Committee Reports > List of Committees > Joint > 1984 > Committee on the Secondary Legislation of the European Communities (4th Committee) > Report No. 05 - Agricultural Structures

REPORT

A. INTRODUCTION

Background

1. At its meeting on 7 March, 1984, following examination by the Sub-Committee on Agricultural and Fishery Matters under the Chairmanship of Deputy Joe Walsh, the Joint Committee adopted a Report on the Adaptation of the Common Agricultural Policy, which had involved, inter alia, the examination of the following Commission documents and proposals:—

(1)Futher guidelines for the development of the Common Agricultural Policy — COM(83) 380 final.

(2)Commission Communication to the Council

—Report and proposals on ways of increasing the effectiveness of the community’s structural funds;

—Common Agricultural Policy: Commission proposals COM(83) 500 final.

(3)Council Regulations (EEC)

—amending Regulation (EEC) No. 804/68 on the common organisation of the market in milk and milk products;

—laying down general rules applying to the milk sector levy specified in Article 5c of Regulation (EEC) No. 804/68;

—laying down general rules applying to the milk sector levy specified in Article 5d of Regulation (EEC) No. 804/68 COM(83) 548 final.

(4)Council Regulation introducing a tax on certain oils and fats, COM(83) 562 final.

(5)Council Regulation (EEC) on the continuation of New Zealand butter imports into the United Kingdom under special conditions, COM(83) 574 final.

(6)Council Regulations

—amending Regulation (EEC) No. 1723/83 as regards the possibility of granting aids for the use of butter in the manufacture of certain foodstuffs;

—amending Regulation (EEC) No. 1411/71 as regards the far content of drinking milk;

—laying down general rules on the granting of aid for concentrated skimmed milk and concentrated milk for use as animal feed;

—amending Regulation (EEC) No. 1269/79 with regard to the terms for the disposal of butter at a reduced price for direct consumption, COM(83) 611 final.

(7)Report from the Commission to the Council on the functioning of the arrangements relating to the import of New Zealand butter into the United Kingdom on special terms during the years 1973 to 1983, COM(83) 616 final.

(8)Council Regulation (EEC) amending Regulation (EEC) No. 1078/77 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds, COM(83) 644 final.

In the course of its deliberations, the Sub-Committee decided to study at an early date the working in Ireland of the Community’s structural legislation in the agricultural sector, and to consider the latest Commission proposals.

Documents Examined

2. The Joint Committee has examined the operation of the following agricultural structural measures in Ireland:—

(i)Council Directive 72/159/EEC on the modernisation of farms;

(ii)Council Directive 72/160/EEC concerning measures to encourage the cessation of farming and the reallocating of utilised agricultural areas for the purposes of structural improvement;

(iii)Council Directive 71/161/EEC concerning the provision of socioeconomic guidance for and the acquisition of occupational skills by persons engaged in agriculture;

(iv)Council Directive 75/268/EEC on mountain and hill farming in certain less-favoured areas;

(v)Council Regulation (EEC) No. 355/77 on common measures to improve the conditions under which agricultural products are processed and marketed;

(vi)Council Regulation (EEC) No. 1820/80 for the stimulation of agricultural development in the less-favoured areas of the West of Ireland;

and the Commission proposals for Council Regulations—

(i)on improving the efficiency of agricultural structures and

(ii)amending Regulation (EEC) No. 355/77 on common measures to improve the conditions under which agricultural products are processed and marketed and Regulation (EEC) No. 1820/80 on the stimulation of agricultural development in the less favoured areas of the West of Ireland — COM(83) 559 final.

Acknowledgements

3. The Joint Committee is indebted to Deputy Joe Walsh and his Sub-Committee for their work. The Joint Committee had discussions with the Irish Farmers’ Association, An Chomhairle Oiliúna Talmhaíochta (ACOT) and representatives from the Department of Agriculture from which it also received written submissions. The Joint Committee wishes to express its deep appreciation to these bodies for making their views known to it.

B. AGRICULTURAL STRUCTURES

General

4. Under the Treaty of Rome expenditure on the Community’s Common Agricultural Policy is financed through the European Agricultural Guidance and Guarantee Fund (EAGGF, frequently identified under its French title, FEOGA). As its name indicates, the EAGGF has two sections: Guarantee and Guidance. The “Guarantee” section finances the public expenditure arising from the market and prices policy. This includes, firstly, the intervention payments for regulation of the agricultural markets in the Community. Then come the réfunds paid in respect of exports to non-Community countries, enabling European agricultural products to be sold on world markets. Expenditure by the “Guarantee” section of the EAGGF also includes the monetary compensatory amounts which had to be introduced in the 1970s owing to changes in the rates of exchange between the European currencies.

The “Guidance” section administers Community funds intended for structural policy measures. These measures are mostly planned and implemented on a decentralised basis in collaboration with the individual Member States, with the regions and, in a few cases, even directly with those concerned.

With this form of division of labour, it is appropriate for the Member States or regions to bear a reasonable proportion of the cost themselves. In the case of investment aids, it is also appropriate for the beneficiaries —whether farmers, co-operatives or enterprises — to make their contribution also and thus assume economic responsibility.

5. As a rule the Community contributes 25 per cent of the expenditure of common measures such as farm modernisation, vocational training or the Mediterranean Programme. In special problem cases, however, the Community proportion is very much higher, covering 50 or even 65 per cent of total agricultural expenditure. This is the case with various programmes in Ireland and Italy. The Community also contributes to the financing of various special measures, which usually apply to a specific sector of production and have a precisely limited duration. These include, for example, aids for producer organisations, dairy cow slaughtering programmes and the grubbing-up of fruit trees and vines.

