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, 23 Mean Fómhair, 1987

Wednesday, 23rd September, 1987

The Committee met at 11.30 a.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. Patrick Graham, Secretary and Director of Audit (Oifig an t-Árd-Reachtaire Cuntas agus Ciste), called and examined.

VOTE 38—DEPARTMENT OF AGRICULTURE (Resumed).

Mr. James O’Mahony called and examined.

1314. Chairman.—The committee are resuming the examination of Mr. James O’Mahony, Secretary, Department of Agriculture. On the close of the last day, Deputy Naughten was putting forward a suggestion about paragraph 45 where there is a note from the Comptroller and Auditor General regarding the fact if ships stored butter off the coast the saving to the Exchequer would have been £1.25 million and if the storage had taken place on Irish lands the saving would have been £1.1 million. I feel strongly that that is not a matter that can just be noted but I think Deputy Naughten has a counter argument and wants to put a proposal to the committee.

1315. Deputy Naughten.—On that occasion, I remember the Chairman felt strongly about the expenditure of money under that heading. I took the view, and still hold it, that there was no other option open to the Department at that point in time. We all recognise the vital importance of the purchase of surplus commodities and the Department could not purchase them if they had not somewhere to store them. I did not see that the Accounting Officer, or his officials, had any other option but to do what they did.

Chairman.—Your proposal is that we note the paragraph?

Deputy Naughten.—Yes, and I do not think there was any other option available to the officials involved.

Deputy Foley.—I second that proposal.

1316. Chairman.—I want it to be on record that I strongly dissent from the noting of it by the committee, by a majority, obviously, notes the matter I strongly dissent from it and I want that to be on record. I would like to welcome Mr. O’Mahony. We have with us also this morning Mr. Patrick Graham, Secretary and Director of the Audit in the absence of the Comptroller and Auditor General. Paragraph 46 of the Report of the Comptroller and Auditor General reads:

Subhead M.5.—Market Intervention— Losses by Deficiency, Accident, etc.

Under the Common Agricultural Policy of the EEC, subsidies, known as export refunds, may be paid on the export of agricultural produce to countries outside the Community. In the Member States expenditure on the Common Agricultural Policy, including export refunds, is disbursed through Intervention Agencies set up under EEC Regulations. In Ireland the Minister for Agriculture acts as the Intervention Agency. It is a principle of EEC financing of the Common Agricultural Policy that the authorities in the Member States are required to make good to the EEC amounts incorrectly paid by their Intervention Agencies, irrespective of whether they can in turn recover those amounts from the beneficiaries.

The price at which the Intervention Agency resells beef which it has purchased under EEC regulations is fixed by reference to whether the particular cuts are eligible or ineligible for export refunds, the price for ineligible cuts being lower by approximately the amount of the export refund. In 1980 and 1981 three Irish companies and four French companies purchased 1,044 tonnes of intervention beef cuts for export to countries outside the Community. The beef as packed at the time of purchase was ineligible for export refunds and the price paid was, therefore, the lower one. In such circumstances EEC Regulations require that the beef be exported in the same state as that in which it was removed from intervention stock and, in order to guarantee compliance with the Regulations, purchasers must provide securities in the form of bank guarantees which must be forfeited to the Intervention Agency in the event of default. The guarantees provided in this case totalled £825,615. Prior to export, approximately 973 tonnes of this beef was broken down by the companies into individual pieces and separately rewrapped. Since wrapped boneless cuts are normally eligible for export refunds the exporters claimed from and were paid by the Intervention Agency such refunds thus reducing the net price of the beef to the exporters to £59 per tonne in some cases, ranging up to £264 per tonne in others. After making payment, the Intervention Agency consulted the Chief State Solicitor, but not the EEC authorities, and in January 1981, the Chief State Solicitor advised that the action of the companies did not constitute a change in the state of the beef purchased. On the basis of this advice, the securities were returned to the companies. When, however, the case was reported to the EEC Commission in April 1982 the Commission ruled that the securities relating to the 973 tonnes (£778,949) should have been forfeited. The Intervention Agency, having unsuccessfully attempted to recover the amount of the securities from the three Irish companies, offset these amounts against other EEC moneys due to them. No such action could be taken in the case of the French companies. The three Irish companies successfully contested the legality of this method of recovering the amounts in question as a result of which the Minister was obliged to refund to them out of the Vote a total of £620,000 including interest of £82,681. The amount of the securities released to the four French companies, £241,251 will be deducted by the EEC from moneys payable to the Irish Intervention Agency and will also have to be made good from voted moneys bringing the total cost to the Exchequer to £861,630.

I asked the Accounting Officer why the Commission’s ruling was not obtained before the securities were returned to the companies. What action was now proposed to recover the amounts involved from both the Irish and French companies and what steps have been taken to prevent a recurrence of this type of operation.

The Accounting Officer has informed me that the issue turned on the interpretation of the words “in the same state as that in which they were when removed from intervention stock” in EEC Regulation 1687/76. In the Department’s view only some physical change in the beef itself and not a change in packaging could reasonably be regarded as a change in its state. This view, according to the Accounting Officer, was reinforced by the Regulation itself which distinguished between products to be exported “in the same state” and “after processing” and was also strengthened by the opinion of the Chief State Solicitor’s Office on the specific question of interpretation. In the circumstances there was no apparent necessity to obtain further interpretation from the Commission. The Accounting Officer stated that the court judgements against the Minister related solely to his offsetting the amounts against other EEC moneys in the particular circumstances and not to any right he may have to recover the amounts involved. Following those judgements the Department consulted the Attorney General’s Office as to how it should now proceed. That Office had sought the advice of Senior Counsel and the outcome was awaited. The Accounting Officer also stated that in May 1982 a specific instruction was issued to departmental officers at meat factories that they should not permit any re-wrapping or repackaging of beef purchased out of intervention without clearance authorisation from the Department. Such authorisation would not, of course, be given if there was a risk that a situation similar to the one in question might arise. Furthermore, in 1982 a special procedure was set up within the Department to ensure that any attempt by exporters to repeat the 1981 operation would be detected before the export refund had been paid or the security released. He assured me that there had, in fact, been no repetition of the operation.

