Committee Reports > List of Committees > Dáil > 1988 > Committee of Public Accounts > Report - Appropriation Accounts 1984

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of public Accounts)

Dé Ceadaoin, 22 Iúil, 1987.

Wednesday, 22 July, 1987.

The Committee met at 11.30 a.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. P. L. McDonnell (An t-Árd-Reachtaire Cúntas agus Ciste) called and examined.

VOTE 38—AGRICULTURE.

Mr. J. O’Mahony called and examined.

967. Chairman.—Paragraphs 39 and 40 of the Report of the Comptroller and Auditor General read:

Subhead C.2.—Bovine Tuberculosis Eradication

Subhead C.3.—Brucellosis Eradication

The expenditure under subhead C.2. Bovine Tuberculosis Eradication is made up as follows:

The expenditure under subhead C.3 Brucellosis Eradication is made up as follows:

Further expenditure totalling £6,035,320 to 31 December 1984 has been met from moneys provided under subhead C.5 and paid into a grant-in-aid fund to enable assistance to be paid to herdowners who experience hardship arising out of the operation of the schemes because of the high incidence of reactors in their herds. An annual account of the grant-in-aid fund is appended to the Appropriation Account.

The gross cost of the Bovine Tuberculosis and Brucellosis Eradication programmes to 31 December 1984 was, therefore, £311 million. Receipts by the Department of Agriculture up to 31 December 1984 arising from the operation of the schemes were as follows:

The net cost up to 31 December 1984 was, therefore, £227 million.

It was noted that when a contract to the value of £786,000 plus VAT at 23 per cent was placed in November 1983 for the supply of 120,000 blood sampling kits for use in the Brucellosis Eradication Scheme, a total of approximately 140,000 kits, which represented one year’s supply at the 1983 level of issues, was already in stock. It was also noted that at 31 December 1984, the number of kits remaining in stock had risen to 235,000, representing several years’ supply at the reduced level of issues from 1 January 1984. Sampling kits, which are supplied free to veterinary practitioners, each contain fifty blood sampling tubes and their usage in the operation of the scheme can be gauged from the number of blood samples returned for testing. An investigation carried out by the Department into the level of wastage of sampling tubes in the period May 1981 to 31 December 1983 showed that there was a shortfall of approximately 39 per cent between the number issued to veterinary practitioners and the number returned by them.

I sought information from the Accounting Officer as to why the contract was placed in November 1983 when there was at least one year’s supply on hands and whether the subsequent reduction in the rate of issues could have been foreseen. I also inquired regarding the very high level of wastage and the steps being taken to reduce it.

The Accounting Officer has informed me that it was considered prudent to have a year’s supply on hands at all times as this reserve level was needed to ensure that the Brucellosis Eradication Scheme would not be interrupted by supply difficulties. Experience had shown that there could be as much as six months delay between the time a contract for fresh supplies was first considered and the actual delivery of supplies. Furthermore, the normal supplier had now gone out of business and the consequences could have been serious if adequate reserve stocks had not been acquired. He stated that the large build-up of reserve stocks could not have been anticipated when the November 1983 contract was placed. It arose because the overall financial provision for disease eradication in 1984 was such that it was not possible to have national rounds of testing and, in consequence, the volume of testing under the brucellosis scheme, where very satisfactory progress had been achieved, was curtailed to allow more of the financial resources available to be applied to TB testing.

The Accounting Officer also said that wastage of sampling equipment had been a matter of concern to the Department and had already been taken up with the Irish Veterinary Union which represents veterinary practitioners and that new arrangements were being made with a view to reducing the wastage. The need for economy in their use was also brought to the notice of all testing personnel.

Mr. McDonnell.—In my report on Agriculture for 1984 there are ten paragraphs to be dealt with. Looking at paragraph 39 which deals with BTE and paragraph 40 which deals with a particular item in regard to a BTE contract for the supply of materials required in connection with this scheme, I wonder if paragraphs 39 and 40 could be taken together because paragraph 39 is the statistical paragraph dealing with the cost of the scheme and paragraph 40 deals with the procurement of veterinary supplies. Paragraph 39 shows that the total cost of both schemes to 31 December 1984 was £227 million. I was concerned with two matters in paragraph 40. First, I felt there was a possibility that the Department might have been over-stocking with the blood sampling kits which they use in herd testing. Secondly, I was concerned at the level of wastage of these sampling tubes. On the level of stocking the Accounting Officer has explained the position fairly fully and the explanation is included in the paragraph. In regard to the wastage, the position at the date of my report was that the Department were taking steps to try to improve the situation. I do not know whether there has been any success achieved in this regard.

968. Chairman.—The total gross cost to 31 December 1984 has been £311 million. The net cost to the State has been £227 million. Over how many years was that?

Mr. O’Mahony.—That would be since 1954, more than 30 years.

969. Chairman.—Do you consider it money well spent?

Mr. O’Mahony.—The answer would have to be yes and no. First, it was well spent in so far as it ensured that the very high incidence of disease which existed in the fifties was reduced very dramatically. From that point it was successful. It ensured that our trade with other countries could be carried on and that the incidence of the disease, which bore certain risks for the human population, was reduced very significantly. So far as TB is concerned, one could not say that it has been successful in eliminating the disease completely inasmuch as we still have this hard core of a few per cent of incidence which has proved extremely difficult to eradicate. By comparison, in the case of brucellosis eradication, there is no doubt that the expenditure incurred has been successful. The number of infected herds is now below 50 so that the complete elimination of brucellosis is in sight. The achievement of a similar result in the case of TB has been proving exceptionally difficult.

970. Chairman.—When did it commence?

Mr. O’Mahony.—In the mid-fifties — 1954, I think.

Chairman.—Thirty-three years ago. Having recovered £84 million through the sale of reactors and so on, it has still cost the State £227 million. Are you aware that a previous secretary of the Department of Finance described that as a national scandal?

Mr. O’Mahony.—Yes, I have seen the reports of the statement by a secretary of the Department of Finance.

Chairman.—Would you agree with that assessment?

Mr. O’Mahony.—I think it is going a little far for the reasons I have given. The results of the scheme in maintaining our trade have been quite significant. I accepted, as I have indicated, that we cannot be completely happy with the failure to eradicate the disease completely. I would, however, point out that the eradication of TB has been proving similarly difficult in a number of other countries. In our neighbouring areas there is still a residue of TB in both Britain and the North. It is a disease that is extremely difficult to eradicate completely. In our situation, where we have a cattle industry based so much on very extensive movement, this adds to the problems we face.

971. Chairman.—Since we are taking paragraph 39 and 40 together, why, after 33 years, under Subhead C.3 have we found it necessary to order additional blood sampling kits while there was quite an adequate supply in stock? Does that not show that there is not much care in controlling this type of spending?

Mr. O’Mahony.—As indicated, the reason for ordering the additional kits was to ensure that there would not be any interruption in supplies. At that time, our experience had been that there could be a delay of at least six months before getting supplies and because of this the stocks were ordered in late 1983. There was in 1984 a very substantial cutback in the amount of money provided for disease eradication and that money was applied primarily to tuberculosis. The result was that the testing for brucellosis was cut back more than proportionately. The fact that we were able to manage on the usage of reduced stocks is to some extent, a reflection of the success achieved in lowering the incidence of brucellosis. This is a side effect of the success of the scheme.

972. Deputy Foley.—The Chairman asked some very pertinent questions. I am not satisfied with the replies to the questions asked by the Chairman. In November 1983 there were approximately 140,000 kits in stock, yet in that month you placed a contract for slightly over £1 million for 120,000 kits. The Comptroller and Auditor General referred to that in paragraph 40 with regard to wastage of blood sampling equipment. At the end of December 1984, you still had 235,000 kits in stock. I believe it was a waste of public funds to expend something in the region of over £1 million, including VAT, when there were 140,000 kits in stock.

Mr. O’Mahony.—I would point out, as already indicated, that it took quite a long time to get additional supplies of sampling kits and while in retrospect, the ordering of additional kits could have been deferred, nevertheless, the kits were eventually used and were not wasted.

973. Deputy Foley.—But the money expended at that time was out of that budget. There was £1 million expended that could have been saved to the Exchequer. In view of the fact that there was a surplus in hand, was it decided to place this contract coming up towards the end of the year?

Mr. O’Mahony.—No, I would not say that. The fact that we wanted to keep an adequate supply would have been the overriding consideration rather than clearing out funds in the Vote that had not been spent. I do not think that the clearing out of funds at the end of the year would have been a consideration at all in the matter.

974. Deputy Foley.—Would it not have been much easier to purchase stocks at the beginning of the following year on the Vote for 1984?

