Committee Reports > List of Committees > Dáil > 1978 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1975

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Déardaoin, 2 Márta,1978.

Thursday, 2nd March, 1978.

The Committee met at 11 a.m.

DEPUTY O’TOOLE in the chair.

Mr. S. Mac Gearailt (An tArd-Reachtaire Cuntas agus Ciste) called and examined.

VOTE 38—AGRICULTURE.

Mr. J. J. O’Mahony called and examined.

336. Chairman.—Paragraph 46 of the Report of the Comptroller and Auditor General reads:

“Collection of Monetary Compensatory Amounts

A test examination of the collection of Monetary Compensatory Amounts by the Department of Agriculture and Fisheries was carried out. As I was unable to determine, on the basis of the records then available in the Department, the amounts due and the amounts collected up to 31 December 1975 in respect of the various agricultural products exported I communicated with the Accounting Officer. He has furnished me with a statement of the sums collectible and collected as Monetary Compensatory Amounts in respect of the various products. This statement indicates that a total of £28,532,217 was collectible in respect of these Amounts up to 31 December 1975. Of this total £7.6 million was uncollected at that date, comprising £7,242,710 on exports to other Member States and due to the European Agricultural Guidance and Guarantee Fund (FEOGA) and £361,255 on exports to non-member states and due to the Central Fund as “Own Resources”. The arrears arose mainly on exports of beef and livestock and of pigmeat.”

Mr. Mac Gearailt.—This paragraph draws attention to the arrears of monetary compensatory amounts which had accumulated to December 1975, mainly on the exports of beef and livestock and of pigmeat. The Committee has referred to this matter in previous reports. In his Minute dated 6 December 1977 on the Committee’s latest report the Minister for Finance has indicated that the amount of MCA charges outstanding in the cattle and beef sector had been reduced to £0.9 million at the end of October 1977 and that every effort was being made to collect this outstanding debt as quickly as possible.

337. Chairman.—Have all the MCA’s for 1975 been collected to date and, if not, how much is outstanding?

—At the end of February the amount outstanding was £878,000. That is slightly less than is mentioned in the Minute of the Minister for Finance. Of that sum, however, we have obtained judgments in the courts for £187,000 which leaves a balance of £691,000. Certain difficulties are being experienced in executing these judgments and these are being pursued by the law officers.

Of the £691,000 outstanding we have cases before the courts representing about one-third of the total sum. We have brought 60 cases in the courts. Of those, four have resulted in judgments, 29 were settled and 27 are still before the courts. The balance in the case of cattle is due by about 80 exporters and these cases are almost entirely in the hands of the law officers. The majority of those concerned are people resident in Northern Ireland and solicitors there are endeavouring to collect the amounts due. In a few cases we have instituted legal proceedings in Northern Ireland. There are also a few cases in Britain where legal proceedings have been instituted or where solicitors are, on the instructions of the Chief State Solicitor, endeavouring to collect the money. That is the position broadly in the case of cattle.

Of the over-all total outstanding possibly half is related to beef and in that case we are endeavouring to collect the amounts involved from the buyers of intervention beef who are mainly continental firms. In a number of cases they have counter claims for damages in respect of quality deficiencies and other matters which may have to be allowed in part and so will offset some of the monetary compensatory amounts due. In other cases the amounts are being disputed on the basis that the buyers should not have to pay any monetary compensatory amount because the monetary compensatory amount applied when the meat was exported from Ireland rather than when they took it several months later out of cold storage on the Continent. This is something that we are proposing to raise with the Commission in Brussels because it is an issue where the Commission subsequently made a legal regulation providing for the charging of monetary compensatory amounts in those cases—that the purchasers of meat in another Member State would have to pay the compensatory amount there. When the meat was sent from Ireland the exporter at that stage was the Intervention Agency which should have paid the monetary compensatory amounts, in effect transferring the money from one pocket of FEOGA to another. There are legal doubts as to whether these continental firms are liable for the outstanding MCA’s.

338. We appreciate the Accounting Officer’s difficulty in this complex matter of the MCA transactions which he spoke of originally but are you satisfied that the arrangements made are adequate and will eventually resolve the problems?

—I should hope so. The arrangements now in operation and which have been in operation for the past year or two have ensured that the kind of situation that developed in 1974 and 1975 will not recur. Our entire efforts are concentrated on recovering the arrears that arose in those years. While very considerable progress has been made in getting the total amount due down to the present level, that is below £1 million as compared with a total of something in the region of £7 or £8 million originally due, nevertheless the amount still due is considerable and we must do everything possible to recover all that money.