Mr. Graham.—This paragraph outlines how a number of meat exporting firms contrived to get an unwarranted financial gain out of the purchase and export of intervention beef. As well as buying beef at the lower price, which presupposed that it would not be eligible for export refunds, they, nevertheless, got the export refunds, by apparently doing nothing more than packing the meat in a different way from that in which it was packed when they bought it. How they did this is explained in the paragraph. The committee will see that in order to guard against exporters changing intervention beef which they buy at the lower price from a type of product which is ineligible for export refunds into a type of product which is eligible, the EEC requires them to provide securities which are forfeited if they fail to export the beef in the same state as that in which they bought it. What happened in this case was that the beef when rewrapped could apparently be seen as fitting the EEC description of products eligible for export refunds. Notwithstanding this, and because the beef itself did not appear to have been changed in its physical state, the intervention agency, i.e., the Department of Agriculture, took the view that the obligation to export it in the same state as that in which it was purchased had been honoured and they therefore released the exporters’ guarantees. Before doing so they did check with the Chief State Solicitor’s Office that their interpretation of the regulation which referred to a change in the state of the beef was correct. It seems that they did not, however, check with the EEC authorities and, while I realise that it is easy to say so with the benefit of hindsight, I would have thought that, in view of the apparent anomaly of the exporters getting a double financial benefit, it should have been fairly obvious that before releasing the guarantees it would have been a wise precaution to check out the position fully with the EEC authorities, which is what I understand is generally done in doubtful cases. The fact that they checked with the Chief State Solicitor’s Office suggests that they had some misgivings about the transaction. It does seem therefore, in retrospect, that the Department’s action was somewhat precipitate. The end result is that it cost the Department more than £860,000 because the latest legal advice suggests that the prospect of recovering the moneys from the exporters is not considered good and the Department of Finance have sanctioned the write-off of the total amount involved this year.

1317. Chairman.—Mr. O’Mahony, there are three Irish companies and four French companies named, and I should like to know did they act together? Was there conspiracy involved in this? Was there a group arrangement or were they individual operations?

Mr. O’Mahony.—As far as we are aware they would have been individual operations. Most of the people in the meat industry are always aware of what their competitors in the industry are doing. I would not say that there are grounds for maintaining that there was any conspiracy between them.

1318. Chairman.—But they were not unconnected?

Mr. O’Mahony.—Each of them would have knowledge of what the other was doing. In that way I suppose you could say there was some connection.

1319. Chairman.—The total cost to the Exchequer was £861,630. Has that been recovered or what steps are now being taken to recover it? What stage is that at?

Mr. O’Mahony.—As the Comptroller and Auditor General’s representative has indicated, the legal aspects of this have been gone into carefully with advice of counsel and the Attorney General’s Office. The conclusion is that it would not be possible to recover the money. There were two aspects involved, the release of the securities and the payment of the export refunds. Initially the EC Commission took the line that the securities should be forfeited and that the export refunds should not be recouped to us by FEOGA. That was a matter which we contested strongly and, eventually, the Commission agreed that they would bear the cost of the export refunds. The legal advice was that the securities having been released — the securities were, in effect, bank guarantees — they could not be recovered. If we had sought to recover the export refunds, we were up against the difficulty that we had, in fact, incurred no loss on the refunds since the Commission had recouped the money to us.

1320. Chairman.—What was the net cost, if it was not £861,000, eventually?

Mr. O’Mahony.—The total cost was the £861,000.

1321. Chairman.—So what you are saying is that your legal advice is that we have to write that off?

Mr. O’Mahony.—Yes, and, as the Comptroller and Auditor General’s representative indicated, this is something that was finally done in the current year with the sanction of the Department of Finance.

1322. Chairman.—Is there reason to suspect that this was a deliberate fraud?

Mr. O’Mahony.—That aspect was also looked at and there were no grounds for regarding it as a fraud. One could regard it as utilising a weakness in the regulations but one could not regard it as fraud.

1323. Chairman.—So there is no question of criminal proceedings?

Mr. O’Mahony.—No.

1324. Chairman.—Why were the EC not consulted?

Mr. O’Mahony.—In the normal course, it is not the regular practice to consult the EC on all matters of doubt. On this occasion the officers dealing with the matter considered it, consulted the Chief State Solicitor and felt that in the case outlined there were grounds for releasing the securities. I should say also that this question of repacking is one that has given rise to problems in other member states as well as in our case. Eventually the question went to the Court of Justice in Luxembourg, only within the past two years, and the Court held that where repacking took place the product was ineligible for support. It is a subject on which there was doubt elsewhere as well as in this country.

1325. Deputy Foley. — From Mr. O’Mahony’s replies there is no way we can accept but that here at this point in time there was a deliberate fraud by seven companies involved — there Irish and four foreign — and that as a result the taxpayer has lost £861,630. What I would like to ask Mr. O’Mahony is why when the Chief State Solicitor’s Office was contacted with regard to their views on this they in turn did not get in touch with the EC authorities considering that the EC was involved? However, we cannot accept the phraseology used in the summing up of this paragraph that there was not a deliberate fraud. We have to contend that there was a fraud involving seven companies. What steps have been taken since then as a result of this fraud to prevent any future fraud within this situation involving intervention?

Mr. O’Mahony.—In the case of the repacking or anything of that sort, all officers engaged in controlling these activities in factories have been instructed that such repackaging is not to be permitted without explicit authorisation from the Department which would not be given. We set up special procedures within the Department to ensure that any effort by exporters to repeat the 1981 operation would be detected before any security would be released or any export refund paid. There has been no such instance since. The Court in Luxembourg has ruled that repacking is not permissible. The whole question of the release of securities and deposits is an aspect of the EC regulations operations which presents considerable difficulties. Each year we gain a certain amount from these. In the year in which we are dealing with, 1984, as will be seen from subhead N.26, the Exchequer gained something over £½ million from these forfeitures. Dealing with the release of securities is an ongoing problem. It has worked out over the years that we gained anything from £½ million to over £1 million last year. This brisket case is the one instance which went against us and we lost.

1326. Deputy Foley.—While I accept what Mr. O’Mahony is saying there is a loss of £861,000 to the taxpayer. I would like at this stage to congratulate the Comptroller and Auditor General for highlighting this situation. There has to be a looseness in the system considering that this could happen especially with the supervision that was supposed to be there at the time with regard to intervention. We have to accept the fact that there was a deliberate fraud.