Mr. O’Mahony.—Yes, it would have been possible to do it out of the 1984 Vote but as matters turned out, the 1984 Vote provision for disease eradication was substantially reduced and pressure on the resources we had for disease eradication was much greater in 1984 than it was in 1983.

975. Deputy Foley.—I must still go back to the point that in November 1984 while you still had stocks of 140,000 kits, you still placed an order coming up towards the end of that financial year. Did you work within your budget in 1983?

Mr. O’Mahony.—Yes, we did not have an excess in 1983. I have not the detailed figure for 1983. Our total expenditure on all aspects of disease eradication that year was £23 million, whereas in 1984, which is the one in front of us here, the expenditure was £22 million.

976. Deputy Naughten.—With regard to the figure of £1.9 million for travel, subsistence and vaccine under subhead C.3 — Brucellosis Eradication — I was not aware that there was any vaccine involved in the brucellosis eradication.

Mr. O’Mahony.—The actual expenditure on vaccine in that year in the case of brucellosis was £30,000. A certain amount would have been used for vaccination of heifers at that time. That would have been the explanation.

Deputy Naughten.—Is that vaccination continuing all the time?

Mr. O’Mahony.—No. It has ended.

Deputy Naughten.—When did it cease?

Mr. O’Mahony.—It would have ended around 1984-85. Only a small amount of it was done in particular areas.

977. Deputy Naughten.—On the question of compensation for reactors, I note that in 1984 the compensation was £6.7 million. It was considerably higher than in previous years while the price of reactors had not increased. Was there a substantial increase in the number of reactors in that year?

Mr. O’Mahony.—There was an increase in 1984 but it was not very significant. The total number of reactors removed in that year was 40,600 as compared with 39,200 in the preceding year. In this case as well, there would be a situation of carry-over payments at the beginning and end of each year which might make a difference.

978. Deputy Naughten.—The compensation went up by £2 million from £4.6 million to £6.7 million.

Mr. O’Mahony.—Yes. £4.6 million in 1983 and £6.7 million in 1984. In my figures, I gave the grand total for TB and brucellosis reactors, that was 39,200 which went up to 40,600. The actual figures for TB reactors were 27,700 in 1983 and 33,600 in 1984. That was a bigger increase than I mentioned earlier. I would accept that there must have been a certain amount of carry-over payments as well.

Deputy Naughten.—We have outlined the cost for compensation for reactors such as surgeons’ fees and vaccines but one thing I note that is not covered is the cost of administration. That is not included in the figures that I have here.

Mr. O’Mahony.—The figures given in the Comptroller and Auditor General’s report are the actual expenditures under the two subheads C.2 and C.3 and also the hardship or depopulation fund in subhead C.5. The cost of the Department staff involved is charged to subhead A.1. The total amount of that currently would be of the order of £9 million.

Deputy Naughten.—How many staff are involved?

Mr. O’Mahony.—The number engaged on TB work would be of the order of 650, with another 250 or so on brucellosis.

Deputy Naughten.—Would you not consider that with the greatly reduced level of brucellosis the number of staff is excessively high at 250?

Mr. O’Mahony.—It is high. We are in the process of reducing it and, indeed, reducing the total on disease eradication work. The fact that we have been successful in the case of brucellosis is one of the reasons why we are able to do that.

979. Chairman.—Before I call in Deputy Ahern could I ask the officials from the Department of Finance what they have to say about the scheme in general and about the cost to the State over 30 years?

Mr. Brady (Dept. of Finance).—One has to acknowledge that a lot of money was spent in bringing down a very high incidence of disease from somewhere in the mid-teens, or even perhaps as high as 17 per cent incidence. to what it is at present, which is 2 or 3 per cent. Clearly, the money involved in that was successful. What we now have to tackle is the remaining hard core and by definition a hard core is very difficult to eliminate.

Chairman.—It seems extraordinary to me and I think it seems extraordinary to the former secretaries of your Department but we will come back to it later in the discussion.

980. Deputy M. Ahern.—I would like to refer to two sections of paragraph 40. One refers to an investigation which was carried out by the Department which showed a shortfall of approximately 39 per cent between the number of sampling tubes issued to veterinary practitioners and the number returned by them and to the statement by the Accounting Officer in which he said that wastage of sampling equipment had been a matter of concern to the Department and had been taken up with the IVU. What I would like to ask Mr. O’Mahony is, what has been the result of their investigations and has the incidence of shortfall reduced significantly since this report?

Mr. O’Mahony.—Yes. The shortfall was reduced to about 25 per cent by last year and we have instituted a system whereby the issues of sampling kits are monitored on an ongoing basis in the case of each individual veterinary surgeon to ensure that a reduction in wastage is achieved. Indeed, in some cases the question of getting back possibly excessive stocks that anyone may hold has been followed up.

981. Deputy M. Ahern.—What was the reason for the shortfall and have the veterinary surgeons any liability with regard to the sampling kits issued to them?

Mr. O’Mahony.—The main reason for the shortfall is that veterinary surgeons have these kits in packs of 50. When they test smaller herds they only use a portion of the pack and not the balance, more or less starting on a new pack for each individual farmer. While we gave them containers to hold the unused items in individual kits, they did not always use them. We have now ordered kits of 25 units and this is a further effort to reduce the wastage.

982. Deputy Crotty.—Where were the kits in question purchased?

Mr. O’Mahony.—They are purchased in this country.

983. Deputy Crotty.—Is more than one supplier available?

Mr. O’Mahony.—I think so because we operate a tender system. The successful tenderer has been an Irish firm and another Irish firm or other Irish firms could be involved.

984. Deputy Crotty.—Seeing that there are a number of firms who can supply these and there must be competition in the scene, why had we to order so early? It seems extraordinary that there are six months’ delivery on an item that is in a competitive market.

Mr. O’Mahony.—We ordered these in 1983. A normal supplier went out of business around that time and we were dependent on a successor firm. That is why I am not certain that another firm was in existence at that time. I said that we have ordered kits recently, that we had a tender system and an Irish firm was successful. I assume that the other firms involved were in Ireland but I am not certain of that. I assume that there were others. In 1983 there was some doubt about assured supplies because a firm who had been supplying had gone out of business.

985. Deputy Crotty.—It seems extraordinary that in a cost of an overall scheme of £4.5 million—is that not what the eradication of brucellosis cost in 1984—these kits should cost nearly 25 per cent of that. Did the Department ever envisage or consider charging the veterinary surgeons for these kits? Would it not cut out the wastage and all the other related matters?

Mr. O’Mahony.—We considered it. We had it under review as a means of reducing the wastage. On the other hand, while it would help in reducing wastage and making veterinary surgeons more conscious of the need for economy, it would be chalked up against us in the fees which we would have to pay them for carrying out brucellosis testing. In that connection the fees they get for brucellosis are cut somewhat tighter than the fees on TB. We have been able to keep them on a very tight rein in the case of the brucellosis fees.

986. Deputy Crotty.—Why can you not have a common fee for both brucellosis and TB?

Mr. O’Mahony.—Apart from anything else, in the case of dairy herds the testing for brucellosis is carried out largely by milk ring testing rather than by blood sampling so that much of the testing is TB only. Also for a while in the case of brucellosis we were having the testing of some of the animals carried out by Department agricultural officer staff — blood samplers. You cannot insist on the veterinary surgeon doing the two together, or at least you cannot have a single fee in all cases.

987. Deputy M. Kitt.—There are a few questions I want to ask Mr. O’Mahony on the change in 1976 to the herd owners themselves disposing of reactors. What were the Department’s savings on that and what sort of control had the Department where the change took place? To follow up Deputy Ahern’s point on reducing wastage on the sampling equipment, what practical steps did the Department take other than the negotiations with the IVU to reduce the wastage on the sampling equipment?

Mr. O’Mahony.—To deal with the second query first, the Department, as well as bringing the matter to the notice of the IVU, communicated with all veterinary surgeons. We also introduced a system whereby the quantities dispatched to individual practitioners would be related to the amount of blood sampling which they had done so as to ensure that they kept an eye on the quantity of kits that they ordered. With regard to the arrangements that existed up to 1976, the main reason why the Department terminated the system whereby we bought the animals and sold them to the meat factories was that we felt that we were in a very weak bargaining position in selling these animals to the meat factories. There were some grounds for believing that the tenders we received at that time were not really competitive and that the Exchequer was losing out as as result. Because of that we switched over to the system of paying a grant to the farmer who had to dispose of reactors and the farmer then had to make his own arrangements for the sale of the reactor. He has to get rid of the animal within ten days in order to qualify for the grant. In the south in County Cork a local co-operative system has developed where the co-operative will take up all the reactor animals and deliver them to factories. This is a useful service for the farmer. From our point of view it is a very desirable development. There are certain problems in extending it throughout the country, mainly because we have not the necessary co-operative and factory facilities and organisation in some areas. At the moment the matter is also the subject of some legal proceedings where a person who feels that it cuts across his business has brought legal action against us on the matter. This is a factor that we have to bear in mind in connection with the possible extension of it elsewhere in the country. Until that is cleared up we have to move rather slowly.