6. Unlike Guarantee expenditure, expenditure under the Guidance section comprises mainly co-financing. This explains at least partially why expenditure under the “Guidance” section is appreciably less than under the “Guarantee” section. The former amounted to 748.6 million ECU in 1983, or rather more than four-and-a-half per cent of the total expenditure of the EAGGF. However, Guidance expenditure has risen considerably faster than Guarantee expenditure since 1975.

7. The Common policy for agricultural structures is a vital element in the Community’s agricultural policy. The long-term development of agricultural production on a sound basis, and satisfactory economic and social conditions for those engaged in agriculture, cannot be assured without common action by the Community and Member States in this domain. The structural measures⁽¹⁾ at present in force and their application in this country are set out below.

Directive 72/159/EEC (Modernisation of Farming)

8. The Farm Modernisation Scheme implements in Ireland the provisions of Council Directive 72/159/EEC. The approximate numbers categorised in and amount of grant paid for land improvement, farm buildings and fixed assets and mobile equipment to each category up to end of 1983 were:

The amount of grant by type of investment up to the end of 1983 was as follows:

The total investment represented by this level of grant aid would amount to around £800m.

9. On 9 February, 1983 aids for certain investments were suspended. Following a review of the Scheme a revised system of aid was introduced on 3 January, 1984. The main features of the revised scheme are:—

(i)aid is available for land improvement and a limited range of farm buildings and fixed assets

(ii)aid for mobile equipment and the Group Fodder Scheme (which provided for aid for the purchase of silage making equipment by farm groups in the Disadvantaged Areas) which were discontinued on 9 February, 1983 were not restored

(iii)aid for farm accounts grant (payable over four years) and guidance premiums (towards the encouragement of concentration on beef/sheepmeat production — payable over three years) is being phased out.

10. Farm categories eligible for aid under the revised scheme are:—

(i)Development: Where the income per labour unit is below the Comparable Income (i.e. the average income of non-farm workers) but where the farm can be developed within six years (eight years in the Disadvantaged Areas) so as to yield the required level of income.

(ii)Commercial: Where the income per labour unit is above the Comparable Income.

(iii)Other: Full time farmers under 55 years of age who are not in the Commercial or Development category; a farmer may remain in this category for only six years or up to a grant aided investment of £12,000, whichever occurs first. After this a farmer may seek reassessment and, if the level of development of his farm so warrants he may be categorised Development or Commercial.

Farmers in the Other “Low” category are no longer eligible for aid under the Scheme. These are farmers unable to reach Development or Commercial status, who are over 55 years of age, former Other “High” farmers who have reached their investment/time limit (£12,000 over six years) or part-time farmers. The “management arrangement” may be used to achieve eligibility to the Other category specified at (iii) above, where the farm owner is over 55 and the farm manager is a son/daughter or other family member under 55 and is a full time farmer.

11. Aid for land improvement is available in the Western Region under the Western. Drainage Scheme and under the Programme for Western Development but not under the Farm Modernisation Scheme. Otherwise rates of grants are:

12. In accordance with Council Regulation (EEC) No. 1946/81 aid for investment in dairying is confined to a maximum of 40 cows per labour unit (Lu) up to 1.5 labour units (i.e. 60 cows) for development farmers and a maximum of 40 cows for commercial or other farmers. This restriction is confined to buildings and fixed assets. Aid for land improvement is not restricted.

13. As a result of Council Regulation (EEC) No. 564/84 an embargo was placed on the approval of new farm plans which provided for investment in dairying, with effect from I March, 1984. As a result of the decision to implement the super levy this embargo was lifted on 27 April, 1984. The situation has now reverted to that which has existed since 1981.

14. In accordance with Council Regulation (EEC) No. 1945/81 aid for investment in pig production is limited to 550 pig finishing places. In the case of sows the limit is 84 sows producing weaners or 48 sows farrow to finish.

Directive 72/160/EEC (Retirement from Farming)

15. On 1 May, 1974 Directive 72/160/EEC, concerning measures to encourage the cessation of farming and the reallocation of the areas so released for the purposes of structural improvement, was applied to Ireland by Statutory Instrument No. 116 of 1974 which provides for the Farmers’ Retirement Scheme. The Scheme has two main objectives:

—to enable farmers, particularly those over 55 years, who find themselves unable to continue or who wish to give up farming, to retire with the help of financial aid;

—to make available, on a priority basis, to farmers who are implementing a development plan under the Farm Modernisation Scheme and who need extra land to achieve their targets, the land thus released by retiring farmers.

16. The financial benefits of the scheme may be granted to those applicants whose main occupation is farming on a holding not exceeding the equivalent of 45 statute acres of good all-purpose agricultural land. Qualified applicants also include farmers whose main occupation is farming and who are disabled, regardless of size of holding, and widows who are the owners of agricultural land regardless of size of holding, for whom farming has become a main occupation through the death of their husband and provided the farm was worked by the widow or her late husband for at least the previous five years.

The qualified applicant must sell, or lease for a minimum of 12 years, to a farmer whose approved development plan under the Farm Modernisation Scheme provides for additional land and undertakes to discontinue farming. A former option to sell directly to the Land Commission was withdrawn early in 1983. If the farmer wishes, he may retain his residence and an accommodation area of up to 0.809 Ha.

17. For retiring farmers under 55 years a premium of 10 per cent of the sale price subject to a maximum of £1,500 or twice the annual lease rent subject to a maximum of £3,000 is payable in addition to the sale price or lease rent, Retiring farmers aged 55 years and over, in addition to the premium, qualify for a life annuity of £2,268 for a married couple and £1,512 for a single person. A grant of up to £100 is also payable to defray costs of settling title. The rate of annuity is reviewed each year, having regard to changes in the Consumer Price Index. To qualify for an annuity the holding of a retiring farmer must not have been reduced by more than 15 per cent of its area (except where parts were acquired in the public interest by the State, local authorities or statutory bodies) in the three years prior to the application.

