Committee Reports > List of Committees > Joint > 1984 > Committee on the Secondary Legislation of the European Communities > Report No. 07 - Deputy Joe Walsh's Draft Report on the Application of the Milk Super Levy

Joint Committee on the Secondary Legislation of the European Communities

REPORT

A. INTRODUCTION

1.The Joint Committee has examined the following Community Regulations in connection with the application of the milk super - levy in this country and, particularly, the calculation of the guaranteed total quantity of milk to be exempted therefrom.

(a)Council Regulation (EEC) No. 856/84 of 31 March 1984 amending regulation (EEC) No. 807/68 on the common organisation of the market in milk and milk products.

(b)Council Regulation (EEC) No. 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5C of Regulation (EEC) No. 804/68 in the milk and milk products sector.

(c)Commission Regulation (EEC) No. 1371/84 of 16 May 1984 laying down detailed rules for the application of the additional levy referred to in Article 5C of Regulation (EEC) No. 804/68.

2.This Report was prepared on behalf of the Joint Committee by Deputy Joe Walsh in his capacity as Chairman of the Sub-Committee on Agricultural and Fisheries matters. The Joint Committee wishes to record its appreciation of Deputy Walsh’s work.

3.The Joint Committee was assisted in its consideration of the Community Regulations by two officials of the Department of Agriculture, Mr. Michael Corry and Mr. Brendan Nevin. The Joint Committee wishes to thank both these officials for the assistance they gave it.

B. THE MILK QUOTA SYSTEM

General

4.The decisions taken by the Council of Ministers on 31 March 1984 for the introduction of a super-levy applicable for a period of five years from 2 April 1984 to milk delivered in excess of defined quantities represent the culmination of several years of discussion, originating in the latter part of the 1970’s on the means by which Community milk production can be more closely matched with the needs of the market.

Market imbalance

5.The tendency for Community milk deliveries to rise at a significantly greater rate than the increase in normal internal consumption and in export demand is not a recent phenomenon but has been a feature of the milk sector since the earliest days of the Common Agricultural Policy. The achievement of a self-sufficiency ratio in milk and milk products well in excess of 100% was leading to structural imbalances in the dairy market even by the time of the first enlargement of the Community and the widening difference between production and normal commercial demand could only be eliminated through frequent recourse to public intervention, subsidised disposal schemes on the internal market and a greater, more precarious dependence on the export outlets provided by a volatile world market with, as a consequence, increased calls on the FEOGA for expenditure on intervention measures and export refunds.

Producer Coresponsibility

6.Whilst the earliest Community measures intended to relate milk production more closely to demand were concentrated on voluntary actions to reduce production by, for example, the payment of premiums to producers for dairy cow slaughter or for conversion to beef production, as well as on the maintenance and strengthening of demand through internal disposal schemes and the pursuit of an active export policy, the introduction in 1977 of a flat-rate coresponsibility levy on producers’ milk deliveries to dairies represented a first step towards the assumption by producers of a degree of financial responsibility for structural surpluses.

7.Experience was to show, however, that while the coresponsibility levy played an important role in generating funds which could be used, in particular, for measures aimed at expanding markets, neither this levy nor the non-marketing of milk and reconversion scheme which was introduced at the same time had any perceptible long-term impact in curbing the almost unremitting upward evolution in milk deliveries. Instead, the growth in production continued to outstrip the barely positive trend in consumption which, despite the application of both existing and new disposal measures was tending to stagnate or even decline in some important product areas.

The first Super-Levy proposals

8.The likely economic and financial consequences of the continuing divergence between the prospects for production and forseeable demand led the Commission towards the end of 1979 ⁽¹⁾ to launch the idea of a supplementary levy applied to milk delivered to dairies in excess of defined base quantities and to present this idea in its price proposals in 1980 ⁽²⁾ as a firm proposal for the introduction of a super-levy, applicable to the excess quantities at the rate of 84% of the target price in order to meet the disposal costs of the additional milk. Neither this proposal, which can be said to have formed the genesis for the present decisions, nor a similar but modified proposal submitted by the Commission in 1981 ⁽³⁾ was accepted at the time by the Council.

New guidelines for the milk sector

9.In three policy documents drawn up by the Commission at the end of 1980 and during 1981 ⁽¹⁾ in the context of the Council’s mandate to the Commission of 30 May 1980, the analyses of the outlook not only for milk but also for other agricultural products showed that it was neither economically sensible nor financially possible to give producers a full price guarantee for unlimited quantities of products in structural surplus. It was proposed that guidelines for future decisions on the Common Agricultural Policy should therefore include the modulation of the guarantees in line with annual production targets, determined within a five-year framework of the perspectives for production, consumption and trade, so that producers would bear at least part of the disposal costs for quantities exceeding the targets. The precise form in which the guarantees would be modulated, either through a levy system or another mechanism such as a lowering of the support price, would depend upon the characteristics of the sector concerned.