988. Deputy M. Kitt.—Is that a pilot area if it is chosen to establish it?

Mr. O’Mahony.—To some extent it is a plot area scheme. But as I said, the legal difficulties constitute an obstacle to its further extension at the present time until we see exactly where we stand. The area where it applies is well organised on a co-operative basis to enable this to be done easily.

989. Deputy M. Kitt.—You see that as the way it should be done?

Mr. O’Mahony.—It is one that we think highly of because it ensures from the farmer’s point of view, that the reactor is got out rapidly and that he qualifies for the reactor grant by getting rid of the animal within ten days. From our point of view, it ensures also that the reactor is got rid of quickly and does not spread infection. Furthermore, there are no risks of the reactors getting into the wrong hands between the farm and the factory.

990. Deputy M. Kitt.—On the question of research which is obviously a key area in the case of bovine TB. I would like to ask Mr. O’Mahony how many people are working in research and when he talks about the Department redeploying staff, will there be extra personnel given to the research area?

Mr. O’Mahony.—I could not give a precise figure of the number engaged in research in regard to TB but a total of 148 people were engaged in laboratory work in connection with TB and brucellosis. The vast bulk of those would have been engaged on the laboratory testing of the blood samples. It is an aspect on which a certain amount of work is continuing in our veterinary research laboratory in Abbotstown. Also, a certain amount of work is being done on the epidemiology of the disease, the manner in which it spreads and so on. Some people feel that the real solution to the problems in regard to TB would be if a system of diagnosing the disease from blood samples could be developed. A small amount of work on that has been done here but it is mainly done abroad. It is one thing that would certainly give a ready answer because it would be a much more positive and effective method. In the case of brucellosis a laboratory test on blood samples is one of the factors that has enabled success to be achieved. In the case of TB the testing is a system where the tuberculin is inserted into the animals neck and a veterinary surgeon has to see, after 72 hours, what has been the reaction. As you can appreciate, in the conditions of bad weather and unsatisfactory conditions on farms, it is quite difficult for a veterinary surgeon to assess the extent of the reaction by measuring the lump in the animal’s neck. It is less precise and certainly has been a less effective method than testing blood samples in the laboratory as was the case with brucellosis.

991. Deputy Desmond.—What is your reaction to the view that for so long as the State continues to pick up the costs of eradication there is no incentive either to the farming community or to the veterinary profession to eradicate these diseases?

Mr. O’Mahony.—So far as the farming community are concerned there is a very definite incentive to eradicate TB. In the case of brucellosis, it was quite clear that the cow had not a calf and, therefore, there was a direct and obvious loss. The loss in the case of TB, I would accept, is not as obvious to the farmer but the fact that there are very substantial levies applicable now means that the farmer is bearing a certain proportion of the costs. In fact, if you add to the annual costs here the staff figure which I mentioned earlier, you are talking about a total expenditure perhaps of the order of £40 million. The rates of levy that are now applicable represent an annual sum of the order of £20 million. Therefore, the farmers are bearing a very substantial part of the total cost. This is giving them an incentive to get rid of the disease. Indeed, the farm organisations in recent years since the levy was introduced and particularly this year, have displayed very considerable interest in trying to improve the situation. For those reasons I believe that it is not quite right to say that they have no incentive to get rid of the diseases. As regards the veterinary profession, from one point of view I would accept that it constitutes a very substantial proportion of the veterinary practitioner’s work. The State provides a substantial income to the veterinary practitioners. It must be remembered that the veterinary profession is the profession which has brought about the substantial reduction from what existed in the fifties to where we are at the present time. They have done quite a good job on that. They are still doing their best to get rid of the diseases.

Deputy Desmond.—May I press you further on the matter? You will agree that in 1984, the year in question, gross expenditure on the two schemes was £311 million. Farm levies in that year amounted to £20 million. Therefore, the contribution the gross side of the farming community towards the eradication costs was approximately 7 per cent. Also, on the net Exchequer cost of £227 million, even relating the levies to the net Exchequer cost, the contribution was less than 10 per cent. Would you agree that in that framework where the State or the European Community picks up £12 million, the penalty for permitting the disease to exist is, to say the least, marginal?

Mr. O’Mahony.—I would accept that for quite a long time the contribution of the farming community to the total cost was certainly limited, but that situation no longer applies inasmuch as at the present time they are bearing, as I have said, about 50 per cent of the cost, which is a substantial amount.

993. Chairman.—Are the figures quoted by Deputy Desmond correct? He quotes figures up to 31 December 1984. Is he correct in saying that it would be 7 per cent? Is the expenditure he refers to over 30 years?

Mr. O’Mahony.—The figure of £311 million mentioned is the total gross cost of the two schemes from the fifties up to 1984, as mentioned in the Comptroller and Auditor General’s report.

Chairman.—It is over 30 years? —Yes.

Chairman.—The levies only run from 1979.

Mr. O’Mahony.—The levies were only introduced in 1979. They brought in £20.6 million by the end of 1984.

Chairman.—So we need to compare that with the brucellosis expenditure from 1979, not from 1954?

Mr. O’Mahony.—That is so.

Chairman.—I did not want the record to go wrong. You were confirming the opposite which would be inaccurate.

(Interruptions.)

Chairman.—Things are bad but they are not that bad.

Mr. O’Mahony.—No, they are not that bad. The point I am making now is that we have got to the stage of more substantial levies on the farmers and the farmers are bearing half the cost.

994. Deputy Desmond.—Nevertheless, from an historical perspective and indeed up to 1981 one might say, you would agree there was virtually no incentive to eliminate the disease, although the farming community were penalised?

Mr. O’Mahony.—There would not have been a direct penalty but, of course, there would be penalties in the form of the lower yields and things like wasting of animals from TB. These are not direct and readily apparent losses to the farming community.

995. Deputy Desmond.—Without labouring the point, may I come back to the year in question, 1984, and to the second aspect of the question I asked, namely, the incentive for the veterinary surgeons to eliminate the diseases? You would agree that for 1984 half of the cost approximately was made up of fees to veterinary surgeons, approximately £8.3 million from two schemes out of a total expenditure of £21 million, which, roughly accounts for £8.5 million? How many vets were involved in that £8.5 million in the private sector?

Mr. O’Mahony.—I do not have the precise number but it is of the order of 700 to 800 veterinary surgeons. You could take it that 800 would be a reasonable figure.

996. Deputy Desmond.—Would you not agree that as 800 persons received a share of £8.5 million the incentive to work themselves out of a job in not very strong?

Mr. O’Mahony.—I think it is a matter of opinion to some extent but I would make the point that the profession has made a contribution in getting the disease down from the level it was to the present level. As in every business, there are some people who will not have regard for the highest standards of the profession. However, one must have regard for the integrity and ethics of the profession as a whole and they have done a lot already. We want them to do the rest of it.

997. Deputy Desmond.—Nevertheless, you would agree that a succession of Ministers for Agriculture — in this regard as Accounting Officer you have my absolute sympathy — succession of Ministers, notably from Mark Clinton onwards, have struggled to deal with this very complex incentive situation. For the most part, apart from the introduction of levies from 1979 onwards, they have not succeeded?

Mr. O’Mahony.—Yes, it is true that it has been a major problem for decades in the Department of Agriculture. It constitutes a very substantial proportion of our total expenditure, It absorbs quite a lot of our staff and involves us in dealing with a highly organised veterinary profession which has ensured good terms for its members. That said, it is necessary to rely on the profession to carry out the task and we must ensure that they do it to the best of their ability and that progress is achieved towards the ultimate aim.

998. Deputy Desmond.—How many are employed in the Department dealing with the scheme? Perhaps this is a repetition of a question but I may not have heard the reply. Is it 600?

Mr. O’Mahony.—The total, between TB and brucellosis, would be of the order of 900 or slightly more, and of those, about 650 would be dealing with tuberculosis. That would include staff around the country including clerical and veterinary staff in the district offices.

Chairman.—Thank you Mr. O’Mahony. We have spent half of our allocated time on this so far. Deputy McCreevy has not spoken so far and Deputy Naughten and Deputy Ahern want to ask questions. With the agreement of the committee I will move on.

999. Deputy Desmond.—I do not want to prolong any point. There are 213 veterinary inspectors in the Department. How many of those are directly involved in the schemes?

Mr. O’Mahony.—There are 196 veterinary staff on all kinds of disease work. The balance of the veterinarians are concerned with meat factories and things like that. Of that 196 veterinary staff some are engaged only part time on TB.