Annuities are eligible for assistance at the rate of 65 per cent recoupment from the Guidance Section of the EAGGF, up to the amount of 900 ECUs per year in the case of a married farmer, or 600 ECUs in the case of a single farmer provided the annuitant is aged between 55 and 65 and that at least 85 per cent of the land released is allotted to potential Development Farmers and/or for public purposes.

18. By 31 December, 1983 a total of 2,164 applications had been received for participation in the Farmers’ Retirement Scheme. Of this total, 614 cases were successfully completed — representing 28 per cent of applicants. Of those, 533 cases involved direct sales to the Land Commission. Over two-thirds, or 1,444 applications, were not completed: Unsuccessful sales to the Land Commission accounted for 1,407 of these. The cause for non-completion can be divided into withdrawn applications (496), ineligible applications (493) and breakdown in negotiations on price, etc. (418).

19. A total of 10,862 hectares of land was released by participants in the Farmers’ Retirement Scheme. Sales to the Land Commission (9,642 hectares) accounted for the major portion of land released, with direct sale/lease accounting for the balance.

Some 5,942 hectares or 50 per cent of total land has so far been allotted to other farmers by the Land Commission. Of this, only 50 per cent, or 2,998 hectares, was allotted to potential development farmers (308 in all). This represents an allotment of 9.7 hectares per development farmer on average. Some 2,685 hectares were allotted to 568 other farmers, an average of 4.7 hectares per farmer.

20. The level of annuity paid to married and single retired farmers increased in the period 1975 to 1983 from £600 and £400 respectively to £2,268 and £1,512. At the same time the level of annuity eligible for assistance in unit of account terms did not change. Over the period its equivalent in Irish pound terms increased by only 60 per cent. As a result of this divergence between rate of annuity and the level eligible for assistance, the effective rate of recoupment on eligible assistance fell from 50 per cent in 1975 to some 21 per cent in 1983. Coupled with the declining rate of effective recoupment has been the low number of cases eligible for assistance. In 1977 only 42 cases were eligible for recoupment out of a total of 371 cases. By 1979 this had risen to only 73 and declined thereafter to 56 in 1982 and 39 in 1983.

By September, 1983 some £1.5m, and £5.4m in 1983 prices had been expended on premiums and annuities under the scheme. Due to the small number of eligible cases for recoupment and the substantially reduced effective recoupment rate, EAGGF receipts over this period amounted to only £206,000 or some four per cent of annuity expenditure.

On 31 December, 1983 a total of 513 applicants were in receipt of annuities. Some 230 (45 per cent) of these received the married annuity and 278 (55 per cent) received the single annuity. Based on the age distribution of annuitants life expectancy rates and recoupment levels in 1983 and on the basis of commitments entered into as at 31 December, 1983, it has been estimated that expenditure on annuities at 1983 prices will amount to some £15.6m gross or £15.4m net of recoupment.

21. The location of retiring farmers and their lands, some two-thirds of whom are resident in the Western counties is not matched by a similar distribution of development farmers.

On the other hand, for farmers wishing to retire in areas outside the West where the chances that a development farmer may be contiguous are increased, there will be difficulty in finding such a farmer who would require additional land, given an average farm size of 115 acres.

As a result of this mismatch in location between retiring farmers and development farmers only 39 cases are currently eligible for assistance from EAGGF out of the 614 cases completed. This problem is compounded by the fact that, as already stated, the effective rate of recoupment for those eligible has declined sharply to some 20 per cent in 1983. The Exchequer contribution to annuity payments will total some £15.4m. in 1983 prices out of total annuity payments of some £15.6m.

Analysis of a sample of completed cases suggests that only 40 per cent of the retired farmers are under 65 years while 60 per cent are over 65 years. The concentration of farmers in the upper age category raises questions as to whether these farmers would have in fact retired from farming anyway in the absence of the Retirement Scheme.

Directive 72/161/EEC (Socio-Economic Guidance and Training)

22. In accordance with the provisions of EEC Directive 72/161/EEC, the Department of Agriculture drew up the following schemes:

(i)Scheme for the Provision of Socio-Economic Guidance for the Agricultural Population (Title I),

(ii)Scheme for Vocational Training for Persons Engaged in Agriculture (Title II).

The schemes were approved by the EEC Commission on 10 July, 1975 and 25 February, 1975, respectively.

23. The scheme for the provision of socio-economic advisers under Title I of the Directive provided for the appointment of 27 such advisers. The first phase of the scheme approved by the Commission under which courses in the work would be provided for all interested members of the general agricultural advisory service was completed in June, 1980 and covered 185 advisers. This first phase does not qualify for any EAGGF reimbursement.

The next phase was the selection and formal training of full-time socio-economic advisers. This was delayed due to industrial relations problems, which have since been resolved, and following the reorganisation of the agricultural advisory and training services under ACOT the number is being increased from 27 to 45. Training of the 45 socio-economic advisers commenced in January, 1984.

24. Vocational training courses under Title II of the Directive were provided since 1975 by the County Committees of Agriculture. On 1 July, 1980, responsibility for the provision of these courses was transferred to ACOT.

Basic training courses under Directive 72/161/EEC (Farmer Training Courses) for established farmers and others working in agriculture, horticulture, etc. comprise a minimum of 100 hours instruction in the general, technical and economic aspects supported by practical training. The subject matter takes account of the special requirements of the agricultural industry in the locality where the course participants are employed.

Block-release or day-release Advanced Training Courses provide training in different farm enterprises and related subject areas. These courses are phased in units of 25 hours, the number of units being related to the trainee’s previous training. Each person receives a minimum of 100 hours training.

