Committee Reports > List of Committees > Dáil > 1975 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1972 - 1973

APPENDIX 5.

FINANCING OF INTERVENTION PURCHASES

4 April, 1975.

Cléireach,

An Coiste um Chuntais Phoiblí.

During my examination by the Committee on 20 February I undertook to furnish information on the existing procedures for financing intervention purchases by the Department of Agriculture and Fisheries under the Common Agricultural Policy of the European Communities. A note setting out the procedures involved is attached for the information of the Committee.

Accounting Officer,

Department of Finance.

The Financing of Intervention Purchases

1. In Ireland, intervention is thought of only as the process whereby products are bought-in off the market. However, the term applies to all aids to guarantee agricultural prices under the Common Agricultural Policy of the European Communities. Subsidies such as export refunds are regarded as first category intervention and the official purchase of agricultural products at guaranteed prices, known as intervention purchasing, is regarded as second category intervention. This note is about the latter.

2. Legal Authority

In each member State the Common Agricultural Policy is operated through the National Intervention Agency. The European Communities (Common Agricultural Policy) (Market Intervention) Regulations, 1973 appointed the Minister for Agriculture and Fisheries as the Intervention Agency for Ireland. These Regulations empower the Minister to carry out market intervention operations, and for that purpose to borrow money with the consent of the Minister for Finance.

3. Basic Mechanism

Products are bought in by the Department of Agriculture and Fisheries at a price fixed by EEC regulation, under a standard contract between the Department and the seller. Given the requirements as to quantity and preparation of a product for intervention, the seller is unlikely to be a farmer. At present the Department finances its intervention purchases out of repayable advances issued from the Exchequer under the European Communities (State Financial Transactions) Regulations, 1973. Interest is payable on these advances at the Exchequer lending rate (10% at present),

4. Intervention products may be stored by the Department of Agriculture in Ireland and abroad until disposed of, normally by tender. An EEC depreciation allowance, calculated annually, is payable to the Department to take account of the loss in value of a product stored for long periods. When intervention produce is sold the Department repays the Exchequer out of the proceeds. If, after allowing for payment of depreciation, the sale price falls short of the purchase price, the loss is made up by the EEC; such losses on sales are calculated as the difference between the average buying and selling price and are returned to the Exchequer as repayment of advances. If the product is disposed of as a gift, the EEC recoups the full purchase price. In fact, skim milk powder bought-in in 1973 by the Department of Agriculture was subsequently disposed of as food aid. Intervention purchases are channelled through a special Departmental account under the control of the Minister for Agriculture and Fisheries. This account is audited by the Comptroller and Auditor General.

5. Incidental Expenses

The incidental charges necessitated by intervention purchasing e.g. interest on Exchequer advances, transport, storage charges etc. are paid for from Subhead M 6 of the Vote for Agriculture. The Department is recouped by the EEC at rates determined by regulation; these rates are multiplied by an average monthly quantity to give the total due. As the rates are arrived at by formula they do not necessarily reflect actual payments made by the Department of Agriculture (some of which will be higher than the calculated rates and some lower). For example, the EEC allowance for interest was set at 8% p.a. last December by the Commission, with effect from January 1974. Under the EEC formula a payment is received each month based on average stocks (opening stock plus closing stock divided by two) multiplied by average cost.

At the end of each year, a yearly average is worked out and any adjustments made. These receipts are credited to the Vote for Agriculture as an Appropriation-in-Aid.

Department of Finance,

4 April, 1975.