339. Deputy C. Murphy.—It is still an on-going matter?

—Yes. As time goes on it becomes more difficult to collect outstanding amounts. Obviously the people who will not cause any difficulties are those who will pay first and we eventually find ourselves dealing with the hard-core debtors. The situation has improved enormously with regard to the cattle cases and we are hopeful that we will get the vast bulk of the money.

340. Chairman.—Paragraph 47 of the Report of the Comptroller and Auditor General reads:

“In order to facilitate the export of agricultural produce a packing book system was devised by the Revenue Commissioners whereby firms recognised as approved consignors can enter in their packing book goods intended for export. The date of entry of each consignment in the packing book is accepted by the Customs authorities as the date on which the goods come under Customs control and is therefore regarded as the date of export. This book is subject to periodic scrutiny by Customs officers at the premises of the firms concerned.

Monetary Compensatory Amounts became payable on beef exports on 11 September 1973. In the course of audit it was noted that amounts of £30,092 and £24,667, which had been collected from a beef exporter and brought to account as Agricultural Levies in May 1974 and March 1975, respectively, were subsequently refunded following the alteration by the Customs officer of the dates on which the goods were regarded as coming under Customs control. While this exporter had been recognised as an approved consignor as from 13 March 1973 he was not operating the packing book system when the beef to which these sums related was exported. In regard to the sum of £30,092 the Customs officer stated that, while the beef on which these Monetary Compensatory Amounts were collected was exported in the period 21 September to 30 November 1973, it was in stock and under Customs control on 10 September 1973. As this date was therefore regarded as the date of export the beef should not have been subject to the payment of Monetary Compensatory Amounts.

From 21 January 1974 Monetary Compensatory Amounts on beef exports were offset by Export Refunds payable from FEOGA. The beef to which the sum of £24,667 related was in stock before 20 January 1974 but was not exported until 21 January and 1 March 1974. The Customs officer certified that in the absence of a packing book the dates of shipment were the only dates which were relevant in determining the dates of export of this beef.

I communicated with the Accounting Officers for the Votes for Agriculture and for the Office of the Revenue Commissioners because I felt there was an inconsistency in the manner of determining the dates of export. While the packing book system was not used for these exports the actual dates of shipment were ignored in one case whereas in the other case they were stated to be the only dates which could be accepted. The Accounting Officer for the Vote for Agriculture informed me that the determination of the date of coming under Customs control is entirely within the jurisdiction of the Revenue Commissioners whose ruling was accepted by the Department of Agriculture and Fisheries. The Accounting Officer for the Vote for the Office of the Revenue Commissioners informed me that the Customs Authorities were satisfied, from an examination of the exporter’s records, that the beef to which the first sum related was in stock on 10 September 1973 and that was reasonable to assume that the exporter intended to place all his stocks as on that date under Customs control because of the imminent introduction of Monetary Compensatory Amounts. In the case of the second sum the Accounting Officer informed me that since Monetary Compensatory Amounts were no longer payable after 21 January 1974—being offset by Export Refunds—it was reasonable to assume that the exporter would not have placed the beef under Customs control before that date and that the only evidence of Customs control was the relevant Customs entries dated on or after that date. The case under query was considered to be an isolated one which arose due to the inexperience of both traders and staff in the operation at short notice of a new and complex mechanism. The Accounting Officer added that both staff and approved traders are now experienced and aware of their responsibilities and that it is most unlikely that there could be a recurrence of the circumstances which obtained when the case arose.”

Mr. Mac Gearailt.—This paragraph draws attention to an apparent inconsistency in the manner of arriving at the dates of export of two lots of beef for the purpose of determining whether monetary compensatory amounts were payable thereon by the exporter. In one case a notional date of export, that is, the date on which the beef was in stock was adopted whereas in the other case the actual date of shipment was adopted. As a result the exporter was not required to pay MCAs on either lot. If the notional date or the actual shipment date had been used in both cases one or other of the sums mentioned in the paragraph would have been collectible.

The observations of the Accounting Officers for the two Votes concerned, Agriculture and Revenue Commissioners, are included in the paragraph.

341. Chairman.—How did the difficulty arise with regard to the adoption of a different approach in two cases in relation to dates?