In order to be eligible to receive training, persons must be aged 18 or over, engaged in agriculture, whether farming on their own account or in paid employment, or as a member of a family occupied in farming.

For eligibility to attend Basic Training Courses, persons must demonstrate that they have sufficient general education to benefit from the courses and must show satisfactory evidence of their intention to engage in agriculture after training.

In order to attend Advanced Training Courses persons must either:

(i)have satisfactorily completed a Basic Training Course, or

(ii)be aged 25 or over and have at least five years experience, or

(iii)in exceptional circumstances, provide evidence that they would benefit from such an advanced course.

25. Participants in agricultural training courses under Directive 72/161/EEC (Title II) can be divided into two categories:

(i)farmers with management control, i.e. the decision makers, and

(ii)young people aged 18 to 24 years or thereabouts working on the home farm who did not have management control. (The vast majority of participants have been in this category.)

Experience throughout the country is that participation in the courses was strongly associated with development work on the farms. This was especially true of those having control. A high proportion of these farmers began development work at the time of the course or shortly afterwards. This also applied to participants who had a say in decision making or who acquired some degree of management control subsequent to attending the course.

For decision-makers, participation in the course was generally associated with carrying out farm improvements under the Farm Modernisation Scheme. Attendance at the course encouraged them to adopt a planned programme of development over a period of years. It also resulted in their maintaining close contact with the agricultural advisory service in drawing up plans and implementing them successfully.

26. While systematic countrywide investigation was not made of the subsequent performance of farmer participants in training courses under Directive 72/161/EEC, studies carried out in a few counties showed substantial improvements. The following reports are illustrative of the findings:

(i)A study in 1979 carried out by the Faculty of Agriculture of University College Dublin of 281 participants in 100 hour courses under Directive 72/161/EEC in County Mayo in 1976 and 1977 reported the following:

—the percentage of farmers with dairy cows increased by 19 per cent and the average dairy herd size by 29 per cent (from 12 to 15.5 cows per farm);

—the average size of drystock enterprise increased by 26 per cent (from 9.5 to 12 livestock units);

—overall, the average number of livestock units per farm increased by 32 per cent (22.4 units in 1976/77 to 29.6 units in 1979);

—compared with the rest of the county the rate of increase in dairy cow numbers was seven times greater than for farmers in general and ten times greater than for drystock enterprises;

—the number of farmers with incomes comparable to those of non-farm workers increased from 12 per cent in 1976/77 to 34 per cent in 1979.

(ii)In County Cork a group of 33 dairy farmers who completed a 100 hour course in 1982 increased their milk output by 14 per cent in 1983; double the average increase in the locality.

27. Courses under Directive 72/161/EEC have been of particular benefit to farmers who had no formal agricultural training previously. However many such farmers were reluctant to come into a training situation because they felt they could not afford the time, or for some other reason. This has meant that attenders at courses come largely from the younger age groups.

In regard to the impact of vocational training under Directive 72/161/EEC and recognising that other factors, in particular motivation, were at work there is no doubt that attendance at the courses helped in improving farm management and efficiency and in sustaining such improvement.

In regard to courses in farm home management under Directive 72/161/EEC, experience is that attendance at the courses was generally associated with improvements in managing the farm home, in keeping records and accounts and in more informed decision-making in farm and home development.

Appendix I sets out details of vocational training courses under Directive 72/161/EEC.

Directive 75/268/EEC (Less-Favoured Areas)

28. The areas of the country designated as less-favoured under Directive 75/268/EEC were defined in Directive 75/272/EEC as (a) all of Counties Donegal, Cavan, Monaghan, Sligo, Mayo, Galway, Leitrim, Roscommon, Longford, Clare and Kerry, (b) all the islands off the coasts of Counties Donegal, Sligo, Mayo, Galway, Clare, Kerry and West Cork and (c) certain areas of West Cork. Subsequently further portions of West Cork, Limerick, some small areas in the Eastern region and the Slieve Felim area were added to the list.

The Directive has two main provisions: (i) an increase in investment aid available to farmers in less-favoured areas and (ii) a system of payments to compensate for permanent natural handicaps.

29. As regards compensatory payments (i.e. headage payments), the Cattle Headage Scheme applies to areas designated as More Severely Handicapped; the Beef Cow Scheme in Less Disadvantaged Areas and the Sheep Headage Scheme in all the designated areas. The following were the rates of payment under the Scheme in 1983:

Since the introduction of the schemes a sum of almost £224 million has been spent on headage payments, of which some £97 million has been recouped from the EEC. It is not possible to measure the success of these schemes in maintaining the population of less-favoured areas, given-the scarcity of statistics and the influence of other factors on the social objective (e.g. unemployment assistance). Undoubtedly, however, the inflow of £224 million into the economy of the areas cannot but have had a stabilizing effect on the population.

Expenditure in 1984 is estimated at £36 million, of which 50 per cent will be recouped from the EEC.

Regulation (EEC) No. 355/77 (Marketing and Processing)

30. Under Regulation (EEC) No. 355/77 EAGGF aid is awarded to projects aimed at improving structures under which agricultural products are marketed and processed. The types of projects aided are mainly those relating to the establishment of new food processing facilities or the expansion and modernisation of existing plants. The Regulation came into operation on 1 January, 1978 for a period of five years which was later extended for a further two years to the end of 1984. It has been extended recently for a further period of ten years. The rate of grant is 25 per cent; however this can be up to 50 per cent for projects located in the Disadvantaged Areas of the West of Ireland. In the period 1973-83 EAGGF aid amounting to £55.46 million has been awarded to 234 projects. This is related to an estimated capital investment of approximately £168 million.

