Simon Coveney (Cork South Central, Fine Gael)

Despite the need to reduce expenditure in my Department, as in others, due to the serious difficulties in the public finances, Monday's expenditure announcement for my Department and yesterday's budget were a strong statement of the Government's support for the agri-food sector. The budget recognises the contribution the sector can make to economic recovery and future growth in the Irish economy. From the outset of the budget negotiations, my priorities have been to protect farm incomes by targeting existing resources at active farmers, especially those in vulnerable sectors; to support productivity and the up-skilling of farmers and the food sector generally; to ensure the development of the agri-food sector incorporating investment in research and development, food safety, animal welfare and enterprise development in line with the Food Harvest 2020 plan; and reform and continued drive for efficiency and better service delivery within the Department and associated agencies linked to it.

The budget sends out a positive message about the agri-food sector. I hope farmers, their families and the farm organisations will see it as an indication that the Government has confidence in the ability of the sector to do much more in terms of generating growth and employment.

The taxation measures announced in budget 2012 reflect the Government's commitment to the agri-food industry and in particular to the expansion planned in the Food Harvest 2020 strategy. The measures announced have been designed specifically to encourage farming as a career for young people, to incentivise farm partnerships and greater productivity at farm level, to stimulate land sales and land transfers, to facilitate new enterprise opportunities in farming and to help agri-food businesses innovate and export.

The main measures in the budget which will benefit the agri-food sector are as follows. First, it will incentive farm partnerships. One of the most significant new measures introduced in the budget is the new stock relief incentive to encourage farm partnerships. For registered farm partnerships, the current rate of 25% stock relief will increase to 50%, and for certain young trained farmers entering such partnerships, a rate of 100% stock relief will be available. This new incentive will run until December 2015.

I am supporting farm partnerships because I believe collaboration through partnership can improve farm structures generally, facilitating farms to operate more efficiently, increasing scale on farms and bringing more innovative and energetic young prospective farmers into farming. More farming partnerships are required to increase productivity and to meet the Food Harvest 2020 targets. I am confident that providing an additional incentive to farm partnership formation will encourage farmers to consider more closely the benefits of farm partnerships to their farming business and in providing a better work-life balance.

Second, I am particularly pleased that the budget reduces the stamp duty rate on agricultural land from 6% to 2%, with immediate effect. Half the rate, or 1%, will be applicable on transfers to close relatives until the end of 2014. This change will substantially reduce the stamp duty payable on transfers of farm land by gift or by sale. It should stimulate a stagnant land market. Currently only 0.5% of total agricultural land is offered for sale annually and land prices are far too high. It will also promote intergenerational transfer, as the cost of lifetime transfer to transferees who do not qualify for the young trained farmer stamp duty relief has reduced considerably. I am confident this measure will give younger, progressive, commercial farmers a greater opportunity to purchase land and thereby increase their farm size, which will make the farm more competitive.

Third, the budget has restructured the retirement relief available on capital gains tax to incentivise the earlier transfer of farm assets to the next generation and to encourage the sale of land by those farmers with no successors. As of 1 January 2014, for those farmers aged 66 and over, an upper limit of €3 million will be introduced on family transfers, compared to an unlimited amount currently. On non-family transfers, the current upper limit of €750,000 will be reduced to €500,000. Applying the new limits from 1 January 2014 allows farmers already aged 66 and over to plan for an orderly transfer of assets in advance of that date.

It is important to note that these new measures do not mean a farmer has to cease farming altogether beyond the age of 66, but it allows him or her to plan for a phased gradual transfer of assets to the next generation. We are restructuring retirement relief to encourage farmers at the normal retirement age who have successors to transfer their land and holdings to young, ambitious prospective farmers. This restructuring will also encourage farmers with no successors to sell some of their land, if they choose to do so. This measure will encourage an improvement in the age profile of farmers and should ensure farmland is put to more productive use.

There has been some criticism of the increase in the rates of capital gains tax and capital acquisitions tax from 25% to 30% and the reduction in the capital acquisitions tax-free threshold for group A from €332,084 to €250,000. These changes are necessary in view of the economic situation facing the country. However, it should be noted that there has been no change to the very important 90% agricultural relief on capital acquisitions tax, CAT. This means that farms worth up to €2.5 million will continue to be fully exempt from CAT with regard to transfers to a son or daughter or to a "favourite nephew or niece".

There are other significant tax changes that will benefit the agri-food industry. The budget includes additional supports which will benefit the food industry including improvements to the research and development tax credit and a foreign earnings deduction to apply when an individual spends 60 days per year developing markets for Ireland in the BRIC countries, Brazil, Russia, India and China, and South Africa. That is a particular benefit to the agri-food sector. Second, the VAT rate applied to open farms, such as pet farms, will be 9% rather than the new standard rate of 23%, with the obvious benefits that come from that. Third, the exemption rate for the universal social charge has been raised from €4,004 to €10,036. This will be of particular benefit to low-paid seasonal workers in the farming sector.