10.For milk, the objective of production should be that deliveries to dairies should not increase more rapidly than the growth in Community consumption, which at the time implied an increase of about 0.5% a year. The Commission considered that the measures to be adopted for this sector should include the continuation of a prudent price policy but with a strengthening of coresponsibility by:

- the maintenance of the existing coresponsibility levy at its then level of 2.5% of the target price for as long as expenditure on milk occupied more than 30% of the Guarantee Section of FEOGA:

- the introduction of a supplementary levy, designed to cover the costs of disposal of milk in excess of the production objective and applied to dairies who in turn would apply it to individual producers on the basis of their additional deliveries;

- a special levy on milk from intensive farms.

The Commission made it clear that if these measures were not accepted, producer participation should be introduced in the form of a reduction in intervention prices if production exceeded the objective.

The adoption of a guarantee threshold for milk

11.In its price decisions in 1982, the Council adopted a production target for the milk sector in the form of a guarantee threshold for 1982, based on the quantity of Community milk deliveries to dairies in 1981 plus 0.5%, agreeing that, if this threshold was exceeded, appropriate measures would be taken to offset the additional expenditure. In fact, deliveries in 1982 exceeded the threshold by about 3% and in its 1983 price decisions, the Council, which at the time was not ready to introduce supplementary and intensive levies, accepted the Commission’s proposal for the guarantee to be modulated through an equivalent 3% abatement of the price increases for the milk sector. At the same time, the Council fixed a guarantee threshold for 1983 equivalent to milk deliveries in 1981 plus 1%.

The Stuttgart mandate

12.During the course of 1983 it became clear that the abatement applied to milk prices was failing to achieve the desired effect of controlling the increase in production; indeed, the forecast additional rise of 3.5 - 4% for 1983 suggested that deliveries were expected to exceed the guarantee threshold by at least 6%. Following the mandate given by the European Council at Stuttgart in June 1983, the Commission in the following month therefore submitted new proposals for the adaptation of the Common Agricultural Policy ⁽¹⁾.

13.In this Commission document of July 1983, it was estimated that in order to offset fully the additional expenditure likely to arise from the guarantee threshold being exceeded, the milk price for 1984/85 would have to be abated by as much as 12%. This would have had serious and immediate effects on the revenues of producers while there would be some delay before the full effect on production was achieved, a delay which could not be reconciled with the financial imperatives facing the Community.

14.For these reasons, the Commission concluded that the principle of the guarantee threshold in the milk sector should be implemented through a quota system accompanied by a restrictive price policy. In these initial July proposals, it was made clear that reference quantities or quotas, corresponding to the concept of the guarantee threshold, would be established for each dairy, based on deliveries in 1981, and that all deliveries in excess of this quantity would be subject to a supplementary levy designed to cover the full costs of disposal of the additional milk. These initial proposals, which were followed by precise proposals in the form of draft regulations in September 1983 ⁽¹⁾, were the subject of intense discussions amongst the Community institutions and the socio-professional groups concerned during the remainder of 1983 and the opening months of 1984 and formed the basis for revised proposals ⁽²⁾ on which the Council finally took its decisions of 31 March 1984 introducing a quota and Super-Levy system in the milk sector. Principal Features of the Quota System

15.The main elements of the quota system are that guaranteed total quantities are determined in respect of deliveries of milk to purchasers for each Member State and that, depending on the formula chosen for the application of the Super-Levy, these total quantities are allocated within the Member State in the form of reference quantities to purchasers (dairies) and/or to producers. A Super-Levy, designed to discourage additional production and as necessary to finance the cost of disposal of the extra milk, is applicable to deliveries in excess of these reference quantities. There are special arrangements including the establishment of national reserve quantities, to take account of the difficulties of certain producers in special situations. There are separate provisions in respect of direct sales of milk and milk products.

Duration

16.The system is applicable to all deliveries and sales of cows’ milk for five consecutive periods of 12 months beginning on 1 April 1984 except that the first period starts on 2 April 1984. The Commission will report to the Council on the operation of the levy system at the end of the 1986/87 period.

Determination and allocation of guaranteed total quantities

(a) Deliveries to dairies

17.An annual guaranteed total quantity of milk has been determined for the Community as a whole, corresponding in principle to the quantity of cows’ milk delivered to dairies and other undertakings treating or processing milk in 1981 plus 1%. This quantity is allocated among the Member States in proportion to their share in the Community total of deliveries in 1981 except that, in recognition of the particular circumstances of milk production in Ireland and Italy, the guaranteed total quantities for these two Member States have been established on the basis of their deliveries in 1983. The guaranteed total quantities fixed for each Member State provide the framework for determining the quantities of milk beyond which additional deliveries are liable to the application of a Super-Levy.

