Seanad debates
Wednesday, 20 March 2024
Nithe i dtosach suíonna - Commencement Matters
Grant Payments
12:00 pm
Paul Daly (Fianna Fail)
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I welcome the Minister, Deputy McConalogue, to the House this afternoon. I appreciate that the senior Minister has taken time out of his busy schedule to deal with this Commencement matter which states that there needs to be a review of the grant reference costings from the Department when it comes to the allocation of TAMS grants, in particular as they relate to building projects. I raise this because of one instance I am aware of where a farmer is developing a shed. The Department estimates the price, on which the farmer will get his grant, is in the region of €63,000. After a lot of negotiation, price comparison, haggling and so on, the cheapest he can get that job done for is €93,000. That is a massive gulf. The difference in the 60% grant on the Department costing and what the farmer will spend means it is more like he will be getting a 41% grant. There is a difference for him in what he will spend of more than €17,000. It is an issue for another day, but you can couple that with some of the VAT implications that have arisen recently because of the view Revenue has taken. That is along with the fact that when farmers go to the banks to get their investment side of these projects, most banks do the stress test based on a 170 stocking rate. In a worst case scenario, even if a farmer has a higher stocking rate they are looking at a potential reduction in the future, but we will not go there. They are doing that stress test based on 170.
When I heard those figures it was hard for me to believe there could be such a gap between the actual and reference costings. I did some research yesterday with a concrete company. The last time these prices were reviewed, one could buy a cube of 35N concrete for anywhere between €65 and €75. That is now coming in at between €120 and €130 per cube. That is an increase of 80%. Again, when I inquired on pricing in the steel side of things, which would be the second biggest component in any shed development project, the increase since the last review in 2021 is anywhere between 25% and 30% for cladding, steel and all of the major inputs.
The Minister can see there is a massive gulf. My problem is I think this might be inhibiting a lot of farmers from doing necessary development, which in fairness they are on the whole doing for the betterment of the environment.We do not want a situation where necessary development that will improve the lot of farmers and the welfare of their flocks and that of the overall environment is delayed. Projects could be shelved because of the extra cost. As I said, based on the costings relating to this particular job, the 60% grant equates to 41%. For a person getting a 40% grant, it equates to 28%. While the spend on the job I mentioned should be €36,000, it will actually be €54,000. That is a massive gulf.
I hope the Minister has good news for me. There is a need for an immediate review because it is becoming too onerous a task. It is too expensive and is not feasible for many farmers to carry out necessary projects which, as I said, will benefit not only their lifestyles and workloads but also the environment and the welfare of their animals.
Charlie McConalogue (Donegal, Fianna Fail)
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I thank Senator Daly for raising this issue. The Senator is a strong advocate of the targeted agricultural modernisation scheme, TAMS, and has been in touch with me on a regular basis with regard to the development of this particular TAMS. This issue regarding reference costs is one on which he has been advocating very strongly. I will first give a general overview of the scheme for the House, much of which the Senator will know.
The Department's reference costs for the target agricultural modernisation scheme are developed as a maximum ceiling that can be paid for grant-aided equipment under the suite of ten schemes that are open to farmers. In all, there are more than 400 investment items that have a reference cost. I increased that under this Common Agricultural Policy, CAP, by 60 additional items compared to what was available in the outgoing TAMS. The costs are targeted as being for a good standard but not the best standard. For equipment that is required to be installed to operate, the reference cost calculated must also cover the cost of installation. It is also important that the reference costs are set at a level that does not drive inflation or building materials, labour or farming equipment costs. The reference costs are kept under review and are normally reviewed on an annual basis, with the latest review having been undertaken in the lead-up to the launch of TAMS 3. Any revised reference costs are developed and only applied to applications that are submitted after the completion of a review. That has always been the way it has operated with regard to TAMS.
These new reference calls are in place for all TAMS 3 applications to date, and the first payment claims under TAMS 3 were submitted in the past few weeks. The review of my Department's reference costs for the TAMS involves a number of steps, the first of which is a review of all the receipted costs submitted in support of claims, as downloaded from the TAMS computer system, to compare the actual claims costs for the relevant items over the preceding year with the reference costs in place. Once this has been completed, the Central Statistics Office, CSO, construction index figures are obtained for the period being reviewed to act as a guide for the potential expected increases in the prices of equipment and buildings.
Meetings were organised with reputable supplier companies to obtain quotes for the different types of equipment and buildings being evaluated, with quotations obtained from at least three separate companies for each item for which reference costs are being developed. This is to ensure that the average obtained is reflective of the true market costs of the items. Once the quotations have been received, the average cost is then calculated for each item. When revised reference costs are finalised and approved, they are uploaded to the TAMS 3 computer system to go live in conjunction with the beginning of the next tranche. A further review will be commenced later this year when there are sufficient claims submitted by applicants under the scheme to enable evaluation of the actual costs being incurred by farmers with regard to building works and equipment purchases. It is also important to be aware that the applicants avail of the reference costs that are in place at the date they make an application under TAMS, as I said, and any revision of reference costs only applies to future applications. That is the structure that is in place and operational under the scheme.
Obviously, costs change and evolve. It is important that they are considered and reflected. They do apply to future TAMS applicants going forward, however. We are only now getting into the stage where we are opening up tranche 3, with tranche 1 of TAMS having closed last June and the majority of those applicants having received their approval. The claims are starting to come in for those now as well. It is something I will closely monitor as those claims come in to ensure there is an updated reference assessment in order that it can be applied subsequent to that concluding.
Paul Daly (Fianna Fail)
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I appreciate the Minister's response and his outline of how the system works. I plead with him to consider a more immediate review. I will not rehash the figures I mentioned other than to say they are genuine. There is a big gulf in funding at the moment, particularly on the concrete, steel and building side, more so than in terms of equipment. A number of farmers with live applications are only now beginning to realise the difference. They were using the Department's reference costs to calculate their potential outlay. It was only when they received price quotations from contractors that they realised the massive gulf in funding. It is putting some of these necessary jobs in jeopardy as farmers have second thoughts as to whether to complete them. I plead with the Minister to initiate an urgent and up-to-date review and to try to bridge the gap between the estimated costs and the actual costs for farmers. There has been an 80% increase in the cost of concrete, which is the major component of any development, since the previous review of building costs by the Department.
Charlie McConalogue (Donegal, Fianna Fail)
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I thank the Senator again for raising this issue. It is the first time it has been raised with me on the floor of the Seanad or Dáil. It is no surprise it is the Senator who has done so, given his commitment to the scheme and to the importance of on-farm investment.
The structure of the scheme and the way it operates are about going forward. It is my understanding that this is what we have approval to do. I accept the Senator's point that as we move forward with the scheme, it must be reflective of costs. The costs are coming in for those who were in tranche 1 and were assessed and updated before TAMS 3 was launched. We are just starting to get the cost assessments from those who got grant approval and proceeded with work. As those returns come in, they will be assessed to see what the evolving situation is on the ground, with a view, as the year moves on and as we receive more returns, to updating the reference costs, as has been done previously over the long history of TAMS.
I will give the Senator's feedback to the TAMS team in my Department. Looking forward, any change that may be made over the next couple of months, including updated reference costs, will apply into the future for future applicants only.