Regulation (EEC) No. 1820/80 (Programme for Western Development)

31. The Programme for Western Development which implements Regulation (EEC) No. 1820/80 (dated 24th June, 1980), consists of a wide range of measures designed to deal with the special problems of agriculture in the West of Ireland. It provides over a ten year period, for the injection into the Western region of about £300 million of which about half will come from the EEC and half from the Exchequer. It covers grants for land improvement, commonage division, and for capital investment on the farm together with the provision of improved training and advisory services for Western farmers, grants for forestry development, the improvement of rural infrastructure such as roads, water supplies and electricity and the development of facilities for processing and marketing of agricultural products.

Apart from the improvement of divided commonages, orientation of production (i.e. on-farm investment) and private forestry, progress under the Regulation is considered to be satisfactory. There is provision for a review of the programme after four years and this review will take place in 1985.

Appendix 2 gives details of the progress of the scheme up to the end of March, 1984.

Directive 78/628/EEC (Western Drainage Scheme)

32. The scheme to implement Directive 78/628/EEC came into operation on 1 January, 1979. The Directive provided for field drainage of 100,000 hectares over a five year period, in addition to the arterial drainage of the Corrib-Mask-Robe and Boyle and Bonet catchments which would result in the improvement of a further 30,000 hectares. In 1981, pursuant to Regulation (EEC) No. 2195/81, a further 50,000 hectares of field drainage were provided for during the period up to 1 December, 1986. The EEC refunds 50 per cent of the cost.

Up to 31 December, 1983, 47,039 applications had been received and approvals had been issued for the drainage of 153,920 hectares at an estimated cost of £84,816,000. Drainage works relating to 114,290 hectares had been completed and grants amounting to £41.155 million paid in respect thereof.

It is estimated that the 150,000 hectares of field drainage authorised by the Directive and Regulation will be taken up by applications received up to September, 1981 and consideration is being given as to how applications received subsequent to that date should be dealt with. In fact, no applications under the scheme are being accepted since 1 February, 1984.

C. COMMISSION’S PROPOSALS

33. The Commission proposes to replace Directives 72/159/EEC, 72/160/EEC, 72/161/EEC and 75/268/EEC (associated with Directive 72/159/EEC) with the two Council Regulations outlined, in document COM (83) 559 final referred to in paragraph 2 of this Report. In broad terms, the following are the main provisions of the draft Regulations:

(i)Investment aids for full-time farmers, earning less than the comparable income, who take out improvement plans and undertake to keep simple accounts. Maximum aid eligible for recoupment from the EEC would be 60,000 ECUs per labour unit or 120,000 ECUs per holding in a six year period. Maximum grant rates would be 35 per cent for fixed assets and 20 per cent for other investments (in less-favoured areas, 45 per cent and 30 per cent respectively). For Ireland, Italy and Greece, maximum grant rates would be ten percentage points higher for a period of 30 months. In general, investment aid could not be given for products defined by the EEC Commission as being in surplus. Reimbursement rate by the EEC would be 25 per cent.

(ii)Special aids for farmers aged less than 40 years. These would comprise of an installation premium of not more than 15,000 ECUs and increased investment aid to such farmers who submit an improvement plan within five years of installation. Reimbursement rate by the EEC would be 50 per cent.

(iii)Aid for keeping accounts and launching aids for certain agricultural groups (mutual aid, relief services, management services, etc.). Reimbursement rate by the EEC would be 25 per cent.

(iv)Compensatory payments as at present, but including horses and afforested land (in certain areas) and excluding the provisions whereby a dairy cow counts as 0.8 of a livestock unit. Reimbursement rate by the EEC would be 50 per cent.

(v)Aid for afforestation and improvement of existing woodlands on agricultural holdings. Reimbursement rate by the EEC would be 50 per cent.

(vi)Aids for agricultural training. Reimbursement rate by the EEC would be 25 per cent.

The measures would run for 10 years and the estimated cost to the Community in the first five years is 4,432 million ECUs (about £3,324 million).

34. The Commission are also proposing amendments to Regulation (EEC) No. 355/77 (Marketing and Processing of Agricultural Products). The main innovations would be that there would be more emphasis on new products, new technologies and new outlets, that aid would be paid for harvesting equipment and for primary forest products, that pilot and experimental projects could be aided and that the Commission could decide on the inclusion of products not specified in Annex II of the Rome Treaty. The measure would run for ten years and is estimated to cost the Community 1,750 million ECUs (£1,312 million) in the first five years. The special allocation of eight million ECUs for marketing and processing projects in the West of Ireland (Regulation (EEC) No. 1820/80) would be discontinued.

Implications of the Proposals for Ireland

35. Only the investment aids referred to at paragraph 33 (i) above are mandatory on a Member State. In this connection—

(i)The replacement of development plans by improvement plans would enable Community funded aid to be given to a wider range of farmers. The numbers to benefit under the new arrangements cannot be quantified at this stage pending finalisation of the precise terms of the improvement plan to be followed.

(ii)The rates of grant provided for allow in general for higher rates than those currently applicable under the revised Farm Modernisation Scheme. Member States are, of course, free to fix their grant rates below the maxima allowed.

(iii)The question of restricting investment aids for products such as cereals and beef could arise in the future. Like most Member States, Ireland has opposed the Commission being given the role of deciding which products are in surplus and has advocated that this should be a function of the Council. The Commission proposals on aids for dairy investment are extremely restrictive and, if adopted, would considerably reduce aid for dairy investment in Ireland which heretofore has accounted for up to 50 per cent of all investment aid. The West of Ireland could, in theory, benefit from the exemption granted to areas with special regional measures but since aid for milk investment in the West would have to be in the context of the regional measure in question (Regulation (EEC) No. 1820/80 — Programme for Western Development), which virtually excludes increased milk production, the benefit is more theoretical than real. Since the adoption of the measures to contain milk production, a more favourable climate to allowing some aid for dairy expansion within the overall country quota has developed. The extent to which aid for dairy investment in Ireland will be allowed in the new arrangements depends on now far this trend is reflected in the measure eventually adopted by the Council.