1000. Deputy McCreevy.—Could I ask Mr. O’Mahony about something to which he referred earlier about the vaccine used for TB? I have never read this officially but is it true that the vaccine used from 1954 to 1978, or thereabouts, was found on examination to be completely useless? I knew someone who had the unfortunate experience in his younger days of rounding up cattle one day and two days later rounding them up again to be tested.

Mr. O’Mahony.—The vaccine referred to earlier was for vaccinating heifers against brucellosis. In the case of TB, the Deputy is correct in that the tuberculin, not the vaccine, in use up to the late seventies was found in the late seventies to be not quite as satisfactory as we would have wished and we altered our source of supply. Up to the late seventies we had been obtaining supplies in the United Kingdom but in that year we changed to the Netherlands as a source of supply. I would not go so far as to say that is was virtually useless but we were unhappy with some of the batches that we received around that time. We felt that the Dutch product was more suitable to our requirements. The product in question from the UK which was supplied by the British Ministry was the one that they had been using themselves in Britain and in the North of Ireland and which they are still using.

Chairman.—Could we keep the replies a little more brief because we are nearly at the half way mark.

1001. Deputy McCreevy.—Notwithstanding what the British authorities used or may still be using, it is my understanding that the tuberculin that was used from 1954 to 1978, in the words of a good veterinary friend of mine, might as well have been water because that is how effective it was. The expenditure from 1954 to 1978 when the new tuberculin was tried out was, in the view of a lot of veterinary surgeons, quite useless.

Mr. O’Mahony.—I do not agree completely with that, because if it had not been effective we would not have got the incidence down as much as was achieved over that period.

1002. Deputy McCreevy.—If we could turn the clock back to the fifties when the scheme was started would it be more appropriate to implement a system not using veterinary surgeons? Surely what vets do in TB cases is a thing that any technician could do. Any person here would be able to do it. As regards the reading in two days time, Mr. O’Mahony has as much experience as I. It is just not possible for anyone to go into a field with 50 cattle in it, and try to measure the lumps that have come up at the back of the neck. Would Mr. O’Mahony give an opinion as to whether veterinary surgeons should be used at all?

Mr. O’Mahony.—As with any task which is reasonably uniform and routine, it is possible to train non-professional people to do it, but we had very considerable difficulty with the veterinary profession for some time in the early seventies in trying to introduce lay blood samplers to carry out a much simpler operation in regard to brucellosis.

1003. Deputy McCreevy.—I assure Mr. O’Mahony of my sympathy in dealing with the thorny problem of veterinary unions. I am not trying to get at him. Out of the expenditure of £21 million gross, in 1984 between the two schemes, £8 million went to the vets in fees and another £5 million went on travel and subsistence. To whom is the travel and subsistence paid?

Mr. O’Mahony.—It would be for Department staff. Those figures also include tuberculin and other items. It would not be paid to veterinary practitioners.

1004. Deputy McCreevy.—The figures for disease eradication for some counties were down as low as 2 per cent on ten years ago. In some counties now the figure has risen to 10 per cent. Surely these figures prove that disease eradication will never be achieved as long as the present system of using tuberculin with fees being paid to vets is used. We cannot expect any profession, whether accountants or veterinary surgeons, when they have a vested interest in keeping a scheme going, to do themselves out of a job. No one will do it, whether he be a trade unionist, a farmer, a veterinary surgeon or whatever.

Mr. O’Mahony.—The alternative to having it done by veterinary practitioners would be to have it done by departmental veterinary surgeons or, if an arrangement could be made, by non-professional staff employed by the Department. In some areas there are outbreaks of TB which are largely inexplicable. The real reasons for them are not very clear and the line taken in those cases is to engage in intensive testing to deal with those outbreaks as, say, in Longford or in south west Cork in the last year or so.

1005. Deputy Naughten.—With regard to these outbreaks that flare up, one of the things I am concerned about is the lack of research by the Department into why those outbreaks flare up in particular areas. Can a lot of those cases be traced back to the movement of improperly tested cattle, cattle which were not tested because of difficulties with tagging and with getting a tag which cannot be tampered with? Getting back to the point made by Deputy McCreevy about the quality of the vaccine used, is it not a fact that a previous Minister is on record as saying that he was stunned to find out as Minister for Agriculture that the vaccine was not up to standard?

Mr. O’Mahony.—I accept what the Deputy says with regard to some of these outbreaks being due to movements which might be somewhat irregular. That is a factor, but it is not possible to have a measurement of the extent to which that occurs. Also there is no doubt that once something goes wrong, the contact from farm to farm of animals over fences spreads it. I have already mentioned the unsatisfactory tuberculin that was used. As regards inadequate testing, that takes place in some instances, but I would not rate it as being a major factor in the spread. You will have a little of everything, irregular movements, possibly some cattle not tested, maybe some ear tags switched and so on. It is a combination of all of these, rather than any one factor, which is responsible for the trouble.

1006. Deputy Naughten.—What progress has been made with a tamper free tag and how much research has gone into it? How much money, to the nearest million, has been spent on disease eradication in 1987 and what is the disease levy contribution.

Mr. O’Mahony.—As regards a tamper proof tag, work has been going on on that and a number of firms have been providing samples over the years. We have not yet got one that is 100 per cent tamper proof. What is in use is reasonably efficient, but so far there has not been a tag that one can say cannot be tampered with. As regards disease eradication expenditure in 1987, the provision in the Vote is just £30 million and there would be an addition of £9 million or £10 million for administration. So you are talking about a gross total of £40 million. The provision from the disease levy in the Vote is around £20 million out of £40 million.

1007. Deputy Naughten.—In other words, farmers are contributing 50 per cent of the cost of the disease?

Mr. O’Mahony.—Yes.

1008. Deputy Naughten.—I want to put that on record because an impression was created earlier on that that was not the situation.

1009. Deputy Ahern.—Previously you stated that there were about 800 vets involved with regard to the £8 million fees. I wonder if they are 800 individual vets or does the figure include practices where you would have more than one vet?

Mr. O’Mahony.—I think it would be 800 vets in total rather than practices. Some of them may be in a practice of seven or more vets.

Chairman.—Deputy Dempsey has not spoken so far.

1010. Deputy Dempsey.—In relation to the purchasing policy of the Department, especially in relation to the brucellosis eradication scheme and the blood sampling kit, are you satisfied that the purchasing policy, this once-off annual purchasing of stocks, is the most cost-effective way of doing this? Would a better way not be to have a certain level of stock in hand and then purchase as was necessary to keep that stock at a particular level? The second point I want to advert to is the wastage that has already been adverted to. I am horrified that the level of wastage with the vets would be in the region of 39 per cent or 40 per cent. You say now that it is down to 35 per cent but that is something in the region of £350,000 of taxpayers’ money that is being wasted because people basically are not careful with the blood sampling kits they are getting free. Are you satisfied that the tighter controls you mentioned earlier will in actual fact reduce or eliminate this or is this going to be a recurring item of expenditure year after year?

Mr. O’Mahony.—I would agree with the Deputy’s point when he mentioned what I think was a topping up of stock, that you would keep topping it up according as it was used. In a way I suppose that is the way we are doing it. We are trying to maintain enough of a stock that would cover us for a period ahead. Also there is the fact that the amount required now is being reduced drastically. All the dairy herds are being done through milk ring testing because we have got to the stage of being officially brucellosis free. The country was declared officially brucellosis free in April of last year which reduced the need for testing and we are now only testing with blood kits the non-dairy herds which normally are much smaller than average. On the question of wastage, the shortfall was cut down from 39 per cent to 25 per cent by last year and we have tightened up further on it since. This is not necessarily a wastage. It is a shortfall between the numbers issued and the number returned and it means that the veterinary surgeons have stocks. We are following this up with them and ensuring that they utilise those stocks before they get more.

1011. Chairman.—I do not think the Committee would wish to spend the same amount of time on other matters. This has been one of the major matters of the day’s presentation. I want to put one thing on the record just in case we get our jerseys mixed up. The receipt from farmer contributions towards the cost of eradication of bovine disease for 1984 was £5.8 million, expenditure for TB was £16.9 million and for brucellosis was £4.6 million. That is an expenditure of £21.5 million. From an expenditure of £21.5 million we had an income of £5.8 million. I think the figure is nearer to one-third than 50 per cent. Is that right?

Mr. O’Mahony.—That is correct for 1984.

1012. Deputy Naughten.—The 50 per cent I put on record was for the current year.

Chairman.—The Deputy will be quite happy to put that on record when we come to the 1985 accounts. We have to deal with this matter and with the agreement of the Committee, I propose that as it is a major area which constantly recurs — normally we wait until the end of the examination of all the accounting officers and then we get the observations and the minutes of the Department of Finance on the various areas we have examined — we deal with this matter by asking for an early minute from the Department of Finance. Is that agreed? Agreed.

