Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I am happy to answer any questions Members have. It is hard not to be crestfallen when I walked into the Chamber and everyone else left. I take it that is not a reflection of the interest, or lack thereof, in agriculture or the Common Agricultural Policy, CAP. It is hard to follow the Taoiseach.

I wanted to put on record a statement of where the CAP is and then we can have a question and answer session for as long as Members want. I can get under the skin of some of the issues if Members want a deeper understanding. I am very pleased to have an opportunity to address Members on the state of play of reform of the CAP. I would first like to make some general comments on the outcome of the negotiations and refer briefly to some of the main features of the reform package before explaining where we currently stand as we move towards implementation in an Irish context. In overall terms, the agreement reached on 26 June is characterised by three broad themes. The first is a greater emphasis on sustainability through Pillar 1 greening measures and Pillar 2 environmental measures. The second is generational renewal through supports for young farmers under Pillar 1 and the option of supports for young farmers under Pillar 2. The third is a continuing move towards greater market orientation, with support measures and market intervention measures used only as a safety net. All three elements are in Ireland's interests as a country building markets for our products outside, and within, the European Union.

Moreover, the agreement includes a range of flexibilities that allow member states to pursue targeted policies suited to their individual circumstances and agricultural production systems. In addition to the method by which payments are redistributed within member states, these flexibilities include the options of a small-scale farmer scheme, a redistributive payment favouring small to medium-size holdings, coupled payments and additional supports for areas of natural constraint.

Parts of the CAP agreement hinged on the parallel negotiations taking place on the multi-annual financial framework, MFF, for the next EU budget from 2014-20. Although the Heads of State and Governments reached agreement on the MFF at the European Council on 7 and 8 February, final endorsement of the MFF elements of the CAP package was only obtained from the European Parliament at the end of September. Under the MFF agreement, the expenditure ceiling for Heading 2 of the CAP was set at €373 billion. While this represents a reduction of over €14 billion in comparison to the Commission’s proposal, Heading 2 has been protected to a far greater extent than other headings. For Ireland, the CAP will deliver in excess of €11 billion over the next seven years.

Turning to the main features of the reform package, the key issue for most member states, including Ireland, was of course the distribution of direct payments within member states, which we have discussed in this House on more than one occasion. We faced proposals from the Commission for a mandatory movement to a flat rate of payment per hectare. This could have had very negative effects on our capacity for sustainable growth and production. However, the institutions ultimately agreed that member states will have the option to apply a partial convergence model recommended by Ireland.

Again, I would have discussed this with many interested parties, including in this House, in terms of how the alternative convergence model would work. The scheme will be subject to a minimum payment per farmer of 60% of the national or regional average payment per hectare by 2019. Member states will also have the option to limit to 30% of the farmer's initial payment the amount redistributed through convergence. In other words, there are two tools. First, one can limit the amount that any one farmer could lose. Second, one can simply apply the convergence model adding a guaranteed minimum payment for everybody, as the Irish model suggested.

This outcome is a reasonable and balanced compromise that has satisfied the demands of members states as well as accommodating the concerns of the European Parliament. It also represents a very good outcome for Ireland. The partial convergence model, combined with the minimum payment would lead to a redistribution of about one third of the amount that would have resulted from the Commission's flat rate proposal. This will allow us to achieve the twin objectives of making the direct payment system fairer for those currently on low payments, while not undermining the efforts of those on higher payments to develop their farm enterprises. Of course we are free to redistribute more if we wish.

I was pleased with the outcome of the negotiations on greening of the CAP. As Senators will know, I have always supported the Commission's desire to imbue the direct payment system with a stronger environmental charter or character. For this reason I warmly welcome the balance struck between members states, the European Parliament and the Commission on the practical implementation of the three proposed greening criteria in Pillar I.

I also agreed with the decision to ensure that there can be no double funding of the environmental measures under Pillars I and 2. I am particularly pleased that the option to apply the greening payment as a percentage of each individual farmer, as proposed by Ireland, instead of a flat rate as this will limit the redistributive impact of the greening on the new direct payment system. In other words, there was a proposal that the greening payments would be paid to farmers on the basis of an average flat rate per hectare. Instead, we have the option of taking 30% of a farmer's payment and making it the greening payment. That creates the same incentive for all farmers to adopt the greening criteria whether one gets high or low payments per hectare.

Farmers will also be assisted in getting used to the new system by the fact that penalties for non-compliance with greening will not be implemented until the third year of the new direct payments regime. In other words, everyone has plenty of time to adapt.

I was particularly pleased with the agreement to introduce mandatory top-ups for young farmers, which was an Irish objective from the outset. In fact, it was an Irish idea from the outset. I have argued strongly that it is vitally important that we encourage generational renewal in Irish agriculture. Ireland has been one of the first member states to propose such a payment. Irish voices were very much part of the debate and included Macra na Feirme and other farming organisations.

There were other important aspects to the agreement that covers the broad range of instruments applicable to the agricultural sector. Let me give an example. A new framework to draw up rural development has now been agreed. In addition, programmes must contribute to the achievement of three headline objectives which in turn must be pursued through a set of priorities that includes the enhancement of farm competitiveness and the support of a climate resilient economy. A minimum of 30% of funding must be spent on environmental measures. However, flexibility is again the watchword with members states able to choose from a wide range of measures.