—An arrangement was introduced whereby exporters could indicate to the customs authorities that they wished to export goods and they would then enter the goods in what was known as a packing book maintained on their premises. This enabled them to select the date on which they would export the goods or put them under the control of the customs authorities. There is an apparent inconsistency in the way in which these two cases were treated. The first instance was on the occasion of the introduction of MCAs in a particular sphere and the exporter maintained that the meat was in stock and that he proposed to put it under the control of the customs authorities before the date on which the MCA penalty would apply. In the second instance it was a case of going by the date of shipment which came after a date on which the MCA ceased to be payable. In both cases the exporter got the benefit. We accepted the decision of the Revenue Commissioners as to which date would be taken. In matters such as this, it would be our practice to accept the judgment of the customs staff because they can say when a product came under their control. This is what we did in this case.

342. Deputy V. de Valera.—It would appear that there has been a change in the circumstances which gave rise to the anomalies. Am I correct in saying that there will be consistency in the future?

—Yes. I understand that the Revenue Commissioners have revised the packing book system and that the records of the dates on which goods are put under the control of the customs authorities are now kept at Revenue head office, and any difficulty is avoided.

Would that apply uniformly?

—Yes.

May we then regard this as an historic case not likely to recur?

—Yes. These instances occurred in 1973 or 1974 when most people were getting to know what the rather complicated MCA system was all about.

343. Chairman.—Paragraph 48 of the Report of the Comptroller and Auditor General reads:

“Subhead D.12.—Cattle Feed Vouchers —Advance to Supplement Meat Industry Fund to subsidise Cattle Feed Vouchers

To assist farmers with a land valuation of £50 or less who had difficulties in providing fodder for young cattle in the winter of 1974 a scheme was operated by the meat industry in consultation with the Department of Agriculture and Fisheries whereby feed vouchers to the value of £7.50 each were distributed through the Land Project offices to eligible farmers. These vouchers were intended to be used in the purchase of grain/compound feed from merchants. The scheme was operated by the Irish Fresh Meat Exporters Society, the moneys required up to 26 March 1975 being provided by the meat industry by way of contributions which were deducted by the Department of Agriculture and Fisheries from intervention payments due to meat factories and paid over to the Society. From 27 March 1975 the cost of the scheme was borne on the Vote and payments to the Exporters Society were charged to this subhead pursuant to a Budget provision that the Exchequer would advance up to £2.2 million for the scheme, the advance to be recovered by adjusting VAT regulations temporarily so that the cost should be met in full by the cattle and meat industry.

The arrangements approved by the Department of Finance for the operation of the scheme in relation to the Exchequer advance provided that claims from the feed merchants supported by the relevant feed vouchers would be met by the Exporters Society who would then claim recoupment on the basis of a certified schedule of payments made to the merchants. The cashed feed vouchers in respect of which payments were made by the Society were to be retained and made available for spot checking by officers of the Department of Agriculture and Fisheries who would also have full access to the relevant records of the Society. It was also agreed that these vouchers and records were to be made available for audit by my officers.

A fire at the offices of the Society in May 1975 resulted in the destruction of a large number of the vouchers and it was, therefore, not possible to have the intended audit carried out by my officers. It subsequently came to the Department’s notice that the value of cashed vouchers received by the Society exceeded the total value of the vouchers issued under the scheme and that a fraud had taken place involving the submission of forged vouchers to the Society. The Department of Finance was duly notified.

I was informed by the Accounting Officer on 30 June 1976 that the extent of the fraud was approximately £324,000 and I understand that the matter is still under investigation. The Accounting Officer also informed me that other outstanding matters are:—

(1) the meeting of claims from feed merchants in respect of genuine vouchers for which they have not received moneys from the Society—this is the subject of legal proceedings, and

(2) the recovery from the Society of all moneys obtained from the Department in refund of the payments made by the Society in the encashment of forged vouchers.”

Mr. Mac Gearailt.—This paragraph deals with the funding of the cattle feed voucher scheme and draws attention to a fraud which took place in the operation of the scheme. I understand that the legal proceedings mentioned in the paragraph have not yet been completed.

344. Chairman.—We all know the history of this unfortunate incident. What steps have been taken to prevent a recurrence and to ensure that the necessary records are available to the Comptroller and Auditor General for audit?