(iv)At present, investment aid for development farmers in the West of Ireland qualifies for 50 per cent recoupment. The Commission proposes to restrict aid to 25 per cent for the whole country. Ireland has voiced its opposition to this proposal.

36. The other aids referred to in the Commission proposals are optional i.e. each Member State is free to decide whether, and to what extent, to implement them. There is provision at present for certain optional aids for young farmers but they have not been implemented in Ireland. If it was decided to implement the young farmer aids and other optional aids provided for in the Commission proposals there would undoubtedly be additional demands on the Exchequer but it is not possible to put a figure on this, pending finalisation of the proposals and a decision as to the extent to which the measure would be implemented in Ireland. Ultimately the cost to the Exchequer would depend on the actual rates of aid, within the maxima laid down, which would be applied here.

As regards Regulation (EEC) No. 355/77, the discontinuation of the specific allocation for the West is seen as providing more room for manoeuvre as between one project and another. It is not expected to affect the overall allocation of funds to Ireland under the Regulation.

D. VIEWS OF VOCATIONAL BODIES

Irish Farmers’ Association

37. In their submission to the Joint Committee the Irish Farmers’ Association (IFA) states that the main objectives of the existing Directives, namely (a) to help farmers modernise, (b) to encourage older farmers to cease farming and thereby release land for younger farmers, (c) to provide socio-economic guidance and (d) to ensure that continuation of farming in certain less-favoured areas should continue to form the basis of Community socio-structural policy in the coming years, although the specific measures should be made more effective by being adapted to the new circumstances which now prevail.

The IFA feels that the discretionary powers assigned to the implementing authorities under the Commission proposals are too broad and is of the opinion that many of the proposals would be more effective by making them mandatory.

38. The IFA is extremely concerned by the Commission proposals for very wide-ranging restrictions on the provision of aid, not only in certain specified sectors, but also in certain unspecified sectors which would at present be defined as having no normal market outlet for the product concerned. It also feels that any sector which is to be subject to limitations on the provision of aid must, in any event, be announced well in advance in order to enable farmers to make future plans on a sound basis and that it must be ensured that, if any aid under Community structural policy is to be restricted, other aids and measures are not provided outside the agricultural sector which lead to increases in production. Furthermore, while the Commission emphasises the importance of encouraging reconversion of farm production in line with market requirements, the IFA considers this should be supplemented by more specific measures such as the encouragement of research, in particular into new and better varieties.

39. The IFA rejects the Commission’s proposal that the maximum level of aid paid to individual farmers be significantly reduced compared with the existing level. It requests that, if the proposals are to have the desired results, the maximum level of aid be increased and regularly revised in order to take account at least of inflation. With regard to the financing of socio-structural policy, it is extremely important that it is operated through common measures. This can be best achieved by ensuring joint Community finance comparable to that provided for price and market policy. The IFA, therefore, rejects the Commission proposal that the contribution from the EAGGF in the application of socio-structural policy be maintained at 25 per cent in most cases and requests that the EAGGF contribution be immediately increased to 50 per cent (85 per cent in certain less-favoured areas). Such a level of contribution would help in countries such as Ireland with fewer financial resources and facing most serious structural problems.

40. The IFA welcomes the fact that more farmers will be included for aid under the Commission proposals by virtue of the fact that the Comparable Income does not have to be attained in an Improvement Plan but feels, however, that the Comparable Income attainable should be fixed at 150 per cent. The IFA urges that the restrictions on aid to milk production should not apply in Ireland’s case and that aid should apply to 50 cows per farmer or 70 cows per holding.

41. With reference to aid for pig production the IFA maintains that the restriction of 550 pig places is too limiting, and that this should be increased to 1,000 and that the 35 per cent feed requirement to be met from the farm should be removed, as pig production in Ireland generally takes place in areas unsuitable for cereal production.

42. Other specific points made to the Joint Committee by the IFA in their submission are as follows:

—the six year Plan should be increased to at least eight years;

—the 10 per cent extra aid that can apply to Ireland, Italy and Greece for the first thirty months of the Plan should be extended to the length of the Plan;

—that extra aid apply to young farmers who opt for long term leasing arrangements.

43. The IFA notes that there is no provision to reinstate measures to encourage retirement from farming and expresses disappointment at the failure of the Commission to propose a workable scheme in their proposals. The IFA urges that the Irish Government seeks a derogation for the introduction of a retirement scheme and that consideration be given for application to transfers within families, due to the serious structural problem of Irish agriculture.

44. In relation to the Commission proposals to amend Directive 75/268/EEC the IFA are disappointed that the Commission has failed to propose that certain areas of Ireland be classified for reasons other than altitude, climatology, distance from markets, etc. It feels also that the number of cows eligible for compensatory allowance under Directive 75/268/EEC should be increased to twenty.

ACOT (An Chomhairle Oiliúna Talmhaíochta)

45. In their submission to the Joint Committee ACOT generally welcomes the Commission’s proposals in relation to the system of aids for investment in agricultural holdings in that a larger proportion of Irish farmers would qualify to follow development schemes which would be supported financially by the Community and that farmers who have not achieved the Comparable Income may also benefit from investment aid. However, An Chomhairle fears that these improvements could be offset by the restrictive criteria which make investment aid contingent on “qualitative improvements and conversion of production in the light of market requirements” and the withholding of aid “where the effect of such investment is to increase the holding’s production of products for which there is no normal market outlets”. This gives rise to a conflict in the Irish context in as much as that a larger proportion of the total number of farmers are now proposed as being eligible for investment aid and yet the market and budget constraint dictates that there cannot be any increase in the output of certain products, presumably on the grounds that such investment would allow “qualitative improvement” which should allow a higher unit price, or reduction of production cost, which would increase the margin for each unit of production. Reliance on income generation from “qualitative improvement” to the exclusion of the other avenue of reducing unit cost — i.e. increasing output — would, in the view of An Chomhairle, be insufficient to generate the level of cash flow necessary to finance development. It notes that an exemption from the restrictions on investment aids for the products from which there is no normal market outlet is proposed for the areas covered by the Western Package and urges that this exemption be extended to the whole country.

