Francis O'Brien (Fianna Fail)

I welcome the Minister. I am delighted to see him in good form and jovial mood, as he has been under a lot of pressure in the past few weeks.

I welcome the opportunity to debate this important issue in the House today. In the Treaty of Rome the main objectives for the Common Agricultural Policy were to increase agriculture production, ensure a fair standard of living for farmers and those in engaged in agriculture and to stabilise markets to ensure a supply of wholesome healthy food for EU consumers at reasonable prices.

Since 2003 the main farm support mechanism has been a decoupled payment in the form of the single farm payment scheme. Ireland was the first country to adopt this policy in its entirety and it is important that we remain committed to this approach. Decoupled payments remain the best way of underpinning medium and small family farms, while at the same time giving each individual the freedom to respond to market opportunities. In the past few years we have seen a steep fall in the price farmers receive for beef, cereals, dairy products and sheep. This has resulted in farmers relying solely on direct payments for family farm income. The latest national farm survey report shows beef, sheep and tillage farmers were actually using direct payments to cover some of their production costs. This has resulted in declining family farm incomes which declined faster than non-farm incomes in urban and rural areas.

The decline in farm incomes is not unique to Ireland. We have seen a decline in farm incomes in the past few years in most EU countries. This has resulted in lower production owing to reduced profitability in the main land-based farming sectors. The European Union is no longer self-sufficient in beef or sheepmeat production. This clearly shows that right across the Union farm subsidies under the CAP are essential as a guarantor of food security and income support in the maintenance of the family farm structure as a way to maintain rural communities.

As well as maintaining a support mechanism through direct payments, it is also important that there be market supports or other structures put in place to reduce the huge fluctuations in farm gate prices that have occurred in the past few years. Small to medium-sized family farms cannot survive large farm produce price changes from year to year. It is important, therefore, that mechanisms are put in place that can be acted upon speedily to lessen the impact of sudden price drops, as happened in the case of milk in 2008 and 2009. The existing market support tools need to be maintained or developed further with a view to controlling sudden market price changes.

Since 2003 direct payments have been calculated on an historic basis, decoupled from current production methods or scale of production. From 2013, a new basis for calculating direct payment entitlements will be needed. In this regard, different options need to be analysed. However, any new system needs to be fair and must enable farming to remain competitive and sustainable. The movement to a flat rate payment system would not meet the aim of ensuring a fair standard of living for active farmers. A recent study carried out by Teagasc shows that a flat rate payment, while moving income from the south east and the midlands to the west and Border regions, would also move payments from those farms contributing most to agricultural output and could, therefore, endanger the future of family farming as a means of earning a family livelihood. A fairer system might be based on calculating rates based on income from farming on a regional basis and rewarding farms in active production, protecting the environment or adding to the well-being of the wider rural community. The current supports to improve competitiveness in agriculture through grant aiding target investments and agri-environmental schemes need to be maintained in the CAP programme post-2013. REPS and schemes like the farm waste management scheme have brought major improvements in the environment and standards of animal welfare on Irish farms. The continuation of schemes such as these would bring extra capital and employment into rural areas that are now unemployment blackspots owing to the economic downturn. As a nation we should support and insist on the main plank of rural development policy to be supporting farmers to develop their farms to full productive capacity and at the same time protecting the environment for the well-being of society in general. Measures such as these are critical not alone for Irish rural communities but for the wider EU farming communities.

Direct payments and rural development programmes are essential for the well-being of rural communities throughout the EU. For this reason alone these programmes should be agreed and funded as a common policy for the entire EU. The proposal to have co-financing of direct payments by national governments would discriminate against communities in poorer countries and would end the only real common policy currently in the EU.

The upcoming review of the CAP will be important not alone for Irish farming and rural communities but also for future EU agriculture policy. We need to develop a strong policy where as a nation we can go forward into negotiations with a clear agenda for the well-being of this industry which is so important for this country. I am confident our negotiating team under the Minister for Agriculture, Fisheries and Food, Deputy Smith, can deliver a new CAP post-2013 that will benefit the farming community and rural areas.