1013. Chairman.—Paragraph 41 of the Report of the Comptroller and Auditor General reads:

Subhead D.2. — Scheme of Assistance for the Expansion of the Cattle Breeding Herd

This scheme was introduced in 1982 with the objective of expanding the cattle breeding herd by providing grants for additional calved heifers kept by herdowners above their normal cow herd replacements. A grant of £70 is paid for each additional first calved heifer (subject to a maximum of forty grants per herdowner) verified on inspection as being present in the herd and additional to the applicant’s basic herd number at 30 June of the year prior to the year for which a claim is made. The total paid from the Vote in respect of the scheme up to 31 December 1984 was £17,881,430 representing grants for over 255,000 animals.

In the course of audit of the 1983 scheme a comparison by my staff of the details shown on thirty herd applications under this scheme with the details shown on the disease eradication test reports for the same herds revealed that grants were paid to five herdowners in respect of animals which, on the basis of their description in the test reports, should not have qualified for grants.

I asked the Accounting Officer for his observations on these cases and whether such comparisons were carried out by his Department. He has informed me that departmental officers, experienced in determining the ages and status of cattle, carry out a physical inspection of every animal presented by applicants under this scheme and the introduction of a further comprehensive system of time-consuming comparisons with disease eradication test reports could not be justified. The test reports were examined only in exceptional cases e.g., where suspicions were aroused. Furthermore, because test reports were compiled for different purposes and mainly by private veterinary practitioners, they frequently lack the level of detailed accuracy and precision required for payment purposes under the various headage schemes such as this. An initial examination of test reports in the cases noted did not suggest strong grounds for seeking refunds in these five cases but the matter was being further investigated.

I also asked the Accounting Officer for information on the extent to which the national breeding herd increased as a result of the payment of 255,000 grants under this scheme. He told me that, according to the Central Statistics Office, the national breeding herd increased by 88,000 cows (i.e. from 1.982 million to 2.070 million) between June 1981 and June 1984, the base period covered by the scheme. I have further inquired whether, at the outset of the scheme, the Department had made projections of the proportion of the total number of grants which would be reflected in the increase in the cattle breeding herd and, if so, whether the figure of 88,000 shown in the statistics is in line with those projections.

Have you anything to add Mr. McDonnell.

Mr. McDonnell.—This paragraph raises two issues in connection with this scheme which was intended to provide incentives for the expansion of the cattle breeding herd. The first is a particular issue and the second a more general one. The particular issue with which I was concerned was that animals which should not qualify for grant may have been included in the claims made by some herd owners. I adverted to this possibility because, while their description on the grant claim would indicate that they were elegible, their descriptions on the test reports compiled in connection with the disease eradication programme suggested that they were not. The Accounting Officer’s explanation of how such apparent discrepancies could arise is referred to in the paragraph but the Committee will note that he did say at the date of my report that some further investigations were being carried out. He has since informed me that these investigations did not give firm grounds for seeking the refund of any grants paid. The general question which I raised could, I suppose, be regarded as relating to the effectiveness of the scheme in attaining its objectives. Since the scheme was designed to encourage farmers to increase their breeding herds by paying them a grant for each additional breeding animal kept by them above their normal herd replacements, I felt that it should be possible to show that an increase in the national breeding herd could be attributed to the operation of this scheme and that the extent of the increase should represent an acceptable proportion of the total number of grants paid. What I asked in this paragraph was whether an increase of 88,000 in the national breeding herd was an acceptable result of the payment of 255,000 grants and whether it was in line with what the Department would have expected to achieve from the payment of that number of grants. Subsequently, and the Accounting Officer will correct me if I am wrong, the number of grants finally paid was 325,000. Since my report the Accounting Officer has told me that at the outset it was estimated that a total of 240,000 grants would be paid over three years and that they expected that a half to one third of the total number of animals on which grants were paid be retained in the national herd. On this basis an increase of 88,000 in the national herd was considered acceptable. What I am getting at is the effectiveness of the scheme in achieving its objectives.

Chairman.—We do not need to go all round the table. We have only got three-quarters of an hour left.

1014. Deputy Foley.—I just want to refer to the Comptroller and Auditor General’s point in regard to the audit of the 1983 scheme where he made the comparison that out of 30 herd applications he found that there were five grants paid. How much money was sent on in regard to the five? Five cases came to light that were not entitled to the particular grants. How much was involved in the five cases?

Mr. O’Mahony.—I have not the figure for the precise amount but the case here is that the animals were described as one type of animal on disease eradication test reports and in a different way on the Calved Heifer Scheme reports. This was the reason for the apparent discrepancy between the two. We examined the five individual cases mentioned here and found that some of the animals were described — based on their ear tag numbers — as heifers in one report and in another report, perhaps by the veterinary practitioner, as cows. This was the reason for the auditor’s query on the matter. But on going through them we found there were no grounds for reclaiming any of the money. We were satisfeid that the total numbers were in the herds.

1015. Deputy Foley.—In these five cases which the Comptroller and Auditor General referred to, was that money recouped?

Mr. O’Mahony.—No, we found that the discrepancies between the veterinary practitioners’ reports and our officers’ reports were such that we would not be justified in relying on the veterinary practitioners’ reports. The inconsistencies even between different reports by the veterinary practitioners on the same herds were such that it was impossible to rely completely on those reports. Those reports, incidentally, would have been just for the purpose of testing the animals and the standard of accuracy in the description of animals would not be very high. They are prepared for a different purpose.

1016. Deputy Foley.—Do you have a system of cross-checking the statistics of the herd applications against test reports?

Mr. O’Mahony.—No, because the cost of doing so would be out of all proportion to the end results. In some cases if there are grounds for suspicion we do so. But, at present the difficulty, as will be appreciated, of checking a list of hundreds of numbers from two different reports, where they are arranged in any order, would be out of proportion to the results achieved.

1017. Deputy Foley.—The total Vote for your Department in 1984 was £395 million, of which you had a total expenditure of £361 million. Do I take it that you have no system of cross-checking on expenditure of that range?

Mr. O’Mahony.—We do not cross-check the herd numbers in the returns by veterinary surgeons under the disease eradication scheme with the numbers in the returns we get in regard to, in this case, the Calved Heifer Scheme, because to do so would require a huge staff. There is no way we could do this manually on a national basis.

1018. Deputy Foley.—What was the total staff in the Department in 1984?

Mr. O’Mahony.—About 5,000 in 1984.

1019. Deputy Foley.—Out of a total staff of 5,000 were you not in a position to cross-check where there was an expenditure of £361 million?

Mr. O’Mahony.—We are talking of the Calved Heifer Scheme only. The Calved Heifer Scheme was a temporary scheme introduced for a three year period. We had a system of checking the animals on the farms by our officers. To check each of their reports against the veterinary practitioners’ report prepared and furnished for a completely different purpose would have absorbed a huge number of staff. We did not feel justified in doing that. If the whole exercise of the TB scheme and all the livestock schemes were computerised then it would be possible to cross-check individual herds, but it is not possible to do that for 150,000 to 180,000 farms without a huge expenditure of staff resources.

1020. Chairman.—There are two central points here; (1) whether the five herd owners have been paid; (2) to establish how the scheme is working in general. Deputy Crotty and Deputy Naughten wish to speak. I will take one other Deputy. We should really move on after that unless somebody else wants to offer.

1021. Deputy Crotty.—You mentioned that there were 255,000 grants cleared and paid in this scheme. Is that correct?

Mr. O’Mahony.—The Comptroller and Auditor General mentioned 325,000. The ultimate figure was 325,000.

1022. Deputy Crotty.—How many applications were refused?

Mr. O’Mahony.—I do not have the figure of applications refused but I suggest it would have been very, very small because the farmer would not apply unless he had an increase. In some cases we disallowed certain animals.

1023. Deputy Crotty.—You mention that a physical inspection of every animal was carried out, as to age and so forth. Is this carried out by the veterinary profession?

Mr. O’Mahony.—A physical inspection of the number of cows and calved heifers was carried out.

Deputy Crotty.—This is carried out by the veterinary profession?

Mr. O’Mahony.—No, by agricultural officers — non-professional staff. In many cases the inspection would have been combined with the inspection for the purposes of the various EC livestock schemes — the headage schemes and so on. One inspection covered everything.

1024. Chairman.—There were 325,000 grants for a herd increase of 88,000?

Mr. O’Mahony.—There was a net increase of 88,000. In other words, we paid four grants to get one increase in the number.

1025. Chairman.—We need to know if that is effective?

Mr. O’Mahony.—It was not as effective as we had hoped. We had a similar scheme in the sixties. Towards the end of that scheme we got an increase of one for every three grants. Earlier in that scheme we got an increase of one for every two grants paid. In this scheme ultimately we got an increase of one for every four.