—I think this is unlikely to occur again. It was a single operation which was introduced to cater for the very serious crisis in the cattle industry at the end of 1974. Since the Comptroller and Auditor General’s report there have been certain developments in this case. One feed merchant who held some vouchers secured a judgment against the Irish Fresh Meat Exporters’ Society and following an appeal to the Supreme Court which upheld the decision of the High Court, the Society have paid a substantial sum, in the neighbourhood of £200,000, to meet claims of merchants in respect of outstanding vouchers. The Minister for Agriculture is taking an action in the High Court seeking certain declarations, including in particular a declaration that the Society are liable for all the outstanding vouchers, and also seeking to have the rights, liabilities and obligations of the Minister and of the Society determined by the court. This action has not yet been heard. There have been certain preliminary difficulties about the discovery of documents. We understand, however, that there is a possibility that it could be further delayed because a man and a woman have been charged in connection with the fraud and it is possible that the criminal proceedings may take precedence over the action between the Minister and the Society. The man concerned has also been charged with another serious crime and this other crime may take precedence even over the fraud charge. The present situation is that most, if not all, of the feed merchants who held outstanding vouchers have been paid. The recovery of the sum paid in excess to the Irish Fresh Meat Exporters’ Society will have to await the result of the High Court decision on the Minister’s action.

Deputy V. de Valera.—The matter is essentially sub judice and it would be inappropriate to pursue it here.

—Yes.

345. Deputy Woods.—When you refer to the amount paid in excess to the Irish Fresh Meat Exporters’ Society, do you mean that the vouchers presented were not genuine?

—Yes. The moneys were paid in respect of fraudulent vouchers and, if this had not been done, could have been applied towards cashing genuine vouchers. Approximately £150,000 need not have been paid if the fraud had been detected at the outset or had been prevented.

346. Had the Society already paid for these vouchers?

—Yes.

So they were caught in the middle, in fact, in that situation?

Deputy V. de Valera.—I do not think we should pursue this.

Deputy Woods.—Fair enough, but there is the point that the scheme was obviously open to some fraudulent conversion, let us say, or to some means of fraudulently converting the scheme.

Deputy V. de Valera.—Mr. Chairman, as I understand it, it is a matter for the court to determine whether or not there was any fraud at all.

Chairman.—The matter is sub judice and we may not pursue it at present.

Deputy Woods.—Fair enough. We will leave it at that.

347. Chairman.—Paragraph 49 of the Report of the Comptroller and Auditor General reads:

“Subhead E.4.—Cereals

The Minister for Agriculture and Fisheries in exercise of the powers conferred on him by Section 3 of the European Communities Act, 1972 (No. 27 of 1972) made regulations, the European Communities (An Bord Grain) Regulations 1975, providing for the dissolution of An Bord Grain as from 1 September 1975, the transfer of its assets to the Exchequer and the discharge by the Minister for Agriculture and Fisheries, with the consent of the Minister for Finance, of any of its liabilities arising after 1 September 1975. The asset so transferred, was a cash balance of £191,662, comprising £22,847, the balance of repayable levies which had not been claimed and £168,815, the accumulated surplus on trading at 31 August 1975. The Minister for Agriculture and Fisheries, with the agreement of the Minister for Finance, has decided that the surplus £168,815, less any amounts which may fall to be paid to meet liabilities arising after 1 September 1975, will be made available for research work in relation to the pig industry and the value of cereals as a feeding stuff for pigs. As shown in the Appropriation Account the amount of £191,662 paid over to the Department was brought to account as Exchequer Extra Receipts. The charge to the subhead, £502, relates to refunds of levies and to a number of small accounts which fell due for payment after 1 September 1975.”

Mr. Mac Gearailt.—This paragraph is for information. It outlines the arrangements made under ministerial order for the dissolution of An Bord Gráin from 1 September 1975 and for the disposal of its assets and liabilities.

348. Chairman.—Our entry into the EEC necessitated the dissolution of An Bord Gráin?

—Yes. Some of the functions being performed by An Bord Gráin were contrary to Community arrangements and, because of that, it was necessary to dissolve the board. This resulted in a certain sum of money being available for disposal. The Minister, with the agreement of the Minister for Finance, decided the amount arising should be disposed of for research work in relation to the pig industry and the use of cereals for feeding purposes. It was decided to give this money to the National Agricultural Authority which was being established or, if that body was not brought into operation within a certain period, the money should be given to An Foras Talúntais for research purposes. The sum involved was, in fact, given to An Foras Talúntais last December. In that way, the amount arising, which was £168,000, was disposed of.

349. Paragraph 50 of the Report of the Comptroller and Auditor General reads:

“Subhead F.1.—Agricultural Credit Corporation

In the year under review Errigal Coopertive Society Ltd. was unable to meet its commitments in respect of a loan of £20,000 issued by the Agricultural Credit Corporation in 1967 and guaranteed by the Minister for Agriculture and Fisheries. The amount due to the Corporation on 1 May 1975, £6,715, was paid from this subhead on foot of the Minister’s guarantee.”