Consistent with the commitment in the programme for Government on carbon tax, farmers will be allowed a double income tax deduction in respect of the increased costs arising from the change in carbon tax announced yesterday. Finally, an amendment to the VAT refund order for farm construction will allow farmers to claim a refund on wind turbines purchased from 1 January 2012. This will encourage farmers to invest not only in agriculture but also in sustainable energy projects on their farms.

Total funding of €1,312 million is being provided in the Department's Vote in 2012. On the capital side, the 2012 capital allocation represents an increase of €18 million on the national recovery plan, NRP, expenditure ceiling and this will be boosted by a further €27 million by way of carry-over of savings from 2011 to provide total capital funding next year of €195 million. This is a very substantial increase on the original NRP allocation of €150 million, to which the last Government committed, and will allow a very worthwhile capital programme to be implemented next year. The funding announced in the 2012 Estimates does not include the €1.3 billion in payments under EU funded schemes which are administered by the Department, and it is important not to forget that when calculating the amount of money going into farming.

With regard to Food Harvest 2020 related measures from an expenditure point of view, I am pleased to announce a range of measures which will support that strategy and its objectives. The suckler cow welfare scheme will continue to be fully funded from national funds. In particular, despite the financial constraints, I will continue to provide the necessary funds to meet all payments in 2012, as I said I would. I am anxious to prioritise the suckler beef herd for future growth and development. In that regard I have allocated €5 million towards the establishment of a beef technology adoption programme which will build on the work done to date under the better farm programme. The roll-out of the beef discussion groups will give beef farmers access to a range of additional skills to increase productivity. This programme was a key recommendation of the beef 2020 activation group and will be modelled on the dairy discussion groups which worked so well.

I am re-opening the targeted agricultural modernisation schemes, TAMS, which had been suspended earlier in the year because of the uncertain budgetary situation. I am providing funding in 2012 to enable all of the schemes to re-open - poultry and pig welfare, dairy equipment, sheep handling and rainwater harvesting schemes, as well as the bio-energy scheme. In addition to providing an incentive for farmers to invest in their enterprises and secure their futures, these schemes will make a worthwhile contribution to job creation and to the maintenance of existing jobs in rural areas.

In forestry, I am anxious to deliver on the Government's commitment to afforestation and to support a sector which contributes to job creation and the maintenance of jobs in rural areas and which has a vital climate change role. Overall expenditure for forestry will be higher than the published figures and will amount to €111.76 million when the published Estimates of €84.86 million are boosted by a further €27 million by way of carry-over of savings from 2011. The premiums and the afforestation planting grants are maintained and we will plant 6,500 hectares of trees next year. That is a good news story and a strong injection of confidence into the sector.

With regard to seafood, I am increasing funding to BIM next year as it is involved in crucial work at present to develop the seafood sector and add value to seafood product when it is caught and farmed. I am confident it will be able to do that. There is a reduction in the capital available for fisheries harbours next year, but it still amounts to €6 million, which is a significant amount.

As regards the proposal of a milk levy to allow Bord Bia to actively market and develop new markets for the increasing volume of milk we will have after 2015, I will consult with the industry to develop that in a way everybody will find acceptable. On animal health initiatives, we will financially support the BVD eradication programme. This is being worked on with the farming organisations.

We have had to make savings in the disadvantaged areas schemes but no active farmer in disadvantaged areas will lose payments. We have changed the qualification criteria for the payment and increased the stocking rate requirement, but the new stocking rate is still only two sheep per hectare. That is less than one sheep per acre. If one does not have a higher stocking rate than that, it is difficult to make the case that one is farming in a significant way. If one is required to have lower stocking rates because of a commonage framework plan, for example, one is exempt from any changes in one's payments. We have consulted closely with farm organisations to try to get the disadvantaged areas payment eligibility criteria right.

With regard to the rural environment protection scheme 4, REPS 4, I acknowledge there is a straight cut. We had to make some savings and I believed the REPS 4 payment could take some level of cut because it is a very strong and generous scheme. I would prefer if it had not been necessary to do it, but if one must choose to save money in an area, REPS is a reasonable place to start.

I am confident the positivity and growth potential of the agri-food sector that we have seen this year and last year will continue into next year. I do not believe I have ever heard a Minister for Finance mention agriculture and farming as often in a Budget Statement as I did yesterday. That is a strong signal of intent, and we heard it again from the Taoiseach today. Agriculture and the agri-food sector are very much part of the Government's economic policy to generate growth, job creation and wealth creation in this country again. I look forward to leading that growth in the future.

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