1026. Chairman.—What was your objective in the beginning?

Mr. O’Mahony.—We had hoped to get somewhere between one for every two — somewhere between a half and a third — or one for every three. We eventually got one for every four.

1027. Chairman.—Why did it go so wrong? What was the difference?

Mr. O’Mahony.—We started off the 1960 scheme from a lower level and we achieved quite a substantial increase in the size of the breeding herd. This time we were starting from a higher level and therefore could not achieve the same rate of increase.

1028. Deputy Naughten.—Is it not a fact of life that if this scheme has not been introduced we would be faced with 250,000 fewer suckling cows today?

Mr. O’Mahony.—Certainly we would be faced with fewer suckling cows. I do not know what the figure would have been but we would have been faced with much fewer suckling cows.

1029. Deputy Naughten.—Was this scheme not introduced to try to stem the tide of the disappearance of the suckling herd?

Mr. O’Mahony.—Yes, that was the purpose. It was introduced when there was a tendency for more and more people to switch to milk and to give up beef production. This was an effort to improve the balance.

1030. Deputy Naughten.—Do you share the view that if something like that is not done again — the vast millions we read about being pumped into the meat industry — we will end up with huge killing capacity, packing capacity and no suckling herd? Is it not a fact of life that farmers are getting out of suckling simply because it is not paying, even though there is a £100 subsidy per suckling cow?

Mr. O’Mahony.—One of the major problems we face here is that under EC regulations we are not permitted to give direct subsidies for suckling herds. Payments can be made directly on livestock only in the disadvantaged areas. We had to get special permission from the EC for this three year scheme. While we received permission in 1982 I am not sure that it would be forthcoming in the circumstances of 1987.

1031. Deputy Naughten.—In fact, we could find ourselves with a vast increase in killing capacity, with reduced numbers of cattle available?

Mr. O’Mahony.—That is so. Certain consideration is being given at the moment to possible ways of encouraging people to increase the number of suckling cows but it is not a simple matter and we are not completely free agents in what we might do.

Deputy McCreevy.—On a point of clarification, was the grant paid to all farmers, milk farmers and others, or just people in the beef business?

Mr. O’Mahony.—It was available to all farmers.

1032. Deputy McCreevy.—That is what I thought. Was the purpose of the scheme to increase the national herd but particularly to increase the number of suckling cows, etc.?

Mr. O’Mahony.—Yes.

1033. Deputy McCreevy.—I do not like to pour oil on troubled waters, and it is not under your aegis, but is the figure of the increase of 88,000 from 1,982 million to 2.070 million, which was supplied by the Central Statistics Office reliable? If memory serves me correctly back in the seventies the Central Statistics Office had a method of carrying out the agricultural census during certain periods and then doing the additions and subtractions and saying what it should be. When the physical census was carried out some time in the seventies on the beef cow herd the figure was somewhat in the region of 440,000 when it should have been 700,000. That was a big discrepancy. Is the figure of 2.070 million at the end of 1984 an actual physical count or is it their usual method of compilation? Is it correct, that they were found in error in the seventies on the agricultural statistics?

Mr. O’Mahony.—Yes, I think the Deputy is correct but the figures in any of the Central Statistics Office reports can be questioned for any particular year because many of them are done on the basis of sample returns. Nevertheless they are pretty reliable as an indicator of the trend. While one could perhaps dispute that they are not accurate to the last figure, nevertheless by and large they are pretty reliable. At the end of the day they are all we have to work on.

1034. Deputy McCreevy.—Was there a big discrepancy in the seventies?

Mr. O’Mahony.—There was a discrepancy at one stage.

Deputy McCreevy.—Was it a very large one?

Mr. O’Mahony.—Yes, but one always has to bear in mind that in returns from any farmer he may overstate or understate for reasons that may have no connection whatsoever with the livestock census but which could be affected by some other thoughts that he may have in mind. He may not wish to disclose his full herd to everybody.

Deputy McCreevy.—Would the Accounting Officer agree that a difference of over 200,000 is a large one?

Mr. O’Mahony.—Certainly.

Deputy McCreevy.—I understood that there is a big push by the advisory service to increase the suckling herd. Is that their modus vivendi for 1987?

Mr. O’Mahony.—Yes.

Deputy McCreevy.—Did the scheme finish at the end of 1986?

Mr. O’Mahony.—It was a three year scheme for 1982, 1983 and 1984.

1035. Deputy Desmond.—The breeding herd stood at 2.07 million in June 1984. How does it stand at present in your estimation?

Mr. O’Mahony.—The June 1986 figure was 2.03 million. The June 1987 figure is not out yet but I suspect that it would be somewhat down.

1036. Deputy Desmond.—Would you agree that it is a matter of considerable concern that as a result of the scheme the breeding herd which stood at 2.07 million in June 1984 is now down to, say 2.01 million?

Mr. O’Mahony.—It is a matter for concern that the breeding herd has not gone up and has tended downwards. To some extent that is affected by considerations such as the restrictions on milk and the relative unattractiveness for farmers of suckling cows, which Deputy Naughten referred to.

1037. Deputy Desmond.—Would you agree that because of the recent emphasis on beef export production the number is likely to drop to under two million?

Mr. O’Mahony.—One could say that the emphasis on export production would be to encourage farmers to expand their herds on the basis that the facilities are being provided to build up an export trade and, therefore, they should prepare for that by expanding their herds now.

1038. Deputy Desmond.—Hopefully that would be so but in the short term would it have a substantial impact on a reduction in the breeding herd?

Mr. O’Mahony.—Not necessarily in the herd inasmuch as an expansion of exports would mean eating into the stock of nonbreeding cattle and finishing animals off earlier, which would be a desirable trend in any event.

Deputy Naughten.—It frightens me that the breeding herd has slumped and is on the way out and soon will be a thing of the past. If drastic steps are not taken immediately in the Department of Agriculture the suckling herd will disappear. Banks will not give finance to farmers for a suckling project simply because it has no yield and cannot return sufficient moneys.

1039. Chairman.—If the Committee are in agreement we will note this report and seek a progress report from you when you appear to discuss the 1985 accounts. Perhaps you would let us have a note in advance of appearing to discuss the 1985 accounts so that the clerk could circulate it to the Members. Is that all right?

1040. Deputy Desmond.—I know it is a tentative comment in relation to the prospect of a scheme to increase the herd but it would be of particular interest to Members and perhaps helpful to the Department if we had some outline of your views in relation to that. I know you are constrained by budget considerations but nevertheless we are concerned about the size of the herd and we want to ensure that we have a viable breeding herd.

1041. Chairman.—We have to be careful not to get into the area of policy, but in keeping with spending would you incorporate something like that in your note?

Mr. O’Mahony.—Yes.

1042. Chairman.—Paragraph 42 of the Report of the Comptroller and Auditor General reads:

I referred in previous Reports to the Government’s approval on 26 March 1982 of the proposals by the Minister for Agriculture for the winding-up of the Pigs and Bacon Commission, a statutory body set up under the Pigs and Bacon Acts, 1935 to 1961, and to payments totalling £5,840,769 towards the accumulated deficit of the Commission as at 4 April 1982.

With a view to the setting up of a limited company to succeed the Commission and engage in the centralised marketing of pigmeat, the Commission continued to trade from 4 April 1982 to 31 July 1983 on the basis that the results of such trading would be taken over by the proposed company. No losses were incurred in this period.

The new company — Pigs and Bacon Commission Ltd. — commenced business on 1 August 1983 and continued to trade until 31 December 1984 at which stage a provisional statement of affairs indicated that it was insolvent. Included among it debts is an amount of £400,000, approximately, excluding interest, owed by it to the statutory Commission, mainly in respect of assets of the Commission taken over by the company on its establishment. Because this debt is not now likely to be realised by the statutory Commission, the balance of its deficit not yet cleared by the State has grown to some £640,000 at 31 December 1984. No payments have been made from the Vote in the year under review in respect of this deficit.

A sum of £67,533 has, however, been charged to subhead G.2 of the Vote in respect of salary and superannuation payments made in respect of four former employees of the Commission in accordance with the Government decision of March 1982.

Have you anything to add, Mr. Mc Donnell?