1327. Deputy Naughten.—Like Deputy Foley I am of the opinion that those particular firms deliberately and wilfully set out to manipulate a situation. I do not see how you could change the quality of a particular product by changing the packaging of it. That is actually what was attempted here. Is that not correct. Mr. O’Mahony?

Mr. O’Mahony.—This is the issue on which the whole thing arose — the regulation prescribed that the product should be exported in the same state and it was an issue of whether or not the repacking did alter the state. It could be argued that some change such as cooking or cutting up the product would be a change in the state and not a mere change in packaging. Certainly in regard to the actual inherent nature of the product there was no change — a product packed in one way or packed in another way is still basically and fundamentally the same type of product.

1328. Deputy Naughten.—Whether it was grade 1, 2 or 3 it still remained the same quality of beef?

Mr. O’Mahony.—It was the same quality of beef; it was the same beef.

1329. Deputy Naughten.—Are those Irish firms still trading?

Mr. O’Mahony.—Yes. They are trading firms. I am not certain that they own factories. One of the aspects that arises in some of these cases is that exports take place by companies which are mere trading companies even though they may be associated with particular factories. That is something that has to be borne in mind in connection with dealings with them — the extent of the assets which are behind the firms.

Deputy Naughten.—Trading companies with perhaps very little assets?

Mr. O’Mahony.—Yes.

1330. Chairman.—Was the question of possible criminal proceedings pursued?

Mr. O’Mahony.—The question of whether some fraudulent action had taken place was examined. The advice we were given was that there was no grounds for proceeding.

Chairman.—Who gave that advice?

Mr. O’Mahony.—The Attorney General.

1331. Chairman.—It is a most unsatisfactory affair. Can you tell us of the seven companies how this money was divided up?

Mr. O’Mahony.—In round figures about one third of it would have been accounted for by four French companies and the other two thirds by the three Irish companies, the bulk of that being by two firms rather than one small firm.

Chairman.—I am in the hands of the committee. Deputy Hyland.

1332. Deputy Hyland.—Is Mr. O’Mahony now satisfied that, arising from the European Court decision, there cannot be a repetition of this particular incident again in accordance with the judgment of the court?

Mr. O’Mahony.—Certainly the judgment of the Court has put repacking out of bounds very definitely. Even before that, we had taken steps to ensure that nothing like this could occur again.

1333. Deputy Hyland. — Does Mr. O’Mahony envisage that such a transaction could take place under a different heading than actually changing labels or packaging? Is there any further scope available to these people to manipulate the system in some other way so that they could avail of the same payments that they have availed of in this instance?

Mr. O’Mahony.—There is none that we can see at the moment. I should say that over the years the system of control for intervention in Ireland, and indeed in the Community generally, has been refined. The intervention in beef started in the mid seventies. In the earlier years both here and in the other member states, it was nothing like as sophisticated and as well controlled as it is today. Unlike butter or skim milk powder, which are standard products in uniform packs, intervention in beef is highly complex inasmuch as one is dealing with bone in, boneless and all the different types of boneless cuts which have great variations in value. It is much more difficult to control. The system of control has become more sophisticated over the years. At the same time, one has to accept that, in dealing with commercial firms on a big scale as is the case in this instance — we buy and sell something of the order of £500 million worth of produce per year — traders will try to take advantage of the situation wherever possible. Because of that it takes up a large part of our operations to control what is going on. The same applies to the Community where they devote much attention to ensuring that irregularities of one sort or another do not arise. There are highly organised arrangements in operation for checking up on irregularities and ensuring that, if something occurs in one member state which enables people to circumvent regulations, this is rapidly brought to the notice of all member states. It is an ongoing battle, if one might call it that, to ensure that there are no frauds or irregularities.

1344. Deputy Hyland.—I wonder if Mr. O’Mahony could give us some idea as to the number of traders there are in the country as distinct from actual processors or meat factories?

Mr. O’Mahony.—It is difficult for me to give an answer to that for the following reason. In some instances where meat is put up for sale, particularly meat at a fixed price, we may find that hundreds of applications for the meat are received, each accompanied by a bank guarantee. The total quantity sought in the applications will be many times the quantity available for sale because it may happen to be a good bargain. We then have to have a ballot to decide who gets the meat but because of the attractions of this and because the more applications you put in the better your chance in a ballot, we have frequently found ourselves with hundreds of applications, each in the name of different persons or companies. We have to accept them all as genuine when accompanied by a bank guarantee. On one occasion for a sale we received guarantees that totalled over £1,000 million. Unfortunately, they were in bank guarantees and not in cash. If they had been in cash, we would have had some profit out of the interest.

1335. Chairman.—We will have to find out why it is that the Chief State Solicitor was consulted but not the European Community and I propose, if the committee agree, that we mark this for further information to be forwarded. Agreed?

Mr. O’Mahony.—The comment I would make on that, Chairman, is that as I said we do not normally consult the Commission in all cases and the Commission, while it would give an indication of its thinking — and indeed in this instance one could argue, with the benefit of hindsight, that it would have been more prudent to consult the Commission it will eventually say that the decision is for the member state.

1336. Chairman.—It is very clear in the Comptroller and Auditor General’s Report that it is the principle of the EC financing of the common agricultural policy that the authorities and the member states are required to make good to the EC amounts incorrectly paid by their intervention agencies, in this case your Department. I propose that we mark this for further information to be forwarded as to why the European Community was not consulted and perhaps you could let us have that report.

Mr. O’Mahony.—Fine.

1337. Deputy Naughten.—I would not like to see a situation develop, either, where the Department of Agriculture would have to consult. Where do you draw the line if you decide to consult the EC Commission? We all know the massive delays that take place there. I know for a fact, particularly with regard to MCA refunds, the length of time people are waiting for them. If it was going to add to that delay to seek approval from the EC Commission, I would be reluctant to go along with it. We are talking about huge sums of money and none of us can condone, and I would not condone in any way, fraud of up to £860,000. However we must look at the overall common good as far as this country is concerned with regard to refunds of moneys from the EC. We want to be careful on that, Chairman.

1338. Chairman.—It was the Deputy himself and Deputy Foley who used the words “fraud”. We have to be very careful. This committee do not have any policy function. We have an accounting and audit function and we have to ensure that the proper accountancy and audit procedures are followed. We have discussed it sufficiently and I propose to move on to paragraph 47, if everybody agrees.

