Seán Sherlock (Cork East, Labour)
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Question 65: To ask the Minister for Agriculture, Fisheries and Food his views on whether he has secured a good deal for Irish farmers under the CAP; the benefits to the farming sector here from the deal; and if he will make a statement on the matter. [44091/08]

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I am satisfied that I have secured a very good deal for Irish farmers in the recent health check negotiations. The deal is worth €70 million in additional payments to farmers over the coming years. In addition, the increase in milk quota will deliver €100 million worth of additional milk production in 2014. This is enormously positive for the sector and, although there are elements in the package I do not like, such as increased modulation, I am satisfied that this will not lead to any loss to Irish farmers.

The main aspects of the deal that are of interest to Ireland are that milk quotas will be increased by 1% per annum for each of the next five years and, in addition, an adjustment in the butterfat reference will mean the equivalent of an extra 2% in milk quota for Ireland next year. Two reviews of the market situation are planned, by December 2010 and by December 2012.

Due to our additional production potential, Ireland will benefit greatly from these changes. If the 2% quota increase already in place for 2008 is included, an additional 500 million litres of milk will be produced in Ireland when these changes come into effect. This was an outstanding achievement, given the alignment of forces on the Council of Ministers. I am particularly pleased that our farmers and processors now have policy clarity and can plan their investments with a greater degree of certainty about the future.

With regard to market support schemes, the system of intervention for butter and skimmed milk powder is to remain unchanged and the private storage aid mechanism for butter remains in place. A determined effort was made to introduce tendering for every tonne of butter and skimmed milk powder intervened. This would have been particularly difficult for Ireland given our seasonal pattern of production and therefore it was very important to secure the continuation of intervention buying-in for the first 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder at the fixed price. This was equally true for butter private storage aid where current arrangements were maintained, despite efforts to introduce tendering. In essence, the key market management mechanisms that are most important to Ireland have been left completely unchanged.

I was successful also in obtaining the option of using funds from the national reserve together with unused moneys from the single payment funds allocated annually to Ireland to target at specific vulnerable sectors. A sum of €7 million is available annually in the national reserve and I secured agreement to use these funds with effect from 2009. Under the final agreement, we will have access to additional funds of the order of €24 million annually from unspent funds from 2010, with the possibility for increasing that figure.

The funds can be used to address specific economic disadvantages affecting farmers in the dairy, beef and veal, sheep and goat and rice sectors. I persuaded the Commission to expand the scope of these measures to include economically vulnerable sectors, irrespective of their geographical location. We need to consider carefully how these funds can best be used for the development of Irish farming in the context of the options available under the new regulation. No decisions have been taken yet but I am acutely aware of the difficulties in certain sectors and I will be consulting widely with all stakeholders on this issue in the coming weeks.

Additional information not given on the floor of the House.

In this regard I have already said that I would welcome proposals from interested parties.

I was also able to progress the simplification agenda in the health check negotiations. We got rid of the requirement to deduct modulation from the full payment due to the farmer and subsequently refund that element relating to the first €5,000. We also succeeded in abolishing the requirement for compulsory set-aside and this will do away with the complex associated management rules. In addition, the restriction on the transfer of national reserve entitlements is to be removed and the usage and "use it or lose it rules" have been simplified. Simplifications were made also to the cross-compliance and good agricultural and environment condition provisions. Most importantly, I got an unambiguous commitment from the Council of Ministers and the Commission to continue the simplification process.

With regard to modulation, the rate has been increased by 5%. I would have preferred if no additional modulation had been agreed. However, this was one element of the negotiations on which Commissioner Fischer Boel was particularly determined. I am satisfied that we succeeded in getting the rate of additional modulation considerably reduced from the original proposals. It is worth noting that over 50,000 Irish farmers will be exempt from this increase. I can confirm that there will be a budget-neutral effect in respect of the 70,000 farmers affected by the change as I have ensured that all the funds raised can be passed straight back to Irish farmers.

Seán Sherlock (Cork East, Labour)
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Will the Minister clarify whether the original ratio in the rural development package was to be 50:50 between EU funding and Exchequer funding? In the event of Exchequer funding being at 25%, will the Government commit to that funding in light of the new modulation or the Common Agricultural Policy health check package?

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I assure Deputy Sherlock that we are considerably in excess of the EU requirement. My understanding is that we will continue to be so, even with the new programme. If the need arises we will discuss that matter with Europe.

During recent years our Exchequer has been fortunate in that we have able to put much more funding from national resources into schemes that are partially funded by the European Union. The ratio in some instances is more than 50% of Irish money against the percentage of EU funding.

Seán Sherlock (Cork East, Labour)
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I welcome the Minister's statement in terms of the commitment on modulation and how it is to be ringfenced within agriculture. That is vitally important and is something I have raised with the Minister previously. There should be no leakage of that commitment into other sectors, or into non-governmental, community and voluntary pillars. That is essential.

Does the Minister not agree that the €170 million package delivered by the CAP will be delivered by farmers themselves? The 1% increase in quota will effectively come down to the farmer who gets up every day to milk more cows. The Minister is overselling the package somewhat. It was widely thought that the 1% increases in quota were coming down the track in any event.

Will the Minister explain the €70 million that is in the balance? Some €100 million will be provided for additional milk production and there is an extra €70 million. Will the Minister clarify how this extra sum will be designated?

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I assure the Deputy that large member states such as France and Germany were totally opposed to any increase in milk quota. We got the butterfat adjustment which is the equivalent of a 2% increase which is very important also. All of us who speak to dairy farmers will talk of their frustration when the calculation is made with regard to butterfat. It lifts up delivery levels as such.

I was in the Deputy's constituency recently and spoke to individual farmers there who are very anxious to get additional milk quotas. A number commented that this is the first time, to their knowledge, as it is to mine, that we succeeded in getting the butterfat adjustment. Over the next few years, the increase in quotas amounts almost to 10%, calculating the value of the milk quota at the present poor levels that unfortunately pertain in the dairy industry. This is an issue of concern to all of us who are involved in the sector, particularly to dairy farmers and the pressures they experienced this year. We hope that the value will increase and that this sum of €100 million will prove a conservative estimate rather than a real one in the next year or two. We hope that dairy prices will increase by then.

With regard to the €70 million mentioned by Deputy Sherlock, the calculation is arrived at, roughly, by the €24 million unspent and by our being able to use the national reserve funds that we cannot use at present. These are worth €6 million to €7 million on an annual basis.