Mr. Mac Gearailt.—This paragraph is for information. I understand that further payments amounting to £3,727 were made to the Corporation on foot of the Minister’s guarantee in 1976.

350. Chairman.—Is this amount irrecoverable?

—I am afraid so. I think there will also be some further small payments to be made under this guarantee. It was provided for Errigal Co-op to enable certain experimental projects to be carried out in the Glencolumcille area. A small amount was paid by way of grant. The total here was £5,500 and the rest was by way of guaranteeing a loan of up to £20,000 which was used for helping farmers in the area to purchase fencing and fertilisers and to meet certain expenses on drainage and sales of wool and lambs. Generally, the project was not very successful. It did show, however, that in an area like the one involved, where there is a scarcity of good land, farming on its own cannot play a vital role in the area. There have to be some other activities. Errigal Co-operative Society has run into difficulties, has ceased trading, and has been taken over by another co-operative society engaged in the processing of fish. Some of the moneys outstanding were collected but it is likely that a further sum of about £15,000 will probably have to be paid to clear the debt finally.

351. Deputy Woods.—Will this be on top of the £20,000?

—No. It will meet the £20,000 plus interest.

352. It is, in fact, a question of meeting the Minister’s guarantee and the amounts would fall due to the ACC spread over a period?

—Spread over a period unless it is decided to clear the debt once and for all. There would be a certain reluctance to do that until we see if there is any possibility of doing anything more.

353. Chairman.—Paragraph 51 of the Report of the Comptroller and Auditor General reads:

“Subhead M.6.—Incidental Expenses arising out of Market Intervention

Subhead N.—Appropriations in Aid

I referred in paragraph 49 of my previous report to the method of financing incidental expenses arising out of market intervention.

The charge to Subhead M.6. is made up as follows:—

The amount received from FEOGA funds is the year under review and credited to Subhead N is made up as follows:—

While the charge to Subhead M.6. consists of actual payments made, recoveries are effected, with the approval of the EEC Commission, on the basis of projected expenditure. The necessary adjustments are made when the expenditure is accepted by the EEC as a charge in the FEOGA accounts.”

Mr. Mac Gearailt.—This paragraph is for information. It gives details under the main heads of the amounts expended in 1975 from voted moneys in respect of the incidental expenses arising from market intervention, and of the amounts recovered from FEOGA in respect of such expenditure. The capital cost of intervention, is not reflected in these figures.

354. Chairman.—Is the adjustment between the intervention expenditure account and the FEOGA receipts made in respect of 1975?

—No. The position has been that very considerable difficulties have been experienced over the years in clearing up the beef intervention accounts for 1974. We completed these at the end of February and supplied the accounts to the Comptroller and Auditor General this week. We are pressing ahead with clearing up the 1975 and 1976 accounts and we expect to have this done during the year. It was an exceptionally large task to clear up these accounts. We had to put them on to a computer and, as seems inevitable with introducing a computer in any sphere, certain teething troubles arose which delayed the submission of the 1974 accounts. We are hopeful most of these teething difficulties have now been overcome and that the submission of the 1975 and 1976 accounts can be done fairly rapidly. I should say also that due to the difficulties which arose back in 1974 a new system of controlling the intervention activities in the beef sector was introduced in May 1975 and from that on the control was much more effective than what had applied earlier. According as the accounting work gets into that period, there will be, I think, a speeding up in the clearing of the accounts. I should say in regard to the accounts for the incidental expenses mentioned here by the Comptroller and Auditor General, very considerable progress has been made in dealing with these. These had also been in arrears but all have been paid in full from the beginning of January 1977 and a very substantial proportion of the arrears prior to that date have now been cleared and we are hopeful the balance will be cleared during the coming months.

355.Deputy Woods.—I understand the onus here is on the State to collect the moneys from FEOGA. Claims were £28,746,526 and the recoupment was £25,725,802. The onus in that case is on the State to collect the money?

—Yes. We pay the various charges that arise mainly in connection with beef rather than skimmed milk powder. Beef is the main problem area. We are recouped by FEOGA in many cases on the basis of standard amounts which they apply throughout the Community rather than on the basis of actual expenditure and we have to try to operate on those. We do not lose out on this. Over the years we have more or less broken even. The main difficulty arose in relation to interest rates where the recoupment from FEOGA has normally fallen far short of the rates of interest that we have had to pay to the commercial banks and to the Department of Finance for the moneys which they advance to us on capital account.

356. This is essentially State intervention as distinct from a producer intervention scheme?

—Yes, it is a State intervention scheme. It is the cost of the State buying the beef and the skimmed milk powder.