Paragraph 47 of the Comptroller and Auditor General reads:

The classification of agricultural produce for the purpose of determining eligibility for export refunds is carried out by the Revenue Commissioners supported, if necessary, by scientific analysis of the content of the particular products carried out by the State Chemist.

The charge to this subhead includes a sum of £816,766 refunded to the EEC in 1984 which, together with a sum of £146,504 refunded in 1983, represents export refunds paid to an Irish exporter of milk products in 1977, 1978 and 1979 but subsequently disallowed by the EEC Commission. The export refunds were paid on a product which, following analysis in 1977, was classified as milk powder and therefore eligible for export refunds under EEC Regulations but in 1979 the product was reclassified as whey powder, a product which did not qualify for export refunds.

I asked the Accounting Officer for information as to how the product was incorrectly classified originally and the circumstances leading to the change in classification. I also asked what steps were being taken to recover the incorrect payments from the exporter.

The Accounting Officer has informed me that in May 1977 samples of a product manufactured by the company were submitted for analysis to the State Chemist who agreed with the company that the product should be classified as a type of milk power. During the following two years samples of the product were analysed from time to time but there was no change in the classification. However, following a request by the German customs authorities in April 1979 regarding exports of milk powder to Spain by the company and subsequent imports into the Community of whey powder from Spain, the classification was re-examined. Samples taken from consignments exported in June, July and August 1979 were analysed by the State Chemist who stated that the product should in fact be classified as a whey product. The product was then reclassified by the Revenue Commissioners and the claim for export refunds on these consignments was rejected. The Departmental file indicates that following this rejection the company ceased to export this product.

The Accounting Officer also informed me in September 1980 the company instituted legal proceedings against the Minister for payment of the refunds withheld following reclassification, (£902,531) and that in January 1981 the Minister made a counterclaim for recovery of the amount already paid (£963,270) in respect of the earlier consignments but that the case had not yet been heard.

Mr. Grahan.—This paragraph relates to another case in which the Department may have to bear a loss of just under £1 million. This is the amount which an exporter of milk products was paid over a period of about two years on the basis that a product which he was exporting had been analysed as one which attracted export refunds. It was subsequently recognised that its customs classification based on this analysis was incorrect and it was then reclassified as a product which did not attract export refunds. This reclassification appears to have happened only because the German customs authorities were investigating an operation involving the routing of certain consignments of the product to Germany via Spain. I understand that the legal proceedings referred to at the end of the paragraph are still in progress.

1339. Deputy M. Ahern.—I should like to ask two questions. One of them relates to the decision in May 1977 by the State Chemist to classify the product as a type of milk powder and then in 1979 he reclassified it as whey product. Was it the same chemist, I wonder? How did he change his decision within the two years? Mr. Graham has answered the second question about the court case.

Mr. O’Mahony.—I have to be rather cautious in what I say on this item as the court proceedings referred to in the final paragraph of the Comptroller and Auditor General’s Report have been fixed for 20 October. I do not want to say anything that might prejudice them in one way or the other. As regards the point raised by Deputy Ahern, I am unable to say whether the officer in the State Chemist’s laboratory who examined this initially and later was the same person. We in the Department of Agriculture would not be dealing with the State Chemist on this. He is operating on behalf of the Revenue Commissioners. The position is that we pay the export refunds on the basis of the export documents as certified by customs and with whatever classification is allotted by the Revenue Commissioners. The actual work of the classification is something in which we are not involved.

1340. Deputy Naughten.—I fully accept what the Accounting Officer has said with regard to the classification, that the Department of Agriculture would not be involved in that, but the reason that this irregularity has arisen here is the classification in 1977 of milk powder, and because that classification was later changed. It is very difficult, Chairman, to discuss this paragraph any further in view of the legal proceedings. There are certain questions which I would like to ask but I would find it very difficult to ask those questions in view of the fact that a court case is pending. This is a paragraph which we will have to come back to again, Chairman, and I would propose when legal proceedings have been completed that this paragraph would be discussed again at a later stage. I certainly would like to ask certain questions on it and I find that I cannot do that in view of the legal proceedings that are pending.

Chairman.—This is a very good suggestion but before we take that, Deputy Kitt wants to contribute.

1341. Deputy Kitt.—I have a very general type of question, Chairman. I agree with Deputy Naughten in what he said. Could I just ask Mr. O’Mahony what is the position on the Department’s own laboratory? Why cannot the Department’s laboratory be involved in this type of testing and classification? As you said, the work is being done by the State chemist.

Mr. O’Mahony.—The export refunds are payable on exports as classified in the classification for tariff purposes. This is a function performed by the Revenue Commissioners for all products, agricultural and industrial. They are the people who determine into what category a product goes and it would not be appropriate that we should get involved. In regard to what Deputy Naughten said, about proceedings in the High Court in October, it should be remembered that there is the possibility of appeal by one side or the other which may prolong this matter for some time.

1342. Deputy Naughten.—I understand that but when the legal proceedings are finished the committee should address themselves to this paragraph again.

1343. Chairman.—Is that agreed? We will re-examine Mr. O’Mahony on paragraph 47 again, when the sub judice rule has been raised. Paragraph 48 of the report of the Comptroller and Auditor General reads:

As the Intervention Agency, the Minister for Agriculture is also responsible for the custody of intervention stocks and for reimbursing the EEC in respect of stock losses. The charge to this subhead includes £1,526,663 paid to the EEC in respect of the loss of some 814 tonnes of intervention beef in a fire which occurred at a cold store in August 1981 and £50,000 in respect of the loss of 40 tonnes of intervention beef in a fire at another cold store in August 1980. Following the general rule that no insurance should be effected against the risk of any loss which, if it arose, would fall wholly and directly on public funds, the stocks lost in these fires had not been covered by insurance. As a result of these losses, and in the light of a consultant’s report which recommended, inter alia, that the Department examine the feasibility and establish the cost of insuring intervention beef stocks against major losses, the sanction of the Department of Finance was obtained in 1982 to insure intervention stocks of beef and cereals against damage by fire, etc. Sanction to insure against “all risks” was obtained in 1984.