I shall mention the ongoing move towards a greater market orientation of the CAP which characterises this reform agreement. This is highlighted by the abolition of sugar quotas by 2017 and by confirmation that milk quotas will cease in April 2015. In addition, market support measures, in general, are to be used as a safety net only. For example, export refunds are to be deployed in exceptional circumstances only. Greater flexibility is also given to the Commission to intervene in exceptional circumstances. A special crisis reserve will be availed of where conditions go beyond normal market developments.

One of the lessons learned from the past, particularly in 2009 when there was a collapse in milk prices, is that we do have to give the Commission the powers to intervene quickly and decisively to put a floor on prices in order to protect primary producers, namely, farmers, from a price collapse.

After the June agreement the European Parliament held out for further negotiations on multiannual financial framework, MFF, related aspects of the CAP reform package. These were agreed with the Council and Commission at the end of September and endorsed by COMAGRI on 30 September. It remains for the European Parliament to adopt the package at its plenary session to be held on 18 to 21 November, before formal adoption by Council in December.

Similar arrangements are expected to apply to the adoption of the transitional regulation that contains measures that will allow the direct payments system and rural development measures to be implemented in 2014. In addition, it is expected that the European Parliament will also adopt the MFF at its plenary session in November.

In the meantime, we in Ireland have already turned our attention to the implementation phase. As I mentioned earlier, member states have been given considerable flexibility to implement the CAP reform agreement in a way that best suits their individual farming circumstances.

Last July I initiated a process of consultation with all relevant stakeholders and interested parties to ascertain their views on the most appropriate application of the direct payments regulation in Ireland. A total of 44 questions were put to potential respondents across a range of issues, all of which I am sure the House is familiar with. They include things like the allocation of entitlements, the structure of the basic payment scheme and the convergence of payments, the implementation of greening provisions, voluntary coupled support, and the young farmers’ and small farmers’ schemes. A total of 46 submissions were received by the deadline of Friday, 20 September. My officials and I are currently giving careful consideration to all of the responses. They are quite varied and reflect the different positions and circumstances of the various representative groups and individuals who submitted them. Modelling of the various scenarios that have arisen is also ongoing in the Department.

I hope to be in a position to make decisions across a range of alternatives over the next few weeks. It is imperative that the shape of the new direct payments regime is clear by the end of 2013. We have a very challenging schedule to meet if we are to ensure efficient processing of applications for payment in 2015. Even though the new budgetary period commences on 1 January 2014 we will have a transitional arrangement. It is a carryover of the existing CAP policy that will have a new budget next year. The new policies will kick in at the start of 2015 for the next six or seven years.

As regards the rural development regulation, I mentioned earlier that there is a broad range of measures from which member states may choose. These include knowledge transfer, innovation, young farmers, forestry, agri-environment and climate schemes and Leader-type operations.

Work on the development of the next rural development programme is already well under way. An initial consultation process was launched in 2012, and written submissions were received from over 80 stakeholders. These submissions have been analysed by the Department and have fed into the development of a strengths, weaknesses, opportunities and threats, SWOT, and needs analyses. Last July a second consultation was held where stakeholders attended a full day workshop. Based on the outcome of these processes the drafting of a new programme is being advanced by the Department. It is intended that further stakeholder consultation will form part of this. I expect to make decisions by the end of the year and to submit a draft programme to the Commission in early 2014, if not before then.

To summarise, it is expected that the legal texts reflecting the various agreements of recent months between the three European institutions will be formally adopted in December.

This will coincide with the finalisation of the Irish arrangements for the direct payments regime and the rural development programme, both of which need further lead-in times before becoming fully operational across the EU from the start of 2015. Those of us who were debating the issue 12 or 18 months ago would have been very worried at the potential outcome of the CAP as it was then proposed. Many changes were made, all of which were positive, in terms of support for young farmers making that mandatory rather than voluntary in terms of a sensible greening proposal for Pillar 1, a flexible greening model, that ensured all farmers will have the same incentive to meet a basic benchmark for environmental standards when they produce food and a reasonable balance in respect of market supports and market interventions, where necessary, but still moving Europe's farming and food production systems towards a more globalised market, which is what Ireland wants. The outcomes from the political deal at the end of June suit this country in terms of what we want to achieve in our Food Harvest 2020 plan. We are using the flexibilities within the agreement to design a system that is most suited for Ireland. We are seeking views from all interested bodies and stakeholders. As we have had a stakeholders consultation process nobody can say they have not been asked their view on this issue. At the end of the exhaustive process, which has taken three years, I hope we the outcome will be clear and finalised by the end of this year. We will then have 12 months to plan for its implementation for the start of the following year. That time will be needed in terms of mapping, software systems, inspection programmes, design of new schemes and an information process to ensure farmers understand the schemes and the impact on their incomes.

The other big issue on which members may wish to ask questions is the budget for the rural development programme. What has been agreed under the MFF from an Irish perspective is that Ireland will get €313 million approximately each year for the duration of the next CAP. Of course it is the co-funding element of the rural development programme from the Exchequer that will determine how much money we have to spend on rural development programmes. If we were to maximise the EU drawdown, in other words draw it all down, when one looks at the minimum amount of co-funding the Exchequer has to make to draw down that funding versus matching that funding the gap is €400 million to €600 million. I suspect we need to make a case for an amount somewhere in between. There are some schemes that have 85% EU co-funding and some schemes that will be 100% co-funded and other schemes will only be 53% co-funded from Europe. Obviously that will determine in overall terms how much is spent through the rural development programme in the coming years. There will have to be a collective Government decision to approve an overall rural development package which I will bring to Cabinet at some stage. I look forward to questions from Members on any of the details.