18.In sum, the annual guaranteed total quantity for the Community as a whole for the five year period has been set at 98,152,000 tonnes. As a transitional measure, however, the Council has decided to grant an additional quantity of nearly 1 million tonnes to the guaranteed total quantity for the first 12 month period, giving a Community total for the period 2 April 1984 to 31 March 1985 of 99,024,000 tonnes. In order to cover the cost of this concession, the Council increased the rate of the flat-rate coresponsibility levy from 2% to 3% of the target price for milk.

19.The Regulations on the quota and Super-Levy system also provide for a “Community reserve” to be constituted in order to supplement at the beginning of each of the 12 month periods, the guaranteed total quantities of those Member States in which implementation of the system raises particular difficulties liable to affect their supply or production structures. For the period 2 April 1984 to 31 March 1985, this reserve has been fixed at 335,000 tonnes for allocation between Ireland (245,000 tonnes), Northern Ireland (65,000 tonnes) and Luxembourg (25,000 tonnes). This auguments the total quantity for the Community for 1984/85 to 99,359,000 tonnes.

(b) Direct Sales

20.Separate quota arrangements apply in respect of milk and milk products which are not delivered to dairies and other purchasing undertakings but which are sold directly to consumption by producers. For these quantities, quota amounts have been established for each Member State on the basis of the quantity of milk and milk equivalent sold directly in 1981 plus 1%.

Determination of reference quantities for deliveries to dairy purchasers within each Member State

(a) Choice of formula

21.For each region within its territory, the total guaranteed quantity applicable to deliveries to dairy purchasers is allocated by the Member State in the form of reference quantities (quotas) fixed for 12 month periods for each dairy purchaser and/or each milk producer according to a choice between two formulas:

-Formula A. Reference quantities are fixed for each producer, with the producer being liable to a Super-Levy equivalent to 75% of the target price for milk (ie a levy of 20.57 ECU/100 kg for 1984/85), payable on the quantities of milk or milk equivalent delivered during the 12 months concerned in excess of the reference quantity.

-Formula B. Reference quantities are fixed for each purchaser of milk or other milk products with the purchaser being liable to a super-levy equivalent to 100% of the target price (27.43 ECU/100 kg for 1984/85), payable on the quantities of milk or milk equivalent delivered to him by producers during the 12 months concerned in excess of the reference quantity. The purchaser liable to the levy is required to pass on the burden in the price paid to those producers who have increased their deliveries, in proportion to their contribution to the purchaser’s reference quantity being exceeded.

The system also provides that for Greece (where formula B is applied) all purchasers taken as a whole are considered as one purchaser.

(b) Flexible application

22.In determining reference quantities under either formulas A or B, the national authorities may base these either on deliveries or purchases of milk or milk equivalent in 1981 plus 1% or on deliveries or purchases in the 1982 or 1983 calendar years adjusted by a percentage so to ensure that the sum of the reference quantities does not exceed the total guaranteed quantities laid down for each Member State. On the basis of specified Community criteria, this percentage may be varied between categories of producer or between regions in order to take account of differences in production and collection conditions within Member States.

The percentages used to determine reference quantities in relation to deliveries or purchases in 1981, 1982 and 1983 can also be adapted to provide for the allocation of reference quantities for certain special situations and cases.

(c) National reserve quantities

23.In order to take into account the special situations of certain producers for whom specific or additional reference quantities may be granted, Member States may constitute a reserve quantity within the limit of their guaranteed total quantity.

(d) Provision for special cases

24.Additional reference quantities drawn from national reserves or from other quantities made available within the limits of the guaranteed total quantity for each Member State may be allocated in order to take account of the aforementioned special situations of certain producers and in order to permit structural adaptation. Specific or additional reference quantities may be granted in respect of the following cases:

(i)Producers who have adopted milk production development plans under Directive 72/159/EEC lodged before 1 March 1984 may obtain, according to the Member State’s decision, a special reference quantity taking account of the milk and milk product quantities provided for in the development plan if the plan was still being implemented on 1 April 1984 or, in the case of implementation of the plan after 1 January 1981, a special reference quantity taking into account the quantity of milk and milk products delivered in the year during which the plan was completed. Under certain conditions, non-development plan investments may also be taken into consideration.

(ii)A specific reference quantity may be granted to young farmers setting up after 31 December 1980.

(iii)Producers whose milk production during the year used to determine reference quantities has been affected by exceptional events shall be allowed, at their request, that their reference quantities be calculated on the basis of another reference year during the 1981 to 1983 period. The exceptional events may include:

-a serious natural disaster affecting the producer’s farm to a considerable extent,

-the accidental destruction of the producer’s fodder resources or buildings used for dairy livestock,

-certain diseases affecting all or part of the milk herd,

-compulsory appropriation of a considerable part of the utilisable agricultural area of the producer’s holding, resulting in a temporary reduction of the fodder area,

-if the producer runs the holding himself, occupational incapacity of long duration,

-theft or accidental loss of all or part of the dairy herd where this has a significant effect on the milk production of the holding.