As no further action can be taken to recover these losses, they have, as noted in the Appropriation Account, been written off in 1984. As also noted in the Appropriation Account, a sum of £218,529 has been written off in respect of stock losses in the period 1974-1977. This comprises stock discrepancies £123,108, misappropriation by a foreign store £76,061, and condemned beef £31,283; offset by £11,923 recovered by way of compensation from stores.

Mr. Graham.—This paragraph refers to the losses of EC intervention stocks through fires which occurred at the cold stores where they were being held. In such circumstances the loss is the responsibility of the member state and since, as is the case with all other State property, it had not been the practice to insure intervention stocks, the loss has to be borne by the Department of Agriculture. More recently, intervention stocks are covered by insurance. The paragraph also refers at the end to some smaller losses incurred for other reasons.

1344. Chairman.—What is the annual cost of such insurance cover? The last sentence of the report of the Comptroller and Auditor General says that there was a sum of £218,529 written off in respect of stock losses in the period 1974-1977. This comprised stock discrepancies of £123,108 and misappropriation by a foreign store of £76,061. Could the Accounting Office explain those two figures.

Mr. O’Mahony.—Our estimate for the cost of insurance in the current year is £308,000. As regards the losses, they occurred in the early stages when intervention was introduced in 1973-1974 and when arrangements here and elsewhere were not brought to the point which they have now reached. After 1977 up to last year we incurred losses of just under £1 million and we recovered every penny of that from either the cold stores or the meat factories concerned. As regards the stock discrepancies, these occurred in connection with the movement of beef to foreign cold stores in the pre 1977 stage and would represent meat which disappeared in transit or in store. Where possible, we sought compensation from the store but at the end of the day we had to bear a total loss of £123,000. This £123,000 represented 1,250 quarters which disappeared out of a total of 800,000 quarters. As regards the misappropriation by a foreign store, there was a dispute in regard to freezing charges by a store in the Netherlands where some meat had to be blast frozen. We disputed what we regarded as an outrageously high charge for the work that had to be done in a hurry. We paid the store what we regarded as its legitimate charge and refused to pay what we regarded as a spurious charge. The store sold some of the beef, and we then initiated proceedings through a Dutch firm but the store went bankrupt before the case was heard. That was the circumstance in which we incurred the loss of £76,000.

1345. Chairman.—It was a deliberate misappropriation?

Mr. O’Mahony.—We regarded it as a deliberate misappropriation by this foreign store. It went bankrupt and the legal advice was that there would be little, if any, prospect of recovering any money and that we should save ourselves further expense.

1346. Chairman.—The stock discrepancies of £123,108 represented 1,250 quarters?

Mr. O’Mahony.—Quarters of beef. This arose in respect of 800,000 quarters that were moved to foreign cold stores at that time. It would have arisen from inaccuracies in records and from what one would call disappearance or shrinkage, or in other words, plain theft.

Chairman.—Somebody was eating well?

Mr. O’Mahony.—Yes.

1347. Deputy Naughten.—I find it hard to understand the loss of so much beef through fire. I have been in a number of those cold stores and I find it difficult to understand how there could be that much loss or how a fire could get a grip on such a building.

Mr. O’Mahony.—The major loss of £1.5 million occurred in a case of what can only be called malicious damage. A court case was held which failed in the Circuit Court. It was decided not to pursue the matter further. The Department of Agriculture would have been the main party involved in pursuing the case at higher level and if we had succeeded in recovering the money it would have been borne by the county council but, given the maximum limit on the rate for malicious damage the burden would have been passed almost entirely to the Exchequer in another way through the Department of the Environment. For that reason it was decided not to pursue the matter further. As well as the Department of Agriculture, there would have been other people involved in claiming and the net result would have been that it would have cost the Exchequer much more than this. From the Department of Agriculture’s viewpoint it would have been better to have this borne on some other Vote.

1348. Deputy Naughten.—I am not surprised to hear that it was malicious because I could not understand how that amount of beef could be damaged by fire. Is it a good investment for the Department to pay £308,000 in insurance?

Mr. O’Mahony.—One would have to bear in mind that the loss could be much more than £1.5 million. In fact, as far as my memory serves me, the conditions of our insurance preclude us from having more than £60 million worth of meat in a store. If we were faced with a major fire, such as the one which occurred in this case, the loss could be very heavy indeed. Also, at present we are carrying very heavy stocks of beef and I think on the whole it is wise to insure.

1349. Deputy Naughten.—Can you inform the committee of the total amount of beef and meat products in cold storage at this point in time?

Mr. O’Mahony.—The latest figure I have is for the end of July. At that stage we had 98,000 tonnes of beef, 156,000 tonnes of butter, 3,000 tonnes of skim milk powder and 15,000 tonnes of cereals in storage. The total capital value of those products at that date was £668 million.

1350. Deputy Naughten.—And the cost of insuring them is £308,000?

Mr. O’Mahony.—Yes, that is the estimate for the current year.

1351. Deputy Naughten.—With, from what you have said already, a maximum possible claim of £60,000. Is that correct?

Mr. O’Mahony.—The maximum value that we can store in any one store is £60 million. We have to distribute it over quite a large number of stores to keep within that maximum.

Deputy Naughten.—Does that create a problem?

Mr. O’Mahony.—Not really.

1352. Chairman.—How much of it is stored domestically?

Mr. O’Mahony.—Practically all of it, if not all, is stored domestically. We are in the process of trying to move some of the product out of our own stores to stores outside the country because of the pressure on storage space at present and we can only do that with the permission of the EC and the member state concerned.

1353. Deputy Naughten.—Are you satisfied that there will be adequate storage space left for the rest of this year if you are unable to move some of the goods that are already stored?

Mr. O’Mahony.—With the arrangements we have made we are in the position of having more or less enough for intervention. However, there is some pressure on the meat trade as regards private short term storage and in order to provide some space for them we are seeking to move out some of our mean and butter which are likely to be in store for a somewhat longer time. We will have to bear certain transport costs in respect of its movement but because the rates charged by cold stores outside the country are below Irish rates, if we keep the product abroad for a certain period we will at least break even and eventually may make some savings.

1354. Deputy Naughten.—But you are under pressure in respect of storage space at this point in time?

Mr. O’Mahony.—There is a certain amount of pressure but it’s mainly on the industry rather than on us. We are trying to facilitate the industry by moving product at no cost to the Exchequer and hopefully on a basis that will enable us to make some small saving.

