Simon Coveney (Cork South Central, Fine Gael)

Since their publication, the proposals by the European Commission for reform of the Common Agricultural Policy have undergone detailed examination at Council working groups, the Special Committee on Agriculture and the Council of Agriculture Ministers. At next Monday's Agriculture Council, the Danish Presidency will present a progress report outlining the current status of the negotiations. Negotiations on the new multi-annual financial framework, MFF, for the EU budget for the period 2014 to 2020 are being progressed in parallel, primarily through the General Affairs Council, although the final decision will be taken by the European Council. Many of the CAP issues, including the key issue of distribution of funds between member states, are being discussed in the MFF negotiations and will ultimately be agreed as part of these negotiations. These proposals are also being discussed in the European Parliament and next week will see the release of draft reports from EP rapporteurs on each of the Commission's proposals.

My key concerns about the reform proposals arise in four areas. These are the overall CAP funding, the method for distributing CAP funds between member states, the method for distributing direct payment funds within member states and the overarching need for simplification in the reformed CAP.

On the budget, the funding proposals in the MFF maintains CAP spending at current levels in nominal terms post-2013. The agriculture heading is the one showing the greatest restraint, and in my view the amount proposed by the Commission is the minimum required. However, there are continuing and intense pressures for reductions in the proposed overall EU budget, with obvious implications for proposed CAP allocations. The Government will continue to resist any pressure for reductions in the CAP budget.

As to the allocation of CAP funds between member states, the current Commission proposals for direct payments in Pillar 1 take a pragmatic approach to redistribution and are broadly satisfactory albeit with some loss to Ireland, estimated at approximately 1.4%. The Commission has yet to table a specific proposal for allocation of Pillar 2 funds for rural development. I have concerns that the basis on which they propose to do so could reduce our allocation. However, I am vigorously defending our Pillar 2 funds, and will continue to do.

As to the distribution of direct payments within member states, the Commission proposal is to gradually move towards a system of uniform per hectare payments, or flat rates, by 2019, in each member state or region of a member state. As the Deputy knows, we have a difficulty with this because we would see a significant transfer of money from the more historically productive farming sector, which is likely to continue to be productive, to the less productive sector. We recognise there needs to be a redistribution of single farm payment but we need to put limits on it to ensure we can continue to maintain, grow and expand Ireland's agrifood sector while at the same time moving away from the historical basis for payment based on 2002 and 2003 productivity levels. The Deputy will see more information in the rest of this reply.

Additional information not given on the floor of the House.

Many member states already have such flat rates or are evolving towards them. I recognise that we cannot continue to base our payments on outdated historic production references. Nevertheless, I have major difficulties with the pace and extent of convergence in the Commission's proposal.

Under a national flat rate, although the overall allocation to Ireland would not change, around 76,000 Irish farmers would gain an average of 86% on their current payments, while around 57,000 would lose an average of 33%. These are average percentages, and some of the gains and losses would be far larger than this. For example, in the extreme case of those on very high payments of over €1,000 per hectare, the loss would be well over 70%. In general the losses would be incurred by more productive farmers. This would have undesirable consequences at a time when Ireland is trying to encourage sustainable intensification in the agrifood sector, as we strive to achieve the objectives in the Food Harvest 2020 strategy.

I have accordingly been pressing for the maximum possible flexibility to be given to member states to design payment models that suit their own farming conditions. I also want a more gradual, back-loaded transition process. The approximation approach, by which all payments could gradually move towards, but not fully to, the average is one alternative that I believe should be considered in this regard. The Commission's pragmatic proposal for redistribution between member states is, in effect, an approximation approach and provides a useful precedent. Modelling in my Department suggests that the application of this system to the distribution of funds between farmers in Ireland would lead to much smaller gains and losses to individual farmers than a flat rate system. However, the precise level of transfers depends on the details of the methodology used.

I have been very active in seeking allies for this position, and I have been making significant progress, particularly with a group of member states with somewhat similar concerns. However, it should also be understood that a majority of member states have no difficulty with the idea of flat rate payments, although they have concerns about other aspects of the proposals.

The negotiation process on CAP is complex and difficult, but all of my efforts are focused on achieving the best possible outcome for Ireland. These efforts will be continued over the coming months as the process evolves, and will further intensify during our Presidency in 2013.

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