(iv)Subject to certain conditions and at the decision of the Member State, an additional reference quantity may be granted to producers realising a milk production development plan approved after 1 April 1984 under Directive 72/159/EEC.

(v)According to the decision of the Member States, producers who undertake farming as their main occupation may also be eligible for an additional reference quantity.

(e) National aid for the cessation of milk production.

25.In order to promote structural development in the milk sector, Member States are permitted to grant compensation paid in one or more annual payments to producers undertaking to discontinue milk production definitively. The reference quantities freed by these provisions shall, as necessary, be added to the national reserve quantities.

Reference quantities for direct sales to consumption

26.In principle, each milk producer selling directly to consumption is assigned a reference quantity related to his direct sales of milk and milk equivalent in 1981 plus 1% or, in the case of a producer who began direct sales from 1 January 1981 but before 1 April 1984 or who has greatly altered his operations since 1 January 1981, related to his sales in the last twelve months of operations before April 1984. Where these operations cover less than 12 months, annual sales quantities and appropriate reference quantities are determined on the basis of actual sales.

The reference quantities calculated under the above provisions are corrected where appropriate by a percentage to ensure that the sum of the direct sales reference quantities does not exceed the total quantity specified for the Member State concerned.

27.In order to deal with special situations, there are provisions, similar to those specified in the case of the reference quantities established in respect of deliveries to purchasers, for producers who sell directly to be granted additional or specific quantities.

Producers who have obtained a direct sales reference quantity and who cease these sales wholly or in part may instead deliver their milk and milk products to a purchaser provided that the Member State is able to grant them a reference quantity from the guaranteed total quantity applicable to deliveries to purchasers. There are comparable provisions in the case of producers who wish to switch wholly or in part from delivering to purchasers to direct selling.

The rate of super-levy applicable to direct sales of milk and milk equivalent in excess of each producer’s reference quantity is 75% of the target price (20.57 ECU/100 kg for 1984/85).

Transferability of reference quantities

28.Reference quantities granted to purchasers or to producers delivering to purchasers or selling directly are not freely transferable or saleable except that where a holding or undertaking is sold, leased or transferred by inheritance, all or part of the corresponding reference quantity is transferred to the purchaser, tenant or heir. Member States may provide, however, that a part of the quantities concerned be added to the national reserve. Where an entire holding is sold, leased or transferred by inheritance, the corresponding reference quantity is transferred in full to the producer who takes over the holding, but where one or several parts of the holding are transferred, by sale, lease or inheritance, the corresponding reference quantity is to be distributed among the producers operating the holding, in proportion to the areas used for milk production or according to other objective criteria established by the Member State.

29.In the case where, under formula B, a purchaser replaces wholly or in part, one or more purchasers, including cases where producers change from one purchaser to another, there are provisions for the annual reference quantity of the purchaser concerned to be adjusted to take into account all or part of the reference quantities of the purchaser or purchasers whom he replaces. Again, Member States may provide that a part of the quantities concerned may be added to the national reserve.

30.Where formula B is being applied, the reference quantities of purchasers are also adjusted to take account of additional quantities assigned to special case producers and to former direct sellers who have been granted a reference quantity in respect of deliveries to purchasers, and to take account of changes resulting from the sale, lease or transfer by inheritance of a holding.

Application and payment of the Super-Levy

31.In the case of deliveries to purchasers under either formulas A or B, the levy due on milk and milk products delivered in excess of reference quantities is collected during each 12 month period by means of quarterly payments on account, calculated on the basis of the quantities of milk or milk equivalent which for the liable producer (formula A) or the liable purchaser (formula B) exceed, for the relevant quarter, the cumulative reference quantity at the end of the quarter concerned. Payments are to be made within 45 days of the end of the relevant quarter. Special transitional arrangements for the collection of the levy apply in respect of Greece, Italy and certain mountain regions of the Community. For the other Member States and Community regions, the levy amounts due on excess milk deliveries during the first two quarters of the 1984/85 period are taken together so that the first payments of the levy will be required by mid-November 1984.

There is provision for overpayments to be refunded in cases where the levy paid in respect of a preceding quarter or quarters has exceeded the amount actually due since the beginning of the 12 month period concerned.

32.At the end of each 12 month period, there is a final account for each producer or purchaser liable to the levy, calculated on the basis of the actual excess during this period beyond his annual reference quantity. The difference between the final amount of levy due and the sum of the quarterly payments actually made is to be paid or refunded before 1 July following the end of the 12 month period concerned.

Levy payments due from producers who sell directly to consumption and who exceed their reference quantities will be collected annually and are payable within three months or, by derogation, four months of the end of the 12 month period concerned.