46. In relation to the proposed aid of 1,000 ECUs (£700 approximately) for farmers who begin to keep management accounts and provide to do so for at least four years, An Chomhairle feels that, if these accounting arrangements could be meshed in with systems currently employed by farmers, the scheme could have some appeal. An Chomhairle also sees advantages for Irish farmers from launching aids for group undertakings, farm relief services and farm management services.

47. An Chomhairle identifies the willingness of the Irish Government to fund schemes as the key to farmers deriving benefit under the measures in the Commission proposals to assist mountain and hill farming in the Disadvantaged Areas of Ireland, such as headage payments for which the Community will reimburse 50 per cent of the cost. Aid for investment on agricultural holdings for the promotion of tourism or craft industry together with aid for fodder production in Disadvantaged Areas are seen by An Chomhairle as likely to be of benefit to the farming community, should appropriate national schemes be introduced.

48. In order to gain advantage to Irish farming from the Commission proposals for woodland improvement, An Chomhairle urges a realistic approach to the appointment of horticultural advisers as an indispensable prerequisite. It urges also that consideration be given to which body is best suited to undertake the development of woodlands on farm holdings should it be decided to increase the numbers of advisers.

49. As regards the aids for vocational training for farmers, family helpers and agricultural workers outlined in the Commission proposals, ACOT sees itself as the organisation best equipped to undertake such courses, particularly as courses of instruction or training which form part of normal programmes or systems of agricultural education at secondary or higher level are excluded from aid under the proposals. An Chomhairle would like to see the possibility of co-ordination with Vocational Education Committees and Regional Technical Colleges in the provision of agricultural training explored. It hopes to co-operate with the Agricultural Institute in relation to the operation of such measures as pilot schemes to demonstrate to farmers the real possibilities of production systems, methods and techniques for achieving the objectives of quality improvement, reducing production costs etc., which also qualify for Community aid and which would appear to offer possibilities to test farming systems.

50. The Commission proposals provide for the carrying out of studies to assess the economic efficiency of the measures for which aid is being provided. Such studies, according to An Chomhairle, could provide very useful results as to the cost effectiveness of different approaches to agricultural development and could considerably assist it in developing its future programmes.

51. ACOT, in their submission to the Joint Committee, included tables of comparison of existing rates of grants under the revised Farm Modernisation Scheme and the rates permissible under the new proposals. The Joint Committee considers these tables a very useful reference source and reproduces them in Appendix 3.

E. VIEWS OF THE JOINT COMMITTEE

52. Socio-structural policy is an integral part of the Common Agricultural Policy and, while it can never take its place, in the Joint Committee’s view, it is an essential complement to price and market policy. One of its most important objectives is to enable farmers, through modernisation, to attain income and living conditions which are comparable with those in other sectors. Price and market policy must then be geared to ensuring that farmers on these modern farms are able to maintain their position via the market. Socio-structural policy is therefore of fundamental importance for improving the living and working conditions of farmers and for ensuring the optimal economic, social and environmental use of Ireland’s most important natural resource.

Past experience of the application of the socio-structural Directives has shown that their contribution towards structural improvements in Ireland and in the Community has been far too limited. More and more farmers have had difficulty in showing that they could meet the target Comparable Income set for farm development plans. One of the main reasons has been the dramatic fall in real farm incomes which has occurred since the Directives were first introduced which, in large part, has been caused by the fact that common farm prices have not been fixed on the basis of the Objective Method.

There has also been a marked change in the general economic climate since the Directives were first introduced. In particular, the significant outflow of labour from the land which, in the past, was one of the major driving forces behind structural change, is no longer possible given the high level of unemployment.

Past experience has also shown that many of the problems facing farmers cannot be solved merely by measures to improve structures at the individual farm level. Action at a much wider level is required not only in the sphere of agriculture, and the marketing and processing of agricultural products, but also to improve the infrastructures and general socio-economic situation in these regions.

It must be ensured that socio-structural policy is much more effective than it has been in the past, that it is adapted to the general economic and social conditions which are likely to prevail over the next decade and that priority is given to the less-favoured farmers.

53. The Commission has proposed additional aids to help young people in farming; however, it appears that the provision of this aid will continue to be at the discretion of Member States. The Joint Committee considers that aid for young farmers should be made available in all Member States and that additional measures are required in order to tackle the specific problems faced by young farmers in their initial establishment in farming.

As a large proportion of farmers have had great difficulty in attaining the target Comparable Income at the end of a development plan, the Joint Committee welcomes the fact that the Commission is proposing that the Comparable Income be no longer a target and it is hoped that this will enable more farmers, particularly those in greatest need, to be eligible for aid.

54. The Joint Committee considers that the specific problems of our developing regions cannot be solved by structural measures alone applying to individual farms or farmers but must be tackled through more general measures of an agricultural nature (e.g. measures to improve irrigation, drainage, lime content, marketing, processing and infrastructure) and also of such a nature as to create employment possibilities and other sources of income such as tourism, crafts, forestry and industry.

It considers the Commission proposal to enable the adoption of specific measures to overcome particularly serious structural handicaps or infrastructural weaknesses in the less-favoured areas to be a positive step in this direction although more details are required on the form such measures may take. It is important, however, that the implementation of specific regional measures of this kind in no way reduce the funds available for structural support at individual farm level.

