Séamus Kirk (Louth, Fianna Fail)
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Question 31: To ask the Minister for Agriculture; Fisheries and Food if in the interest of achieving targets set out in the Food Harvest 2020, he will consider recommending to the Department of Finance, special tax exemptions to individual dairy herd owners for investment in expansion of herd and allowance for capital investment in the processing sector; and if he will make a statement on the matter. [7696/11]

Simon Coveney (Cork South Central, Fine Gael)
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We have returned to the subject of Food Harvest 2020, the potential and value of which I hope people outside the farming sector will begin to appreciate. The question concerns whether we can introduce tax breaks for dairy farmers who need to invest to increase capacity in the period after 2015.

Taxation policy is a matter for the Minister for Finance. My officials are in contact with the Department of Finance on an ongoing basis in regard to taxation measures, particularly in the context of preparations for the annual budget. Despite the challenging economic and fiscal situation that pertained at the time of the most recent budget passed by this House, the key tax incentives for farmers were maintained. It is important to recognise the role of the previous Government in that regard.

The Food Harvest 2020 strategy represents the strategic blueprint for the development of the agriculture, food, fisheries and forestry sectors over the next decade. With respect to the dairy sector, there is an ambitious objective of having a 50% increase in output by 2020. The Dairy Activation Group has been established to prepare a roadmap for the expansion and development of the sector and has made a number of recommendations on additional tax reliefs to facilitate dairy herd expansion. These recommendations are being considered in the context of the annual budget process. However, as stated in the Food Harvest 2020 report, any new initiatives must be grounded in national fiscal realities. It was made clear in the report that any envisaged reprioritisation of policy emanating from Food Harvest 2020 would be on the basis of a reallocation of existing resources as opposed to making available any new sources of State funding. In many ways, tax breaks are the same as grant aid. Income foregone is similar to expenditure.

There are a number of taxation measures already in place that are of benefit to the sector. These include 100% stock relief for young trained farmers and 90% agricultural relief from capital acquisitions tax. Additional tax reliefs are in place to promote the transfer of land to young farmers and the long-term leasing of farmland. Consideration will be given to the potential restructuring and better targeting of existing reliefs to maximise the benefits afforded by them. Tax reliefs and targeted investment measures can be designed to encourage specific actions such as restructuring and farm modernisation.

Additional information not given on the floor of the House

One such investment initiative currently being undertaken is the targeted agriculture modernisation scheme for the dairy sector. I am very encouraged by the performance of the dairy sector in 2010, where exports grew by 17% in value. I am convinced that the ending of quota restrictions in 2015 represents a unique opportunity for Ireland to expand its dairy production and it is obvious that the sector is already very well placed to meet the targets set out in Food Harvest 2020.

My Department has recently awarded significant investment aid in the dairy and beef-sheepmeat processing sectors. These awards were made following a competitive process and involve grant aid of 40% or more towards eligible investment to improve efficiency and support value-added production. In all, aid of €114 million was awarded towards investment of €268 million in the dairy sector and aid of €69 million was awarded towards investment of €168 million in the beef-sheepmeat sector. The funds aim to improve efficiency and competitiveness and to support value-added production. In the case of other value-added sectors, my Department is providing funding to improve competitiveness using a proven "lean manufacturing" approach which enables companies to achieve cost savings and adopt a whole-of-business approach to growth. This is managed by Enterprise Ireland with funding from my Department.

Séamus Kirk (Louth, Fianna Fail)
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Without being cynical, I must state the Minister has indulged in subtle sidestepping of the question. The reality is that if we are to have a 50% expansion in the dairy sector between now and 2020, very significant capital investment will be called for, both at the primary production end and the processing, storage and transportation end. Investment in the sector is necessary as it has the potential to create jobs at a time when the Government is considering ways of creating real jobs in the economy. I would have thought some consideration would have been given to providing a stimulus package in this area.

The expansion plan is probably the most significant announced for the dairy sector in a very long time in Ireland, apart from the time when the quota regime was established in 1983. It is a very significant proposal and it will involve very significant capital investment. The reality is that the processors and those in the sector will be looking to primary producers for some investment. There will be a need to build an incentive into the arrangement. Having regard to the job potential that exists in this area, I would have thought the Minister would have considered it more realistically. I am sure he will with the passage of time.

Simon Coveney (Cork South Central, Fine Gael)
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If I had had a little more time, I would have spoken about some of the grant aid that is being planned for the sector. The Deputy will probably be aware of the targeted agricultural modernisation scheme for the dairy sector, which is about providing grant aid for dairy equipment, rainwater harvesting and the modernisation of parlours. Some targeted grant aid will be made available. A quite significant amount of financial assistance is being offered to the processing sector because it also needs to be able to build capacity to be able to deal with increased volumes of milk. One will see in the build-up to the upcoming budget a reflection of the support we need to give in terms of increased production in the form of grant aid. I must be honest also and state we are restricted in how much we can spend. Any increased expenditure I can produce will be as a result of much work on making the case for value for money spend, because every cent we spend at present is being competed for by many Departments because of the budgetary constraints that exist.