Other provisions

33.The rules on the quota and levy system provide for the levy to be applied to deliveries or direct sales of not only whole milk but also of other milk products such as cream, butter and cheese. The levy applicable to these products is based on their whole milk equivalent. There are also provisions to take account of the average fat content of milk delivered or purchased in order to combat fraud.

As is already the case for the existing coresponsibility levy, Member States should adopt whatever additional measures are required to ensure collection of the levy and inform the interested parties of the penal or administrative sanctions to which they will be subject if they fail to comply with the provisions of the levy system.

Implementation by the Member States of the quota system in 1984/85 in respect of deliveries to purchasers

34.With the exception of the United Kingdom, all Member States have chosen to apply a single formula to all regions within their individual territories.

Belgium, Germany, the Netherlands and Northen Ireland have opted to apply formula A (liability for levy by producers) during the first 12 month period. In other Member States formula B (liability to levy by purchasers) will be applied.

35.The majority of Member States have chosen to base the determination of reference quantities for producers or purchasers on milk deliveries during the 1983 calendar year, adjusted by a percentage. Greece and Luxembourg, however, are to establish reference quantities on the basis of deliveries in 1981.

Variations in the determination of reference quantities according to category of producer of region

36.In calculating reference quantities for individual producers or purchasers, Belgium, Germany and Ireland have differentiated the percentage applied to deliveries in 1983, according to the volume of milk delivered by the producers concerned.

In Belgium, the reference quantities for milk producers dependent upon dairying for a substantial part of farm income and who deliver less than 60,000 litres a year are calculated on the basis of a smaller percentage deduction than for other producers.

In Ireland, the reference quantities for purchasers are based on 1983 deliveries plus an amount or percentage which distinguishes between producers delivering more or less than 15,000 gallons a year (approximately 68,000 litres). This should ensure that in comparison with 1983, the reference quantities for purchasers with the greatest number of small producers are higher than those established for purchasers where larger producers predominate.

In Germany, reference quantities for producers are calculated according to percentage deductions which are differentiated both according to the volume of milk delivered by the producer but also, for certain categories of producer, according to the increase in deliveries between 1981 and 1983. Thus, the maximum percentage deduction from the 1983 base is made in respect of the reference quantities for producers delivering the greatest volume of milk and with the highest increase in deliveries in the period 1981-1983.

The United Kingdom, in the reallocation of reference quantities released by producers benefiting from national compensation measures, also intends to give priority to small producers (in England and Wales, production of less than 200,000 litres in 1983), with the objective of supplementing their reference quantities to the level of their actual deliveries in 1983.

France and the United Kingdom have announced their intentions to apply a degree of regional differentiation in determining reference quantities based on 1983 deliveries.

In France, the initial reference quantities for purchasers in mountain regions are calculated on the basis of a smaller percentage deduction from the 1983 deliveries than for other French regions.

In the United Kingdom, reference quantities for certain remote island and peninsula areas of Scotland are similarly established by means of a smaller percentage deduction from the 1983 delivery base than for the remainder of this Member State.

Establishment of national reserve quantities

37.In Belgium, Denmark, Greece, the Netherlands and the United Kingdom, the percentages applied to deliveries in the reference year in order to calculate reference quantities for producers or purchasers make provision for the establishment of initial national reserve quantities, to be used for the granting of specific or additional reference quantities in respect of special case producers. In other Member States, it is considered that sufficient quantities will be made available for special cases from producers who have already ceased milk production since the beginning of the reference year or from the reference quantities which may be obtained from producers who will leave the sector in the future, including from those who benefit from national compensation measures for the cessation of milk production.

National compensation measures for the cessation of milk production

38.Germany, France, Italy and the United Kingdom are amongst the Member States which intend to grant national compensation to producers who undertake to discontinue milk production definitively so that the reference quantities released to the national authorities may be used to grant specific or additional reference quantities in respect of the remaining and new producers who qualify as special cases.

In Germany, an amount of 1,000 DM per 1,000 kg, up to a maximum of 150,000 DM per farm will be awarded to the producer concerned, payable over a 10 year period. This scheme, which commenced in June 1984 and for which applications were to be received by 1 October, 1984, is expected to release reference quantities totalling up to 1 million tonnes, equivalent to a little over 4% of the guaranteed total quantity for Germany.

In France, a scheme was commenced in June 1984 to remain open for applications until the achievement of the objective of releasing reference quantities totalling 1 million tonnes, equivalent to approximately 4% of the guaranteed total quantity for France. This scheme, for which funds totalling 605 million FF are available for 1984, provides for three separate categories of aid:

-For producers who are more than 65 years of age or other producers in receipt of an old age pension, a payment equivalent to 1/3 of the target price (i.e. 0.61 FF per litre), up to a maximum of 30,000 litres of cows’ milk or 18,300 FF per producer.