1355. Deputy Naughten.—Is there any hope of unloading some of this product as there is a huge amount of it in storage? Can you inform us what the difference is in the interest rate between what you can reclaim from the EC and the cost of money here for the purchase of the intervention stocks?

Mr. O’Mahony.—We are most anxious to dispose of some of the stock but we can only do so when the EC Commission agrees to release product put into store prior to a particular date. As regards the interest rate, we are recouped 7 per cent at the moment by the EC.

1356. Deputy Naughten.—How much will it cost you to purchase this £668 million worth of product?

Mr. O’Mahony.—The cost will vary depending on the currency in which we borrow. We borrow the money following consultation with the Department of Finance — the Department borrows the money as the intervention agency. Domestic borrowing at the moment costs us in the region of 10 per cent. Possibly it will come down a bit now as a result of the latest movements. Otherwise, we will borrow ECUs at 7 per cent or slightly under and other currencies, such as the Deutschemark, at 4 per cent but in doing so we carry exchange risks and that was where we incurred losses in August of last year.

1357. Deputy Naughten.—Therefore in fact, the Irish taxpayer could be paying in the region of 3 per cent on this £668 million— the difference between the 10 per cent and the 7 per cent of equity?

Mr. O’Mahony.—Over a period of years we have been losing something of that order and that was responsible to a great extent for the ongoing deficit on intervention which was referred to in paragraph 43 of the Comptroller and Auditor General’s report. He shows a deficit of £55 million since we entered the Community. The vast bulk of that would be attributable to interest.

1358. Chairman.—Can you tell the committee what is the cost of maintaining intervention stocks of £668 million on an annual basis?

Mr. O’Mahony.—£53 million.

1359. Chairman.—That is the net cost but what does it cost to maintain?

Mr. O’Mahony.—I do not have the figure which would correspond to the £668 million but as you will see from paragraph 43 of the Comptroller and Auditor General’s report the total cost for storage, deboning, freezing and the financial charges in 1984 was £65 million of which we got £53 million back from the Community leaving a net gap of somewhere in the order of £12 million. It is costing the State about £12 million.

1360. Chairman.—Overall it is costing about £65 million to store this product?

Mr. O’Mahony.—Yes.

1361. Chairman.—Purely, Ireland’s intervention stocks?

Mr. O’Mahony.—Yes. I should say that the cost to the State has increased since then because the Community took a decision somewhat over a year ago to recoup only 75 per cent of the standard charges. As a result more of the burden has been put on the member states.

1362. Deputy Colley.—Can you tell the Committee what would be the largest period any of the products that you mentioned — beef, butter, skim milk powder and cereals — would be in storage?

Mr. O’Mahony.—I do not have the precise dates for the different products but it could be taken that two years would probably be the outside for the oldest of them. The practice of the EC Commission is to allow releases of the older stock first. In other words, they will say that 10,000 tonnes of beef may be put on the market for say, mid-1986 or before the end of 1986.

1363. Deputy Colley.—So that the £668 million capital value of the products that are in storage now represents the products that were put into storage within the last two years?

Mr. O’Mahony.—Yes. Our annual purchases of intervention product will vary from year to year but the total cost of our purchases last year—1986—was £570 million of which beef accounted for £380 million.

1364. Chairman.—This is a subject on which I would dearly love to go into the policy, but since we are an accounting committee we will just have to note it and move on to pages 118 to 129.

1365. Deputy Naughten.—Under Subhead A.1, how many staff were employed in your Department in 1984 and how many staff are employed today approximately?

Mr. O’Mahony.—On 30 April 1984 the number serving in the Department was 4,831. On 30 April this year it was 4,338. It would be somewhat less at this stage but I do not have the precise up to date figure.

Deputy Naughten.—Roughly a drop of 500?

Mr. O’Mahony.—Yes.

1366. Deputy Naughten.—Would the staff formerly employed by the Land Commission who were transferred over to the Department of Finance account for the reductions there?

Mr. O’Mahony.—No. There are 91 Land Commission inspectors serving in the Department of Finance at the moment. They would not be included in the 4,338. They would be included in the 1984 figure.

1367. Deputy Naughten.—I wonder if you noted newspaper reports recently which stated in fact that those staff have technically gone missing, that they were not employed by the Department of Agriculture or by the Department of Finance. I wonder could you comment on that?

Mr. O’Mahony.—The staff concerned have not so far been returned to the Department of Agriculture.

1368. Deputy Naughten.—As I understand it those staff were on leave of absence from the Department of Agriculture to carry out a particular job which was terminated some time around 1 April. Would that be correct?

Mr. O’Mahony.—They were transferred from us to the Department of Finance, to the Farm Classification Office, to carry out the work of farm classification. A policy decision has been taken not to go ahead with that work. I understand that certain appeals and other work are continuing. I would not be in a position to say how far that work is completed at this stage.

1369. Deputy Naughten.—Did the Department of Finance or these officers themselves seek to be reinstated in the Department of Agriculture?

Mr. O’Mahony.—Not so far. I do not know what action is being taken by the Department of Finance in regard to returning them to us or to what extent they will be staff to which the voluntary redundancy terms will be applied.

1370. Deputy Naughten.—It is my information that in fact those staff were returned to where they came from and were told on return to those offices that they were no longer employed there and that in fact many of them are walking around and do not know whether they are employed by the Department of Agriculture or the Department of Finance?

Mr. O’Mahony.—All I can say on that is that they have not been formally returned to us and we have not taken responsibility for them at present.

1371. Deputy Naughten.—So, you would claim they are the responsibility of the Department of Finance?

Mr. O’Mahony.—Yes, that would be the position.

Deputy Naughten.—Even though they would be permanent officers of the Department of Agriculture on temporary release to the Department of Finance?

Mr. O’Mahony.—They were transferred to the Farm Classification Office and were part of the staff of that Office. I am not sure what is the precise position about its actual abolition at this point.

1372. Deputy Naughten.—Could you inform the Committee as to approximately how many former staff of the Department of Lands are currently employed by your Department?

Mr. O’Mahony.—The number of staff engaged on work which was transferred to us from the old Department of Lands ten years ago is about 240.

1373. Deputy Naughten.—Most of them administrative?

Mr. O’Mahony.—The vast bulk of them would be administrative. These would be engaged on collecting annuities, controlling sub-division, controlling purchase of land by non-nationals and dealing with the management of the land still on hands and trying to get rid of it. Quite a large number are engaged on clearing up a very considerable amount of arrears of work on the vesting of holdings which were allotted by the Land Commission over the years but where all the final legal operations were not completed.

