Simon Coveney (Cork South Central, Fine Gael)

I am anxious to answer as many of the questions as I can, so I will try to be quick. If there are some detailed questions I cannot answer, I will correspond by e-mail with the Senators.

First, I want to clarify a number of things about the new eligibility criteria for disadvantaged area payments. It is important that people know what we are talking about here, because there seems to be a misunderstanding. We acted as we did because we worked with farming organisations, farmers and all sorts of stakeholders to try to come up with a way of saving money under the disadvantaged area payment scheme, because we had to find money somewhere. We have managed to reduce the cost of running my Department and its agencies by €18 million in one year, but it was not enough. We had to find money from somewhere else, and there were only two schemes we could consider making savings from. One was REPS, which was a very successful but quite generous scheme, and we have made savings there. Farmers are not happy about it but they understand why we have targeted that area. The other was the disadvantaged area payment scheme. Targeting AEOS, which already involves low payments, would have been impossible.

I said to farmers that I would do everything I could to ensure I did not touch the rate of their payment or the amount of land on which they could apply for a payment, which is currently 34 hectares. In other words, active, practical farmers who are farming to a reasonable stocking rate and are keeping their stock for a reasonable amount of time in the year would not see any reduction at all in their payments. That is what we were trying to do. There are certain people who have very low stocking rates and are keeping their stock for the bare minimum time, which was three months of the year, who really are not farming at all; they are putting stock on land in order to draw down payments. We wanted to ensure that the limited money we do have was given to farmers who are actively farming and making an income from farming. In an effort to do that, we decided to change the eligibility.

The stocking rate required to qualify for a disadvantaged area payment was incredibly low, at around one sheep per hectare. We have doubled that now and asked farmers to have two sheep per hectare, which is less than one sheep per acre. This is still a very low stocking rate. We also said that instead of having to keep their stock for three months of the year, farmers would have to keep their stock for six months of the year. In other words, farmers would have to be farming. We could not have a situation in which people were swapping stock in order to qualify, with stock spending three months here, three months there so that two farmers could qualify, and so on. What we are saying is that we have a limited amount of money to spend, so let us give it to the people who are actively farming and who need that income the most. That is what we have done.

Certain categories of people who may be vulnerable as a result of those changes, including people who are required to have a low stocking rate because they are in a commonage framework which does not allow high stocking rates, will be exempt from the changes. They still qualify, there is no change for them. Let us be clear on that. People who are farming in commonage areas, particularly in the west and north west, and who have had low stocking rates enforced on them by the National Parks and Wildlife Service or my Department in an effort to protect the environment, will continue to get disadvantaged area payments, uninterrupted, regardless of how low their stocking rates are.

For people who have genuine reasons for having a low stocking rate in 2011 - if, for example, there was a death in the family or a disease in the herd, or a young farmer was taking over and had stock for only four months of the year rather than six months - we will establish an appeals mechanism which will make relatively quick decisions, although obviously all cases must be examined. I have given an assurance to farmers - and I mean it - that we will take a progressive approach towards that appeals mechanism to try to support people who are genuine farmers. However, we cannot have a situation in which people see a change in the rules and buy in an extra sheep to try to qualify all of a sudden. We have to make some savings, so we cannot allow people to simply change the way in which they manage their stock in order to continue receiving payments.

I have agreed with the Minister for Arts, Heritage and the Gaeltacht, Deputy Deenihan, that our two Departments will examine the commonage framework programmes. In my view, in many mountainous areas, we are actually undergrazing land, which is doing as much damage as overgrazing. If a hillside is undergrazed, elements of growth on that hillside will make it unfarmable in the future, and ultimately, mountainous areas that would previously have been managed through grazing by hill stock will be taken over by aggressive weeds. Undergrazing does as much damage, potentially, as overgrazing, so we need to reassess some areas and increase stocking rates to improve management of that land.

This represents a commercial opportunity for farmers. An exodus from hill farming is the last thing I want to see. I am not going to punish those people either in terms of single farm payment allocation under the CAP or in terms of disadvantaged area payments or other mechanisms under pillar 2, which pertains to rural development.

There is a distinction between pillar 1 and pillar 2 in terms of direct payments and rural support mechanisms in the CAP. Single farm payments are primarily intended to support sustainable, safe, environmentally friendly and efficient food production. The scheme recognises the fact that European farmers must operate within restrictions that do not apply to farmers in other parts of the world, and as taxpayers who demand those standards from our food producers, we need to pay for that. That is the primary basis for direct payments. This is not unusual in other parts of the developed world. Every country in the developed world, with the exception of New Zealand and possibly Australia, has mechanisms to support primary food production, and Europe is no different.

The primary focus of direct payments is on supporting food production in areas of high and low productivity. We are to see a redistribution of single farm payments. The question is the level of redistribution. What I am saying to farmers is that the current proposals would mean the most productive farmers at present would lose an average of 60% of their payment while farmers in less productive areas would gain an average of approximately 85% in their payments. This level of switching resources will, in my view, significantly damage the productivity of Irish farming in terms of the capacity of the productive sector to invest and expand as we would like it to do.

We need to change but the idea that the status quo remains intact, whereby the most productive farmers continue to receive the extremely high payments some of them do versus less productive areas, is not acceptable either. The idea that in 2019 single farm payments would be based on productivity in 2002 and 2003, on which the current single farm payment is based, is also a nonsense. Some redistribution of these funds is necessary and we are trying to put in place a mechanism which will allow for this without a massive resource shift from the productive sector to the less productive sector.

We have submitted proposals to the Commission, and the Commission has made a proposal based on a redistribution of direct payments between member states because historically some countries have done much better than others. Many countries joined the European Union halfway through the last CAP process and do not have the same level of direct payments as countries such as France, Germany and Ireland. The Irish Government worked hard with the Commission to put in place a formula to calculate who is doing well and who is not doing well and how EU moneys might be redistributed between member states to ensure everyone gets a slightly fairer deal.

The formula divided the national envelope of direct payments received by countries by the eligible hectarage in those countries and calculated the average payment received by countries. Everybody over the average is doing better and everybody under the average is not doing so well. The formula the Commission has on the table in its proposals is for approximation, which is to move everybody towards the average but not equality. It would mean everybody under 90% of the average payment would be moved towards 90% of the average figure by one third and this would be paid for by everybody over the average. This is not about bringing everybody to the same payment because the cost of farming in some countries in the European Union is not as expensive as in others with regard to the cost of labour, inputs and machinery because of how those economies have developed historically. However, we are moving everybody slowly in the direction of the average.

If we used the same philosophy with regard to the distribution of the single farm payment in Ireland it would mean a redistribution but instead of the productive sector on average losing 40%, 50% or 60% it might lose 10% or 15% and instead of the less productive sector gaining 70%, 80% or 90% on payments it may gain 20%, 30% or 35%. This is the type of compromise towards which we are trying to work and I believe it can be sold to both sides of the equation, including those farming in less favoured or disadvantaged areas.

The alternative, which is what the Commission would like us to do, is that we use flexibility to break up the country into various regions which would receive differing flat rate payments. Will Senators imagine the political challenge of trying to break up Ireland into 20 or 30 regions with each region receiving a different direct payment based on geography? It would be impossible and would cause civil war throughout Ireland.