-An annual payment to producers aged 55 to 65 years and not eligible for old age pension, equivalent to 1/3 of the target price (0.61 FF per litre in 1984/85) on the first 45,000 litres per producer and 1/6 of the target price (0.305 FF per litre in 1984/85) on the next 15,000 litres, up to a maximum annual payment per producer of 32,025 FF. The payment continues until the recipient is 65 years of age or receives an old age pension.

-A single payment to producers aged less than 55 years, equivalent to 1/3 of the target price on the first 60,000 litres and 1/6 of the target price on the next 30,000 litres, up to a maximum payment per producer of 45,750 FF.

In the United Kingdom, a cessation scheme provides for a payment to producers of £650 per 5,000 litres of reference quantity released. This amount, equivalent to 13 pence per litre, is payable in equal instalments over five years. There is no maximum amount per producer and up to £50 million has been made available to fund the scheme over the five year period. The objective is for up to 2.25% of the total amount of reference quantities to be bought up in England and Wales and in Scotland and up to 5% in Northern Ireland, or approximately 385,000 tonnes for the United Kingdom as a whole.

C. APPLICATION OF MILK SUPER LEVY IN IRELAND

General

39.The Council of Agricultural Ministers decided at their meeting on 29-31 March 1984 that each Member State was to be allocated a quota of milk and that a super levy would be payable on quantities of milk delivered above these quota thresholds. Council Regulation (EEC) No 856/84 provides for the laying down of the quotas of each of the Member States. Ireland’s and Italy’s quotas are based on 1983 delivery levels while the other Member States are based on 1981 levels.

Council Regulation (EEC) No 857/84 adopts the general rules for the application of the system and how it has been implemented in so far as Ireland is concerned is set out in the succeeding paragraphs.

Council Reg. No. 857/84

40.Article 1 fixes the amount of the levy to be applied on quantities delivered in excess of the quotas. For Ireland the quotas are being applied on a purchaser (co-operative/dairy) basis (Formula B) as this is considered to be the best means of minimising loss of quota arising from the variations in output by individual farmers within a co-operative/dairy. The amount of the levy to be applied is therefore 100% of the target price for milk, ie 96.32p. per gallon. There is also a separate quota under the Regulation of 16,000 tonnes for Ireland for direct sales for consumption purposes. It is unlikely that there will be much levy to be applied in these cases but any such levy would be at the rate of 75% of the target price ie 72.24p per gallon. Ireland has been designated as one region for the purposes of the Regulation and the necessary notification to this effect was sent to the Commission before 1 May.

41.Article 2 provides that a quota allocated to Member States on the basis of 1981 levels can be changed to being based on 1982 or 1983 levels weighed by a percentage so as not to exceed their allotted guaranteed quota. As Ireland’s quota is based on 1983 levels this provision does not affect this country.

42.Under Article 2(2) it has been decided to divide the national quota on the basis of favouring small scale producers. Each co-operative and dairy has been allocated a basic quota of its 1983 purchases from producers plus 497 gallons for each supplier with a 1983 delivery of less than 14,000 gallons and 3.55% for 1983 deliveries of 14,000 gallons.

43.Articles 3, 4 and 5 relate to the provisions for dealing with certain categories of farmers who are designated special cases and are therefore eligible for special consideration in the allocation of individual quotas if their 1983 supply was less than that of 1981 or 1982. The arrangements for these cases are at present being finalised in consultation with the farming and co-operative organisations. Draft rules for dealing with these cases were published in July but these are now being revised in the light of rulings obtained recently from the European Commission in the matter.

The categories of special cases are as follows:-

(a)Herd owners with herds affected by disease, (such as brucellosis, tuberculosis or leukosis) where the disease affects 10% of the herd;

(b)Herd owners whose holdings are affected to a substantial extent by a serious natural disaster or where theft or accidental loss of all or part of the dairy herd has a significant effect on milk production or where fodder resources or buildings used for dairy livestock are accidentally destroyed;

(c)Herd owners who are subject to compulsory purchase orders reducing their farm area;

(d)Herd owners who suffer long-term illness;

(e)New entrants to farming between 1 January 1983 and 21 May 1984;

and

(f)Herd owners who have difficulties, such as those coming within the rescue package.

In relation to categories of special cases the Commission has recommended that these be catered for out of flexi-milk (that is unfilled quotas by people going out of milk production or reducing supplies) on a year to year basis. (These unused quotas are not permanently allocated to those who benefit in any one year).

The amount of flexi-milk to be allocated to special cases is not to exceed 1% of a co-operative’s quota.

44.Article 6 relates to the provisions for direct sellers for consumption purposes. These producers have been registered with the Department of Agriculture for quota purposes and the Department’s inspectors are at present verifying the quantities involved. The quota for direct sellers relates to 1981 production plus 1%.

