 143% of family farm income. Those statistics alone illustrate the importance for agriculture in Ireland of underpinning the Common Agricultural Policy. Ireland's pillar 1 and pillar 2 payments per hectare are below the EU average. Ireland receives 2.9% of the single payment fund funds in the CAP pillar 1 budget and it receives 2.6% of rural development scheme funds under the CAP pillar 2 budget.

The first CAP reform in 1992, known as the MacSharry reform, coupled with the inclusion of agriculture for the first time in the General Agreement on Tariffs and Trade, GATT, forced a major change in traditional European farm support systems. The decoupling of production and European support and the introduction of environmental measures marked the first fundamental reform of the CAP system. In November 1997 the "European Model of Agriculture" was introduced that significantly broadened the concept of a farmer's role to include maintaining the landscape, bio-diversity and so forth. The vision in this model underpins the CAP. The Agenda 2000 agreement further advanced the decoupling of production and income support. The Luxembourg agreement of 2003 essentially dismantled the linkage between direct payments and production. This was known as the Fischler reform. The single farm payment on a historical basis is adopted by Ireland.

With regard to the CAP after 2013, the EU budget is under significant constraints with growing political demands for spending in other areas such as research and development. With the accession of the new member states there are an additional 7 million farmers in the EU. The CAP after 2013 will reflect these new demands and changes. The future reforms are aimed at addressing the three major challenges of food security, environmental impact and territorial balance between rural and urban areas. The current spike in food prices globally, caused by rising demand for meat in growing economies such as China and India as well as the impact of bio-fuel production, has generated uncertainty about food security for the future. The global fears about food security form the backdrop to the current proposals for CAP reform.

The Commissioner for Agriculture launched the CAP post-2013 reform with a communication on possible future CAP models in November 2010. The "CAP towards 2020"communication was formed in the context of the broader Europe 2020 strategy that guides the future of EU economic and social development. The future reforms are aimed at addressing the three major challenges of food security, environmental impact and territorial balance between rural and urban areas.

Under these proposals the Commission appears to be committed to dismantling previous entitlements and starting afresh with a new basis payment. What type of disruptive impact will this have on Irish agriculture and farmers, following the 2005 confusion over entitlements? At least 50%, after greening and all the other deductions, is paid on a per hectare basis, based on the land submitted in the first year of the scheme as the Commission shifts away from 2002 entitlements. There are deadlines of 2019 for countries and regions to move from historical towards regional area payments "in linear reduction steps", as it is termed, and the end of 2028 for payments to move to a single flat rate across the EU. The proposals seem to imply limited flexibility on a flat rate payment across the regions. What implications has that for the underpinning of the Irish agriculture industry?

The proposals include a 100% cap on payments from a threshold of €300,000, with a claw-back of between 20% and 70% on a sliding scale for payments between €150,000 and €300,000. Direct aid will only be paid out to recipients who obtain at least 5% of their income from agricultural activity. Is this a sufficient definition of an active farmer? Given the evolutionary changes that have taken place in the industry it is vital that the definition of an active farmer in the final agreement is clearly laid down to ensure there are no grounds for misinterpretation.

It is proposed that member states set aside up to 10% of their ceilings for financing a lump sum scheme for small farmers, involving reduced environmental requirements. Payment is proposed to range from €500 to €1,000. Young farmers should benefit from an installation aid fund limited to their first five years and funded by up to 2% of a member state's ceiling. In the last few months there was a virtual scramble for places in agricultural colleges. We clearly made a mistake when we closed a number of the colleges, particularly the college in Warrenstown in the Minister of State's constituency. Its availability at this time would be of huge benefit to young farmers not only in the north east but further afield. There could be specialisation in these colleges, be it in Ballyhaise or Warrenstown, but we no longer have that choice. We must work within the constraints of the inadequacy in the number of places and the availability of lecturers and tutors in these colleges. I am sure the Department of Agriculture, Fisheries and Food is examining this issue as it is vital for the future of the industry.

The age profile of the primary producers in this industry has gone the wrong way; it is the wrong side of the age scale. We need a regeneration process, with young farmers coming into the industry, if we are to avail of the clear potential that exists to develop agri-food exports from this country. Agri-food exports is the ultimate means for national wealth creation, particularly in the case of dairy products. In the dairy sector individual farms can produce milk but not to unlimited levels. We are currently in an unsatisfactory position where the milk quota system is due to be phased out by 2015, but there is no transitional arrangement in place.

We have the ludicrous situation where many farmers, including in Louth and Meath, will be adversely affected next March while north of the Border farmers will be well under the allowable production thresholds under the quota regime in the UK and Northern Ireland. A strong and compelling argument can be made for a bilateral arrangement between this country and the UK to ensure that progressive, hard working, committed and indebted young farmers in this State are not lumbered with a severe super levy bill at the end of March next year. The Minister is from an agricultural background and has a personal understanding of the issues involved. I believe he would agree with the sentiments I am expressing. The need to address the quota system is the biggest single challenge facing the agriculture industry at this time. We need a transitional arrangement between now and 2015.

In the context of the wider issue of EU support to get this country out of its difficult economic circumstances, there is one sincere and genuine way in which it could help us, and it will not cost the EU. The quota is available and the EU could allocate it to farmers in the Republic of Ireland so they could produce milk to a much higher threshold and ensure that our export statistics will be even greater next year and into the future.

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