In a number of areas the intervention must come from the producer. Under this heading it is totally State intervention?

—That is correct.

357. Chairman.—Paragraph 52 of the Report of the Comptroller and Auditor General reads:

“It was noted in the course of audit that £1,333,997, received from FEOGA in 1974 to meet payments for the deboning of intervention beef, was repaid to FEOGA in February 1975 when the relevant payments were disallowed by the Commission. The repayment was charged to a suspense account and, as this account had not been cleared at 30 April 1976 I communicated with the Accounting Officer. He informed me that the amount was repaid to FEOGA on the basis of an interpretation by the EEC Commission of the requirements in regard to accounting for stock losses. At the time the Commission disallowed these payments the full accounting implications of holding beef in deboned form had not emerged and when eventually a final interpretation was agreed between the Commission and the Member States it emerged that the repayment need not have been made.

The Accounting Officer also stated that a refund of this sum by the Commission would normally have to await the clearance of the 1974 FEOGA accounts but that, following contacts with the Commission, it appeared that it might be possible to obtain the refund in the near future and thus enable the suspense account to be cleared.”

Mr. Mac Gearailt.—This paragraph refers to the sum of £1.3 million repaid to FEOGA in February 1975. It subsequently transpired that this sum need not have been repaid and a refund was obtained by the Department of Agriculture acting as intervention agency following a decision of the Commission in December 1976.

358. Chairman.—Has the sum of £1.3 million which we were obliged to repay been recovered?

—The sum was recovered in December and the suspense account was cleared by the end of December. The dispute arose because of a difference of opinion as to whether or not the weight of boxes should be included when calculating the weight of boneless beef secured from carcase beef. The Commission ruled against us at the outset and then reversed their decision when we appealed it, and the money was subsequently recovered.

Deputy C. Murphy.—Was it recovered in September of 1976?

—No. It was recovered in December, 1976.

359. Was any interest payable on the money which was held up?

—No. We have been pursuing the question of interest on some moneys of this nature with the Commission, so far without success. Unfortunately they are able to point to the fact that most of their payments to us in connection with FEOGA are made in advance and that the Exchequer has the use of considerable sums each month free of interest, and that this has to be taken into account when looking for any benefits in other sectors.

360. Chairman.—Does this concession of interest free moneys balance out the interest which would accrue on this sum for a given year?

—Very much more than that. We have calculated that the benefit to the Exchequer, taking the weekly balance that we have had from FEOGA over the past four years, has represented approximately £4 million in the use of money free of interest.

361. In principle if they said that, as a result of dealings, they felt they were obliged to repay that money, it would follow that, apart from ex gratia facilities and so on, they would be obliged to pay the interest on this. Does the Accounting Officer agree that they seem to be obliged to pay?

—In principle they would seem to have a certain liability. As I mentioned, we have been pursuing the question of interest with them on some of these things, so far without success.

362. Deputy Woods.—Was there not a clear definition initially as to whether it was packaged or unpackaged boneless beef? I know that in some cases there is a definite price for the packaging. Is there a standard price for packaging?

—The position was that out of any quantity of carcase beef used for deboning, factories were expected to produce a yield of 68 per cent. The Commission originally accepted that in calculating this yield one could include the weight of the box—I believe there was some limit on what could be included for this weight. Then they altered the decision which meant that we had to pay back the money to them. Some of the difficulties that arose in relation to beef arose mainly because it was not until 1974 that many of the Member States had any substantial experience in beef intervention. Up to that time the beef market generally had been pretty satisfactory and the Community’s beef system had never been really tested until the difficulties arose in 1974. The difficulties that arose then had all arisen for the first time and there was a certain amount of trial and error in what was being done.

363. Deputy C. Murphy.—Getting back to the amount of interest, the interest will work out at £¼ million. Was our Exchequer at any loss because we had made a commitment in respect of this money which was entitled to be paid to the State before it was refunded?

—In so far as this money was paid back, we had not the use of it, because it reduced the monthly advance that we would have been getting from FEOGA. Whether it would have reduced the advance to the State to the position that we would have to advance money from the Exchequer at that stage I cannot say, but there certainly was no direct loss of interest to the Exchequer. There was, however, a loss in as much as the Exchequer had the use of a smaller amount of FEOGA money than it would otherwise have had. They can argue that we should not have had too much money from FEOGA at our disposal. If we could have had this it would have added to the amount that would have been available for the general use of the Exchequer during this period.

364. The matter of interest in this is still on-going?

—Yes. We have raised the question of interest. I am not sure that we will succeed.