Mr. McDonnell.—This paragraph outlines the position at 31 December 1984 in regard to the Department’s efforts to disengage from having any further financial commitment to the centralised marketing of pigmeat and to wind up the Pigs and Bacon Commission as a statutory body. This has proved to be a fairly lengthy process with a certain amount of difficulty being encountered in determining what costs should be borne by the State and what should be borne by the industry. The committee will see from the paragraph that up to 31 December 1984 the Department has paid a total of just under £6 million on foot of their commitment to meet the deficit of the statutory body as at 4 April 1982. Since 31 December 1984 further progress has been made in the negotiations with the industry and in 1986 a further, and what appears to be more or less the final, payment of £960,000 was made by the Department. This included an element in respect of the liability of the company established by the industry. This brings the total costs to the State of disengaging from pigmeat export marketing operations to just over £6.8 million. In the various negotiations with the industry which took place in the course of this exercise the Department succeeded in getting some measure of acceptance for arrangements which would enable them to recover some of their outlay by getting contributions from the industry through other channels. I am not sure with what success, but perhaps the Accounting Officer would elaborate on whether any of the £6.8 million was recovered by other means.

1043. Chairman.—This is largely for information. Would Mr. O’Mahony deal with that point and then, unless any Deputy has any particular question, we will move on?

Mr. O’Mahony.—The position is as the Comptroller and Auditor General has stated. We had a Supplementary Estimate in the Dáil in December which more or less disposed of all liabilities, etc. in connection with the Pigs and Bacon Commission, both the statutory body and the private limited company. There are some matters still to be sorted out but the funds — to put it briefly — will at least balance, if not provide some slight amount of return for the Exchequer. We are also taking steps to abolish the old statutory body. The money spent on this body in effect, was used to support the pig industry as a whole. As regards recouping some of the money, there are certain funds still in the industry held by the Bacon Curers’ Society. We are endeavouring to get our hands on some of that money but overall the amounts will be relatively small in relation to the total we have spent in what, in effect, has been supporting the pig industry since we entered the EC in 1973.

1044. Chairman.—Paragraphs 43, 44 and 45 of the Report of the Comptroller and Auditor General read:

Subhead M.4. — Market Intervention—Incidental Expenses

Subhead N.—Appropriations in Aid

The charge to subhead M.4 is made up as follows:—

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

While the charge to subhead M.4 consists of actual payments made at the rates negotiated by the Department, the EEC contributions towards the costs incurred are made at standard rates determined by the Commission for all Member States. At 31 December 1984 the total expenditure met by the Department exceeded the amount received from the EEC by £55,280,526. The corresponding figure at 31 December 1983 was £43,034,277.

The Department claimed some £11 million from the EEC for transport charges in respect of beef stored abroad in the years 1974-1977. The Commission, however, disallowed a total of £112,527 relating to the transport of quantities of beef in excess of the limits authorised by EEC regulations for storage abroad. This resulted in a shortfall in Appropriations in Aid of that amount which has been written off with the sanction of the Department of Finance and noted in the Appropriation Account.

The charge to the subhead includes an amount of £1,386,510 being the cost incurred in 1984 in respect of two ships chartered for a period of one year for the storage of intervention butter. The need to charter these vessels arose early in 1984 when all available storage space in Ireland had been taken up and the EEC Commission had fixed the amount of butter which could be stored abroad at 20,000 tonnes. The Accounting Officer has informed me that while the final accounts for the chartering of the vessels have not yet been settled, it is estimated that the total cost of the charters will be £2,077,000 and that the total amount recoverable from the EEC is £727,000 (the standard amount allowable). He stated that storage and handling rates vary from store to store, even within Member States, but that if it had been possible to store the butter abroad instead of on-board ship here, the saving to the Exchequer would have been about £1.25 million and that if Irish land stores had been available, the saving would have been about £1.1 million.

Have you anything to add Mr. McDonnell?

Mr. McDonnell.—As you are pressed for time could I suggest that we take paragraphs 43, 44 and 45 together.

Chairman.—Are they related?

Mr. McDonnell.—They all deal with the recoupment of costs from the EC.

Chairman.—Is it agreed to take paragraphs 43, 44 and 45 together?

Agreed.

Mr. McDonnell.—Paragraph 43 refers to the system of reimbursing member states the overhead costs they incur in connection with the intervention buying and storing of beef, dairy products and cereals. Some small part of this shortfall could, perhaps, be attributed to a time lag in receiving moneys from the EC but the main reason is the difference in rates. Paragraph 44 refers to an additional amount which had to be borne by the Department because of the EC regulations regarding storage abroad. That is additional to the shortfall in paragraph 43. Paragraph 45 highlights a particular item of overhead expenditure incurred on an unusual and considerably more expensive than normal method of storage. Apparently this had to be done because there was no Irish storage space available and the EC regulations restricted the quantities which could be stored abroad.

1045. Chairman.—With regard to paragraph 43, this paragraph relates to expenditure in regard to intervention purchases. The subhead bears the expenses arising out of handling the intervention produce, but does not bear the cost of buying it. What is the reason for that?

Mr. O’Mahony.—The capital cost is ultimately borne by the EC. We borrow by arrangement with the Department of Finance to purchase the intervention produce, butter, skim powder, cereals and beef. We have to store, finance, etc. those products while we have them on hands. When we dispose of a product a loss is incurred, we get the price of the product when we sell it and the difference between that and the purchase price is recouped to us by the EC, thereby cancelling out the initial expenditure. What we have to bear and what is borne on the Vote are the incidental expenses, but they are pretty hefty incidental expenses. That is the total cost of financing, cost of storage, freezing and so on.

1046. Chairman.—Could I ask about paragraph 45? I will quote from the paragraph.

The charge to the subhead includes an amount of £1,386,510 being the cost incurred in 1984 in respect of two ships chartered for a period of one year for the storage of intervention butter.

Were these the two Greek ships which were anchored off the coast of Cork?

Mr. O’Mahony.—Yes, I am not quite sure of their origin, but one of them was called Maraki which I presume is Greek. The other was called the Swan and they were anchored off the coast of Cork for some time.

1047. Chairman.—The estimated cost of the charters will be £ 2.07 million, but we will only recoup £ 727,000 from the EC. It appears from the report that the saving to the Exchequer would have been about £ 1.25 million if the goods had been kept in Irish stores on land. Why could storage not be found on land?

Mr. O’Mahony.—There was inadequate cold storage available in this country. This has been a problem since we entered the EC. In fact, the amount of space provided has increased enormously and we are now at the point where we can store everything in Ireland. In 1984 we could not store abroad, except with the permission of the EC Commission and the countries concerned, mainly Belgium and the Netherlands. This arose in March 1984 and there was no cold storage space here. We were starting the main milk season and, therefore, had to take the product, a perishable product, off the market. We had difficulty in getting the EC and the authorities in Belgium and the Netherlands to agree to our moving it to the Continent. The whole situation was affected by another matter. We were in the midst of the milk super-levy negotiations and it would have been extremely serious for our negotiating position if we had fallen down on the job of storing at that time. Therefore, we were forced to charter these boats and store our produce on them for some months. It was an extremely expensive way of doing it; it had been done for beef in the 1970s when we were stuck with inadequate storage for beef. It is an extremely expensive way of storing but it is the last resort when everything else fails.

1048. Chairman.—Has the final account been settled?

Mr. O’Mahony.—Yes, the final figure was £2,035,000.

Chairman.—How much did we get back from the EC?

Mr. O’Mahony.—We got £725,000 from the EC.

—Chairman.—The cost to us was nearly £1.4 million?

Mr. O’Mahony.—The exact cost is £1.310 million.

1049. Chairman.—Would you not agree that there is something almost indecent about a lack of planning which leaves us in a situation where we have to store butter in two ships off the Irish coast?

Mr. O’Mahony.—Over the years we have encouraged the cold storage industry to put up cold stores. They have done a lot on that but they had not reached an adequate point in 1984. It was in 1985 or 1986 that they eventually got to it. Because of the large quantities going into intervention and the pressure on the intervention storage, there was a shortage and more storage space is not something that can be conjured up over night. Also, the State cannot invest huge sums of money in storage that will never be utilised. We have to operate on the basis of doing it as closely as possible to actual needs.

1050. Deputy Colley.—I would be interested in clarifying the last sentence of paragraph 45. This paragraph states that if it had been possible to store the butter abroad instead of on board the ships, the saving to the Exchequer would have been £1.25 million and if Irish land stores had been available the saving would have been about £1.1 million. Does that situation continue? Is the cost of storage in Irish land stores more expensive than abroad?

Mr. O’Mahony.—Yes. That is the situation at the moment. There are two problems. We have to get the permission of the EC Commission and of the other member states concerned to utilise their stores for intervention purposes which is not always necessarily available. In 1984 the Netherlands and Belgium would not give us permission. Also when we move to the Continent we have to bear the cost of transport ourselves but if the product is held in cold store for a sufficient length of time — say about six months or longer — we will be able to recover, with the lower costs on the Continent, the extra cost of transport. This makes the continental stores more attractive to us.

1051. Deputy Colley.—What is the main reason for this? Is it that the land storage industry charges are much higher and if so, why?