1374. Deputy Naughten.—The officers who were at the point of delivering a service have all, by and large, disappeared either by way of transfer to the Department of Finance or otherwise?

Mr. O’Mahony.—We have something of the order of 30 Land Commission inspectors still in the Department of Agriculture. The remaining 90 were the staff to whom we referred who were transferred to the Farm Classification Office. We still have some 6,000 hectares of lettable or good land on hands and arrangements are being made to dispose of that.

1375. Deputy Naughten.—When is it envisaged that that will be disposed of? It is a sizeable pool of land?

Mr. O’Mahony.—It is sizeable but it is still only about one third of what was the normal pool. It is the residue of what was left after the easier cases were disposed of. Certain ideas in regard to disposing of this have been considered. It is going to require legislation to deal with that. That is at quite an advanced stage.

Deputy Naughten.—This new legislation?

Mr. O’Mahony.—Yes.

1376. Deputy Naughten.—How was it decided which of the people who left on transfer should go and which should stay?

Mr. O’Mahony.—I find it difficult to answer precisely on that inasmuch as it was not entirely a decision of the Department of Agriculture and Food. The matter was handled to a great extent by the Department of the Public Service as it then existed. Certain selections were made by the management of that Department and of the new Farm Classification Office. There were certain discussions over a period as well with the staff association by that Department and the new Farm Classification Office.

1377. Deputy Naughten.—Would it be the first in were transferred over or would it be the longest serving members who were transferred over? What were the criteria?

1378. Chairman.—Could we bring this discussion to some conclusion because it has gone on for some considerable time?

Deputy Naughten.—It is a very important discussion in so far as it directly relates to Subhead A.1.—Salaries, Wages and——

Chairman.—It does not strictly relate to 1984.

Deputy Naughten.—I take your point on that.

Chairman.—The Chair has been very lenient.

1379. Deputy Naughten.—I will finish with the question. What are the criteria for the transfer of staff?

Mr. O’Mahony.—I am not aware of what precise criteria were used. The matter was largely handled by the Department of the Public Service and the staff association had quite an involvement in it as I understand the situation.

1380. Deputy Naughten.—The point I am making is that out of a staff of 120, 30 have ended up in permanent jobs and 90 by and large do not know where they are. One question which relates to Subhead A.1. directly concerns stockmasters who were employed at that time in 1984. What became of that group of staff at the Land Commission? I understand that for a couple of years they were sitting around in swivel chairs at comfortable desks with no work to do.

Mr. O’Mahony.—I am unable to say. It is something on which I would have to send a note to the Committee regarding the persons to whom Deputy Naughten refers. I do not know what their situation is, but I will send a note to the committee with regard to what has happened to them.

Chairman.—I hope we have more luck with the missing staff than we had with the 1,250 quarters of beef.

1381. Deputy M. Ahern.—I have two short questions. First, on Subhead A.7.—Consultancy Services—there is more than was granted, £4,860. It is not a great amount but I would like to know what was the consultancy service that was not anticipated?

Mr. O’Mahony.—This was expenditure on a consultant in public relations and communications who was engaged for part of the year 1984 for which provision had not been made.

1382. Deputy M. Ahern.—I hope he was successful. Secondly, on Subhead D.5.—Aid for National Potato Co-operative—there was £100,000 granted and only £36,500 expended. Did the National Potato Co-operative develop any further from 1984 to date, or is it gone down the tubes with the tubers?

Mr. O’Mahony.—It developed, but not as well as had been hoped. It did set up a project in Carlow to do grading and packaging but that ran into certain difficulties because some of the suppliers felt that the standards being demanded were too high. There was some suggestion that the standards were being dictated more by the supermarkets than the growers. Perhaps this was a consideration which should not have been allowed to block progress because at the end of the day it is what the customer wants.

1383. Deputy M. Ahern.—I believe the Minister at the time mentioned that the bags and so on which were to be used for selling potatoes were to be stamped. Has that practice been enforced by the Department?

Mr. O’Mahony.—These are potato grading regulations. We have been enforcing them since the regulations were introduced several years ago. Opinions may differ with regard to the impact of our enforcement. We have had a number of prosecutions but at the end of the day one has to rely on the consumer to enforce a lot of these regulations. The difficulty with regard to potatoes and much of the horticultural side was that we were protected by plant health regulations here up to about 1980 and it meant that these products were not exposed to competition from abroad in the same way as other products were much earlier. Because of this there was a delay in getting our act together on these products. The competition of imports had had quite an effect on these products. Bord Glas is taking over the matter now and is aiming to achieve further improvement.

1384. Chairman.—Can I ask about the Subhead C.2 — Bovine Tuberculosis Eradication. The grant for the year was £12.8 million but you spent £16.94 million, an overspending of £4.1 million. You are aware of the former Senator T. K. Whitaker’s contribution in the Seanad some years ago when he described it as the biggest financial scandal in the history of the State. An NESC report showed that the incidence of TB was worse in 1977 than it was in 1965. There is general concern among a number of people, including the Irish Farmers’ Association, who have forwarded to each Member of the Oireachtas their own proposals for dealing with TB eradication. Could you tell us what the total cost to date has been? Would you see the proposals put forward by the IFA to invest £8 million themselves in the first year in eradicating this disease in return for changes in the organisation and management of the scheme as well as the abolition of all disease levies as a way to save the State these substantial amounts of money and to at last make progress in the abolition of bovine TB?

Mr. O’Mahony.—The net cost to the State of the scheme up to the end of 1984 as indicated in paragraph 39——

Chairman.—Is this for TB only?

Mr. O’Mahony.—TB and brucellosis — was £227 million. With regard to the IFA proposals, I think the concern that has been shown by the IFA, the ICMSA and other interests is to be welcomed. It is a fact that progress with regard to TB eradication over the last decade or so has been absent because the incidence or prevalence has remained much as before.

1386. Chairman.—Are you aware from that report that the only countries in the EEC worse than Ireland are Spain, Greece, Italy and Portugal and that all of the other Community countries have nearly completed their bovine TB eradication and also that the United States has almost completed its eradication of TB?