45.Article 7 is the provision whereby when land is sold, leased or transferred any quota attached to the land is automatically passed to the new purchaser, tenant etc. Under Article 8 the setting up of a Dairy Tribunal Group is being considered that would arbitrate in cases of a dispute, eg in relation to transfers of quota under land transactions or applications for additional quotas under the arrangements for producers with special difficulties.

46.Articles 9, 10 and 11 refer to the conditions for the payment of the levy which is collected on a quarterly basis with a balancing account at the end of the year. The Department of Agriculture will collect the levy from each purchaser exceeding its quota while the purchaser will in turn recoup the amount involved from the individual producers whose supplies are in excess of their individual quotas. The first payment period is for the six months ending 30 September and the first payment by purchasers of any levy is due to be paid by mid-November. Producers who are in the special difficulty category will be exempt from any payment of levy for a further month.

47.Article 12 sets out definitions for the purposes of the regulation.

48.Miscellaneous

When the arrangements for producers with special difficulties are finalised, an Order under the European Communities Act will be made to give legislative backing to the points set out above.

D. Views of the Joint Committee

49.The guaranteed total quantity of milk exempted from the Super-Levy for Ireland was fixed at 5.280 million tonnes under Council Regulation (EEC) No 856/84 ⁽¹⁾ of 31 March 1984. This Regulation also provided for the distribution of a “Community Reserve” to supplement the guaranteed quantities of Ireland, Northern Ireland and Luxembourg.

Commission Regulation (EEC) 1371/84 ⁽²⁾ of 16 May 1984 implemented the Community Reserve allocating a further 245,000 tonnes of milk production to Ireland for the period 2 April 1984 to 31 March 1985. This additional allocation represents an increase of 4.64% on Ireland’s national quota.

50.The Joint Committee was informed by the Department officials that the figure of 5.280 million tonnes was used by the Commission as the latest estimate available at the time of Irish milk deliveries in 1983. This estimate was, according to the officials, based on the latest quarterly forecast supplied in February 1984 by the Department of Agriculture to the Commission’s Milk Management Committee and was also in line with the latest provisional figures supplied by the Central Statistics Office to the Statistical Office of the/ European Communities in Luxembourg. No specific request was received from the Commission for figures for the purposes of Council Regulation (EEC) No 856/84. However, when the actual figures for 1983 milk deliveries were definitively calculated in early June 1984, following receipt of precise details from all our co-operatives and dairies they came to 5.333 million tonnes i.e. 58,000 tonnes above the figure (5.280 million tonnes) used by the Commission in the Council Regulation. The officials further stated that requests were made by the Minister for Agriculture at the June, September and October Councils of Agriculture Ministers to have the guaranteed quantity adjusted to take account of the actual figure for 1983 milk deliveries (5.338 million tonnes) but that so far no positive indication has been given by the Commission that such a correction will, in fact, be made.

51.The Joint Committee in its Report on the Adaptation of the Common Agricultural Policy ⁽¹⁾ drew the attention of the Dail and Seanad to the serious consequences of the imposition of a Super-Levy on milk production in this country in view of the dominant position of this activity in Irish farming. When agreement was reached at Council level on milk quotas for Member States, Ireland had to accept that it would have to cut back on milk production to ease the Community surplus of dairy products and accept the applciation of a stringent super-levy to production above the level of 1983 deliveries plus the addition of a Community Reserve of 245,000 tonnes. Irish farming had braced itself to face this still challenge and it is with extreme apprehension that the Joint Committee learned that this country’s quota could now, in fact, be reduced by 58,000 tonnes. Accordingly, it urges the Government and, in particular, the Minister for Agriculture, to pursue correcting measures with all means at their disposal, including recourse to the European Court of Justice, to vindicate Ireland’s claim to a quota based on actual 1983 milk deliveries. While the Joint Committee does not wish to embroil itself in the controversy over the calculation of the 1983 milk deliveries it categorically rejects any suggestion that the Irish dairy industry should suffer the consequences of failure to put in place the actual figure of 5.338 million tonnes which could cost this country up to £60 million over the five year course of the super-levy.

52.With 80% of our national quota already filled there is every danger that milk producers could move into the Super-Levy bracket at the beginning of the Spring lactation period.

Payment of the amount of the Super-Levy due for the six months ending 30 September 1984 will have to be paid by 15 November 1984. However, as a result of the problems being experienced by the various Member States in implementing the levy it has been decided that any levy payments due for the first two quarters of the 1984/85 milk year will be reduced by 50% with the balance being spread over the period to 31 March 1985. The Joint Committee feels, however, that no levy payments at all should be made until the problem associated with the 1983 deliveries figure is resolved.

53.On the question of the Super-Levy in general the Joint Committee feels that, as Irish dairy farmers are only paid about 75% of the target price for their milk, the application of the Super-Levy at 100% of the target price puts them at a severe disadvantage when compared with their farming colleagues in other Member States. The Joint Committee urges accordingly that this matter be looked at again by our negotiators.