365. Deputy Kerrigan.—Would there be any danger of a reaction, if this happens, that we would not have the use of FEOGA money in advance in the future?

—I do not think so, because for the operation of the FEOGA system generally we have to get substantial advances running at an average of £20 million a month.

366. Deputy Woods.—I take it that for the different countries there is a standard method of advances?

—Yes.

367. Consequently one could reasonably claim that this was a deviation from the standard? In other words, that what was due was due in any event, as would be due to any other country, and therefore that this was an exceptional case that should not have any direct influence on the other moneys?

—That is correct. The Commission always treat us fairly in the matter of providing the advances we seek each month.

And there is a certain quid pro quo?

—Yes.

368. Chairman.—There was a problem of interpretation associated with the deboning allowance. Has this problem arisen in other areas of intervention such as freezing or storage or just in the one area?

—I do not remember any other cases where this kind of problem has arisen. There are, as might be expected, normal day-to-day problems arising because essentially what is being carried on is a large-scale commercial operation. Inevitably there are day-to-day problems but we are constantly in touch with the Commission, as are the other countries, seeking to have certain rulings given as to how various items should be treated. I do not think we have had another instance of this kind of decision of having to pay back money, as a result of which we lost out on interest. There are always cases in which it is decided to appeal against decisions in an effort to get better results.

369. Paragraph 53 of the Report of the Comptroller and Auditor General reads:

“Subhead M.10.—Special Premium on Exports of Beef to the United Kingdom

EEC Regulation No. 3028/74 authorised the United Kingdom Intervention Agency to grant national aid from 18 November 1974 for the slaughter of certain types of beef cattle. The regulation provided that imports from Ireland should also benefit under the scheme.

In the case of imports of live cattle from Ireland into the United Kingdom the aid is paid directly by the United Kingdom Intervention Agency. In the case of carcase beef the aid is paid through the Department of Agriculture and Fisheries. Sums received by the Department are credited to appropriations in aid and payments are then made to the exporters and charged to this subhead.”

Mr. Mac Gearailt.—This paragraph is for information.

370. Chairman.—Has there been any accounting or reconciliation difficulties in relation to the operation of this scheme?

—This is very much a Post Office type operation where the money comes in from the UK and is paid out to the exporters. Until we get the money from the UK Government we do not make any payment. There is no net charge on the Exchequer in respect of this scheme. What we get in has to be paid out.

371. Deputy Woods.—This is really the point I had in mind in relation to our intervention transactions, that is, that you end up in a situation in which you are paying out on the spot fairly efficiently and having to get the money back from FEOGA. This could lead in certain instances to a gap for the State. Of course the system of advances is meant to overcome any gap that may arise.

—The advances would cover mainly the refunds and MCA subsidies on exports. We have outstanding throughout a very big capital sum. At any one time our borrowings are more than £100 million to finance the capital. The Member State is obliged to advance the capital for the purchase of the intervention products and what FEOGA do is to recoup the net loss at the end of the day—when the product is sold. The State has borrowed something in the region of £120 million at the moment to finance all the beef and skimmed milk powder in intervention. We are allowed 8 per cent interest on that by FEOGA. While up to six or eight months ago we were paying 11 or 12 per cent for this money we were allowed only a net 8 per cent by FEOGA. Therefore, we were incurring a substantial loss in interest there.

This is an interesting principle. I happen to know from the horticultural area that the onus rests with the producer to provide the capital through producer groups.

—That is so.

372. Deputy C. Murphy.—On subhead A.1—Salaries, Wages and Allowances—I note from the Estimates for Public Services for the year that there were covered in the general heading of salaries, wages and allowances, 3,396 employees. The estimate originally was for £9,764,000. Even then with a supplementary of £700,000 the grant was not sufficient to meet the expenditure—a further £184,297 was required. There is no footnote to explain the variation but I am wondering whether it was caused by the employment of additional staff. I note, too, that there was no money put aside in 1975 for additional staff. How did this arise?

—The Deputy may be right in this. Offhand I cannot say why this transpired. We had substantial provision for extra staff in the preceding financial year. We expanded our staff very considerably at that time. This was due to some extent to the EEC operations. It will be seen that the total number increased by almost 200. It could be that this was the reason for the excess, that is, that we may have expanded further in 1975.

373. I have here the details for April-December 1974 and I note that there was a provision of £203,000 for additional staff. There was no provision for additional staff in 1975. The numbers increased between 1974 and 1975 by 184 employees. That does not account for a situation of something in the region of £884,297 which came in by way of supplementary and excess expenditure. I would have thought that a footnote would have been included with the subhead to explain the variation but perhaps we could have a note on it?