55. The Joint Committee wishes to express its concern about the severe restrictions proposed for dairy investment. One half of all farm families depend almost solely on milk for their incomes. The Joint Committee hopes that our negotiators will pay particular attention to the special needs of Irish dairying and that they will emphasise the specific problems of dairying in the Disadvantaged Areas.

56. The Joint Committee is pleased to note that the Commission has proposed that horizontal agricultural structural policy may include forestry measures for certain agricultural holdings and areas. It would like however, to see the egg and poultry meat sector included for investment aid in order to encourage farm yard enterprise.

57. The Joint Committee welcomes the inclusion of horses for aid under the Community proposals and urges that determined steps be taken to ensure that the Irish draught industry benefits from this aid. It would also like to see the position of ponies, in particular Connemara ponies, examined in the context of the Community aid proposed. The Joint Committee wishes to stress the importance of the non-thoroughbred industry in this country as a source of good show-jumping stock.

58. The Joint Committee is particularly concerned about the Commission proposal to restrict investment aid recoupment for developing farmers to 25 per cent throughout the whole country. This must be seen as a serious retrograde step for Western development farmers and the Joint Committee urges that it be vigourously opposed. Indeed the Joint Committee feels that, in view of the particular difficulties facing agriculture in this country and the central role of agriculture in our economy, the 50 per cent level of recoupment should be applied in the case of all improvement plan farmers.

The importance of the Farm Modernisation Scheme to Irish farming is underlined by a recent ACOT study which revealed that participants in the Scheme had a gross margin of 33⅓ per cent higher than nonparticipants. However, the ACOT study also revealed that farmers under the Farm Modernisation Scheme had to bear up to 88 per cent of their individual investment expenditure. The ACOT study, in the Joint Committee’s view, fortifies the case for significantly increasing the level of recoupment aid for all Irish farmers.

The Joint Committee is apprehensive about the wide-ranging restrictions on the provision of Community aid particularly in relation to products for which there is no “normal market outlets”. This is a rather sweeping restriction and could give rise to serious problems in the Irish context where products such as beef could be affected. The Joint Committee understands that since making their original proposals the Commission have adopted a less rigid approach on products in surplus and hopes that the final measures adopted by the Council will reflect this position.

59. The Joint Committee considers that the release of land through encouragements to older farmers to cease farming will be an extremely important means of ensuring employment for younger farmers, as well as achieving structural improvement and thereby improvements in farmers’ living and working conditions in the coming years. It deprecates the omission of any intention in the Commission proposals to reinstate the Farm Retirement Directive (72/160/EEC) in a revitalised form which would ensure a reasonable measure of take-up. The Joint Committee would like to see provision for inter-family transfers included in any new scheme as this could be instrumental in releasing a significant amount of land to improvement farmers. The Joint Committee feels that, had the Farm Retirement Scheme been better marketed in Ireland, it could have been more successful. In this connection, the introduction of a national pension scheme would, in the Joint Committee’s view, create a favourable atmosphere for the launching of a new retirement scheme. However, the Joint Committee notes that retirement schemes under Directive 72/160/EEC have had an extremely limited impact on the stimulation of land mobility for structural reform purposes except in France which already had a national scheme. The Commission must analyse the cause of the failure of the farm retirement measures and come up with an attractive package.

The Joint Committee considers that farmers on farms where the structure does not permit modernisation, and who cannot either change their job due to their age or benefit from retirement annuities, should be helped by the provision of transitional aid under conditions compatible with the Common Agricultural Policy.

60. The Joint Committee believes that, in order for this country to benefit to the full from the Community aid proposed by the Commission, the Government must be willing to introduce appropriate national schemes. The Joint Committee is concerned at the wide ranging discretionary measures in the proposals and would prefer to see a stronger mandatory element introduced.

61. The Joint Committee is in general agreement with the specific recommendations made in the submissions of the vocational bodies and urges that our negotiators press for their implementation in the final measures agreed by the Council. In particular it would support the suggestion that the special young farmer aids should apply to long-term leasing.

F. CONCLUSION

62. The Joint Committee notes with concern the uneven operation of the present structural measures, particularly the lack of revision of rates of grants to keep abreast of inflation and, more seriously, their suspension for the best part of 1983. All grants on dairy buildings were removed for a period, being restored at the end of April, 1984. These restrictions were applied mainly due to the lack of finance and, the Joint Committee contends that, unless the basis of financing the Community budget is overhauled, a similar fate could befall the present Commission proposals. The revenue yield from agricultural levies and the Common External Tariff is diminishing and, therefore, the Community must rest its financial basis more on. VAT contributions. The financing of the Common Agricultural Policy will face stiff competition from sources such as the Social Fund and the Regional Development Fund. All these Community development policies are vital to the welfare and progress of the Community and the Joint Committee feels that, rather than have competition among them for funding, the resources of the Community should be enhanced to allow each fulfil its role.

63. The structural policy of the Community should be examined to identify its potential for job creation. The Joint Committee, accordingly, urges that the Commission proposals, when adopted, be exploited to the full through the introduction of complementary national schemes in order to ensure that the Irish economy benefits to the full.

MAURICE MANNING, T.D.

Vice-Chairman of the Joint Committee.

11 July, 1984.

⁽¹⁾ Directives 72/159/EEC, 72/160/EEC and 72/161/EEC were due to expire on 30 June, 1984 but their operation was extended to 31 October, 1984 at the June, 1984 Agricultural Council meeting. The operation of Regulation (EEC) No. 355/77 was continued in operation for a further period of ten years at the same Council meeting. Regulation (EEC) No. 1820/80 was left unchanged.