54.The Joint Committee deprecates the undue delay in the allocation of definitive quotas to co-operatives arising from arrangements for special category milk producers not being finalised, leaving the co-operatives in an uncertain position. However, the Joint Committee understands that these quotas will be allocated very shortly. It urges that these arrangements be concluded immediately to avoid confusion.

Dairy managers are going to have problems with applciations for special category status when the quotas are allocated and the Joint Committee urges that a Dairy Tribunal Group be established for the purposes of independent arbitration.

55.In relation to categories of special cases the Joint Committee rejects any cut in the quota of individual farmers in order to create a 1% national reserve (11 million gallons). This must be vehemently resisted especially if this country is not successful in adjusting the national quota to take account of actual 1983 milk deliveries. The Joint Committee feels that special cases could be provided for by the introduction of a milk discontinuation scheme, with State finance, which could create a national milk reserve and thereby avoid cuts in individual quotas. The Joint Committee draws attention to the existence of such schemes in other Member States already referred to in this Report.

56.While individual quotas can be adjusted within co-operative groupings the question of adjustments between co-operatives should, in the Joint Committee’s view, be investigated. This could take the form of a national milk purchasing agency. However, the Joint Committee understands that such an arrangement could conflict with Community law and awaits with interest the outcome of the determination of the Commission’s legal service on its consideration of the Danish agency. Should the concept of a national agency not be countenanced the Joint Committee feels that permission should be sought from the Commission for a regional purchasing agency. This would allow some limited measure of relief to co-operatives who are over their quota. In this connection the Joint Committee notes that Greece operates a single national purchasing arrangement. The Joint Committee also notes that the Commission may allow the use of a national quota for the first year of the Super-Levy in Member States to ease teething problems.

57.The Joint Committee is surprised that, in this age of advanced computer technology it takes up to six months to definitively calculate yearly milk deliveries and urges that this problem be tackled without delay.

The Department representatives stated that delays in the furnishing of returns and verification of delivery figures was a problem being experienced by most Member States. In the past these delays did not cause major problems but as this country is now in the Super-Levy era, the Department is examining the question as to how the compilation of these returns could be speeded up.

E Conclusion

58.The Joint Committee understands that other Member States are experiencing difficulties with the implementation of the Super-Levy regime in their respective jurisdictions. In the final package worked out to accommodate all Member States with their problems the Joint Committee is confident that our claim to adjustment of the 1983 deliveries should not present an insuperable problem. Indeed, the Joint Committee is aware of a deal of sympathy among other Member States for our unfortunate plight. The Commission for their part are intransigent lest the Community quota system worked out last March would come unstuck. Against this rigid attitude must be placed the possibility of breaching the spirit of the agreement last March which acknowledged the unique importance to Ireland of the dairy industry.

59.With the growth of milk production since 2 April, estimated at 4.1%, the Joint Committee envisages serious difficulties for farmers next Spring trying to pin their production at Spring 1983 levels in order not to incur the Super-levy imposition.

The only solution that the Joint Committee can advance for the problems of the dairying industry, in this country, tied as it will be for the next 5 years to quota limits, is for milk producers to diversify into higher value-added consumer products in order to maintain farm incomes.

60.The Joint Committee has recently requested debates in the Dail and Seanad on several of its Reports which it regarded of particular importance.

The Joint Committee feels that the present Report also falls into the aforementioned category and would welcome a debate in both Houses on the crucial issue of the Super-Levy and, accordingly, makes hereby a specific request for such debates.

_________________________

Gerard Collins T.D.,

Chairman of the Joint Committee

31 October, 1984.

(1) Elected Member of the European Parliament 14th June 1984.

(1)“Changes in the Common Agricultural Policy to help balance the markets and streamline expenditure”. COM (79) 710 final, 30.11.79.

(2)“Commission proposals on the fixing of prices for certain agricultural products and on certain related measures (1980/81)”. COM (80) 10 final, 6.2.1980.

(3)“Commission proposals on the fixing of prices for certain agricultural products and on certain related measures (1981/82)”. COM (81) 50 final, 20.2.1981.

(1)  - “Reflections on the Common Agricultural Policy”. COM (80) 800 final, 5.12.1980.

-“Report from the Commission of the European Communities pursuant to the mandate of 30 May, 1980”. COM (81) 300 final, 24.6.1981.

-“Mandate of 30 May 1980 - Guidelines for European Agriculture - Memorandum to complement the Commission’s report on the mandate of 30 May 1980”. COM (81) 608 final, 23.10.1981.

(1)“Common Agricultural Policy - Proposals of the Commission”. COM (83) 500 final, 28.7.1983.

(1) COM (83) 548 final, 14.9.1983.

(2) COM (84) 190 final, 22.3.1984.

(1) 0J No L90, 1 April 1984, P 10

(2) 0J No L132, 18 May 1984

(1) Report dated 7 March 1984.