—I shall arrange for Members to have a note in this regard.*

374. Deputy Woods.—On subhead A.2.— Travelling and Incidental Expenses—there is a variation of a fairly substantial amount, about £96,919. This is a considerable increase in travelling expenses. The note indicates that expenditure on travelling and incidental expenses was higher than expected. That is fairly obvious from the figures but does not give us any details. I appreciate that due, perhaps, to the energy crisis, there was a substantial increase in travelling costs but was it a question of the mileage travelled being greater than expected or was it because of a necessity for more travel abroad?

—One of the big factors here was that in that year we were filling the role of the Presidency of the Community and had an exceptionally large amount of foreign travel in the first six months of the year. In addition to the normal heavy staff travel to Brussels we had to act as chairman of all the committees and this doubled our representation immediately at all meetings of the Community. This would be one of the factors that caused the excess here. In the Department of Agriculture there are approximately 2,000 travelling officers who are mainly located throughout the country but, in addition, there is the very heavy expenditure that arises in connection with EEC business. This can be very heavy. Although air fares are refunded by the Community, the subsistence for staff in Brussels is exceptionally high.

I would suggest that on future occasions it would be useful to provide some brief remarks in a case like this. Without intending in any way to be awkward, to say that expenditure on travel and incidental expenses was higher than expected is not enough. I would suggest that a reason for the variation may have been the increase in rates in the year because of increased fuel charges.

375. Chairman.—Regarding the variation between expenditure and grant, we have a statement of fact rather than an explanation in the note on subhead A.2. If some indication were given apart from the obvious it would help to expedite work.

—Certainly. We will arrange that in future.

376. Deputy Woods.—On subhead B.15 —Errigal Co-operative Society Ltd.—I note that the grant-in-aid was not earned because the scheme did not progress as had been hoped.

—Yes. The project was being terminated at that stage. We had already paid about £5,500 to the society in some previous period. That was the end of it.

We discussed earlier losses incurred and I felt it only fair to point out that there were moneys saved in that case.

377. On subhead M.3—Aids to Farmers in certain Less Favoured Areas—there is a supplementary grant of £4 million but £3,556,186 was not paid out. The note states that it was not possible in the time available to process and clear all eligible applications before the end of the year. While I can appreciate that the supplementary grant came later in the year, are there continuing difficulties in clearing grants in less favoured areas?

—We have three schemes in the less favoured areas, for sheep, beef cows and the main cattle headage payment scheme. Inspections for the purposes of these schemes normally take place from August onwards and the numbers involved are high. We have approximately 20,000 cases in the sheep scheme, 4,000 or 5,000 in the beef cow scheme and 75,000 cases in the cattle headage payments scheme. The inspections go on until about November and at the same time payments are being made to the farmers. While we appreciate that the producers would wish to get the payments as rapidly as possible, from the point of view of administration we have to spread the payments over as long a period as would be reasonable. The net effect is that about half of the payments for any year fall into the first few months of the following year. The aim is to have all payments completed by the middle of March. We are at present finalising payments for inspections made between August and the end of November last. It would be expensive to have to take on staff to clear all the payments by the end of the year and then transfer such staff elsewhere for the rest of the year.

378. In that case, was it necessary to look for a supplementary grant of £4 million, knowing that there would be this kind of timescale in paying the money? Is there still difficulty with the inspection and clearance or has it settled down to a routine system?

—Yes. This was the first year in which the scheme was introduced and there was a certain amount of uncertainty as to how it would work out. It is now a fairly routine scheme where the cost and the rhythm of payments can be foreseen fairly accurately.

379. On Appropriations in Aid, No. 17— Recoupment from EEC of incidental expenses arising out of market intervention— it is rather unusual to use the term “incidental expenses” in relation to £25,725,802. I note that you recouped slightly more from the EEC than you thought you would get. The estimate was £25,300,000 and you received £25,725,802, which I suppose is a satisfactory outcome. Do you think “incidental expenses” is a rather unusual term for a sum like that?

—Yes. It is a rather unusual title. It is used to cover anything other than the capital expenditure involved.

I really have no comment on it, but the man in the street might find it quite amusing.

Chairman.—It may seem strange but it is the actual terminology used. It appears in the heading.

VOTE 35—LANDS.

Mr. J. J. O’Mahony called.

No question.

The witness withdrew.

The Committee adjourned.

*See Appendix 6.