Mr. O’Mahony.—The charges are higher here than on the Continent. The Deputy is correct on that. Two reasons could be adduced for this, (a) the costs here, particularly the cost of electricity, and (b) the fact that until now the cold stores were in a very strong negotiating position with us.

That position has now changed and we are able to put pressure on the cold stores because there is adequate storage and the quantities for intervention will, as a result of the restrictions on the EC side, go down. Our position, which was very weak in the past, is now quite strong. We hope to see that reflected in our expenditure on cold storage in the future.

1052. Deputy Naughten.—Are we about to reach the stage where we will have surplus cold storage in this country within 12 months given the amount of storage facilities that have been built in the last three or four years? There is approximately £12 million in the difference between what it cost us for handling and financial charges, transport and other charges and a difference of £1,200 in the refunds. Has that figure grown since 1984 or is it reducing?

Mr. O’Mahony.—There certainly will be a surplus of storage. From the Department’s point of view, the sooner we can reap the benefit of that for the Exchequer the better. The cold stores have done well up to the present and it is now our turn to reap the benefit of the surplus that exists and get charges more in line with those applicable on the Continent. As regards how we are faring now compared with the past, I cannot say off hand whether there has been a significant change in the net cost of intervention. There are two factors involved. One is that the storage etc. rates allowed by the EC Commission have been reduced with effect from late 1985. They were cut by 25 per cent which adds to the amount we have to bear. On the other hand, the losses on interest which constituted a high proportion of the net cost to us in the past have probably been reduced somewhat, given the reduction in interest rates.

1053. Deputy Naughten.—What is the subsidy the Government have to pay at present on interest rates?

Mr. O’Mahony.—The position is that the Community will refund 7 per cent to us. It depends on where we borrow. If we borrow in Deutschemarks we can get them at 3.75 per cent currently. As against that, we have to take the exchange rate loss if there is a realignment of currencies. We can borrow ECUs at the more stable rate of about 6.75 to 7 per cent which means we just about break even. We fared relatively well in 1984, 1985 and 1986 because there was no realignment which adversely affected our borrowing. We had borrowed a lot in Deutschemarks at that time and we are getting 7 per cent and even 8 per cent from the Commission, but we had a capital loss when the realignment took place last August. The net effect overall was that much of the profit we made earlier was wiped out. This is something we have to keep a close watch on in consultation with the Department of Finance.

1054. Deputy M. Kitt.—On the question of recoupment from the EC, you talk about the standard amount allowable which works out at about 35 per cent on the chartered business. Does that vary if the storage is in some other country?

Mr. O’Mahony.—No. There are standard rates which are based on the average for the Community as a whole. Some gain and others lose and the same more or less applies in the case of the interest. This is something we have fought bitterly over the years, especially in the case of the interest which used to account for the bulk of losses. The standard rate operated against people like ourselves with high interest rates and was very attractive to countries which had low interest rates. Similarly, storage and other charges tend to be standard.

1055. Deputy M. Kitt.—Is it around 30 per cent?

Mr. O’Mahony.—In this case it worked out like that because of the very high cost of storage. Normally it would be pretty close. We might make a slight profit on some of these incidental charges inasmuch as we would not give the factories or the cold stores the precise amount we get from Brussels. Our aim is to come as close to balancing as we possibly can. We certainly lose on interest. We try to lose the minimum on the other matters but we do not always succeed.

1056. Deputy Crotty.—What is the normal or average duration of products in cold store?

Mr. O’Mahony.—It varies very much. Some of the butter has been in cold store for two years plus. Beef would probably be there for one year. It can vary from time to time. Taking the Community as a whole, when stocks are getting very old the Commission tend to adjust the terms of sale so that it is possible to make a large sale to, say, the Soviet Union or some other market like that. This would enable the Commission to get rid of some of the older products. It also allows sales for animal feed and so on.

1057. Deputy Crotty.—Would the cost of storage in the case of two years plus equal the realised cost of product or would it be more?

Mr. O’Mahony.—The Deputy is right on that. In some cases we found that it might well have been cheaper to have destroyed the product in the beginning rather than to store it for a long time and then dispose of it at a giveaway price. This is one of the reasons why the Commission has been taking such a strong line in regard to intervention and trying to get out of the system of more or less permanent intervention, because of the high costs that are incurred with no net benefit at the end of the day.

1058. Deputy Crotty.—In 1984, handling, freezing and storage cost £31 million. What was the purchase cost of the product in that year?

Mr. O’Mahony.—The total purchase cost of the products we stored in 1986 was £570 million. On a quick tot I think it was about £350 million in 1984.

1059. Deputy Crotty.—About £350 million was expended on the purchase of that product.

Mr. O’Mahony.—Yes.

Deputy Crotty.—What was paid out in grants to cold storage operators in that year, or are grants available, and to what extent, to people who provide cold storage?

Mr. O’Mahony.—I am not certain. It would be a matter for the IDA as to whether they were paying grants for cold stores. Certainly in recent years they were not paying grants and I doubt if they were paying in 1984. They may have been paying in some earlier years.

1060. Deputy Crotty.—Was any incentive given to people to provide cold storage?

Mr. O’Mahony.—We gave encouragement to them. We gave them no money.

1061. Deputy Crotty.—What did the encouragement consist of?

Mr. O’Mahony.—The encouragement was to persuade them that there would be a large amount of intervention product available, that if they were to provide storage they could be certain of getting business because the only other place the product could go to would be abroad where we would have to reply on the Commission and on member states to take it. It was generally persuading them of the attractiveness of putting up more cold stores.

Deputy Crotty.—You were nearly guaranteeing them—

Mr. O’Mahony.—We were nearly guaranteeing them business.

1062. Deputy Desmond.—Did you ever contemplate in the earlier years that the State might have provided some cold storage?

Mr. O’Mahony.—I do not think it was seriously considered as a possibility because, after all, cold stores are used for other purposes as well as for intervention. We also were aware of one other member state which provided a large amount of storage for grain, took over stores, rented stores in advance of harvest and so on. On the whole it did not work out satisfactorily. We felt that it was better to rely here on the industry to put up the stores and take the commercial risks involved.

1063. Deputy Desmond.—In a monopoly guarantee storage situation how much has the State expended on intervention storage since the inception of the scheme?

Mr. O’Mahony.—I accept the point that, if there had been more storage available, we might have got the storage more cheaply, nevertheless we would have incurred the capital cost on an operation which could well be very limited in time. There are strong commercial risks in putting it up and also intervention will be cut back, as is quite a reality now in 1987.

1064. Deputy Desmond.—How much has the State expended in storage costs since the inception of the scheme?

Mr. O’Mahony.—I cannot put a figure on how much of the £31 million would represent storage costs in that year. Of course, we get the recoupment from the EC for the vast bulk of it.

1065. Deputy Desmond.—Since the inception of the scheme is any figure available on the net Exchequer cost?

Mr. O’Mahony.—The net Exchequer cost as set out by the Comptroller and Auditor General is £55 million. It is very much a guess on my part, but I would say that the vast bulk of that £55 million would represent financial charges. In other words we did not recoup the full interest we had to pay. Some of it could be storage but I would say that it is a very small proportion of that figure.

1066. Chairman.—At 31 December the total expenditure met by the Department exceeded the amount received from the EC by £55 million. Is that since 1973?

Mr. O’Mahony.—That is over the whole period since 1973.

1067. Chairman.—We have to deal with one or two matters in private session. I am afraid we will have to leave it at that for today. If we are taking long over your Department it is only because they have such a prominent role in the economy. We will be in touch with you to set a mutually convenient date for continuing this session. Before we conclude the public session we have to dispose of some items. I propose that the Committee agree that we note paragraphs 43 and 44. On paragraph 45 it should be noted that the Committee expressed dissatisfaction. That is in regard to the two ships off the Irish coast. I raised with the Accounting Officer the point that the forward planning should have allowed us to find some other process than to have two ships which would cost the State £1.25 million more than it would cost to have these goods stored on land.

1068. Deputy Naughten.—If the Department of Agriculture had not provided those ships I would be asking questions also as to where the stock was going. I do not think it is relevant and I dissent from that.

1069. Chairman.—We must deal with it in some way. I propose that we express dissatisfaction and if the Committee dissent from that we will take whatever other proposal there is and then we will put that to the Committee. Those who are in favour of expressing dissatisfaction—

Deputy Desmond.—This is a matter of committee decision after due consideration. I suggest that we reflect now on the information available to us and take that decision at our next meeting.

Chairman.—We will defer paragraph 45 until the next meeting of the committee. We are going into private session now. Thank you.

The witness withdrew.

The Committee adjourned.

*Prior to August 1976 reactors were purchased by the Department and disposed of to meat factories by contract sale. From that date herdowners themselves dispose of reactors and are paid compensation from the Vote.