Mr. O’Mahony.—Yes. Progress has been made in these other countries but even in the best of them you will find, with a few notable exceptions, there is a continuing residue which they all have found difficult to eradicate.

1387. Chairman.—Let me quote from the IFA document just so as we will know what we are talking about. In Denmark the document states that TB has been eradicated. In Holland it says it has been eradicated with the exception of 30 cases a year. In Luxembourg it has been eradicated. In West Germany it has been eradicated except for about 20 cases a year. In France 99 per cent of herds are officially classified as free. In Spain 67 per cent of the herd, that is one which I said earlier was worse. In Belgium it has been practically eradicated. In the UK it has been practically eradicated except for 1.6 per cent in Northern Ireland. In Italy, 77 per cent of herds are classified free, Ireland 97 per cent, Greece 82 per cent, Portugal 75 per cent and the USA, practically eliminated. In other words, only Spain, Greece, Italy and Portugal are worse than Ireland when comparing all the EEC countries and the United States. Bearing that in mind and bearing in mind what we spent, is there not much to be considered in the IFA proposal that they will get directly involved in eradicating TB once and for all.

Mr. O’Mahony.—I would not like to preempt ultimate decisions by the Government on the IFA proposal. When the Taoiseach met the IFA some time ago he indicated that their proposal would be considered on the basis of the cost to the Exchequer, whether it would work and whether the result would be acceptable internationally. As you said, there is a suggestion there about eliminating the disease levies and the farmers bearing the cost of the testing, the monitor round of testing each year, as well as the cost of compensation. That would immediately put an extra £4 million onto the Exchequer because the receipt from the disease levies are at an annual rate of some £22 million. The cost of the monitor round is £10 million and the compensation figure mentioned is £8 million, so there is an extra £4 million for the Exchequer. The provision of funds is the main factor in regard to TB eradication. The difficulty over the past decade has been that there has never been adequate financing on a continuing basis.

1388. Chairman.—Up to 1984 we spent £227 million — probably £250 million more by now — and yet between 1965 and 1977 it got worse according to the NESC. We do not know what happened between 1977 and 1984. We are continually spending money. Would it not be better to invest that £4 million and eradicate the problem once and for all so that this national scandal, as former Senator Whitaker called it, can be eradicated?

Mr. O’Mahony.—I would agree fully with you, Chairman, that it would be better to spend what is needed to do the job properly than to half do the job and still have the disease remaining with us.

1389. Chairman.—When you are counting the number of TB stock do you just count reactors or do you actually count the cases where there has been proven TB? In other words, does a reactor always have TB?

Mr. O’Mahony.—That is a technical matter with which I am not quite conversant but I would say that a reactor does not necessarily show lesions or obvious signs of TB but nevertheless it is regarded as a reactor and, as such, is slaughtered.

1390. Chairman.—I have not got the letter here in front of me; I have it somewhere. In reply to a Member of the Oireachtas you did say that you Department take all reactors as being TB carriers. In other words, you do not take any further steps to see. If it is a reactor it is counted as being TB infected stock. Is that what they do in the UK?

Mr. O’Mahony.—As far as I know, yes. I would say that in the UK if an animal on test is shown to react to the test then it is an animal that has to be removed and slaughtered whether or not it has visable lesions on post mortem examination.

1391. Chairman.—I would like to propose to the committee that we hear not the policy view but the accounting view on how this would save the State money. I propose that we would invite the IFA to come in and let us hear exactly what this would cost the State and exactly what it would save the State. Is that agreed?

Deputy Naughten.—I certainly would have no objection to meeting the IFA and discussing the document with them. It would be a useful exercise.

Chairman.—Any more questions?

1392. Deputy Naughten.—Under Subhead B.5—County Committees of Agriculture—is the Accounting Office aware that many of those committees are unable to meet now because of lack of finance?

Chairman.—In fairness, we are jumping ahead of the 1984 accounts.

1393. Deputy Naughten.—It is a serious matter. These committees were doing very useful work and in some counties, including my own county, they have not been able to meet because they have no finance to meet.

Mr. O’Mahony.—I understand that quite a number of committees have been put in the position of having no further funds available. The provision in the Estimate for the current year was reduced to £50,000 which is, as will be seen, only a third of what was provided in 1984 and this is certainly having an impact on the meetings of the county committees as the Deputy has said.

Deputy Naughten.—On Subhead F.1, Chairman, could the Accounting Officer inform us what that sum of £1,300 is there for?

Mr. O’Mahony.—This relates to some small payment to the ACC in respect of loans at a reduced rate which were given to certain farmers in 1978 to replace sheep lost during a snowfall. I gather expenditure under the scheme has since ceased completely.

1394. Deputy Naughten.—Could the Accounting Officer inform the Committee as to the amount of bad debts written off by the ACC over the past two years?

Mr. O’Mahony.—No. I am afraid the ACC is the responsibility of the Department of Finance. We are not involved in its control.

1395. Deputy Naughten.—Under Subheads F.3 and F.4 I note that the amount of money spent under both of those two headings — interest subsidy schemes for farmers in severe financial difficulty and also for nondevelopment farmers — the amount of expenditure there was much less than envisaged. Would the Accounting Officer accept that the terms and criteria of the scheme were far too restrictive and that this was the reason for the reduction in the expenditure?

Mr. O’Mahony.—In the case of Subhead F.4 which is for the Rescue Package, it was a matter of getting the scheme off the ground initially. Naturally where one is providing funds to help people in difficulty there will always be a demand for more funds. What happened here was that the scheme took some time to get off the ground. There was a decision in the 1983 budget that only participants in the Rescue Package would be eligible for a second instalment of the interest subsidy scheme covered by F.3. Then we had a delay in payments under F.3 because, until the Rescue Package decisions were taken, it could not be decided whether or not these people were to get the second instalment under F.3.

1396. Chairman.—Under Subhead J.2 would you explain what that is — Payment to World Food Programme (Grant-in-Aid) Account?

Mr. O’Mahony.—The world food programme is a joint operation, in practice, of the United Nations and, the Food and Agriculture Organisation. The idea is that it would use food donated by the various countries to help developing countries. You are asked to make one-third of your contribution in cash and the rest is product. We have supplied mainly skim milk powder for distribution under this programme.

Chairman.—The more we can supply the better. Does anybody else want to ask a question on 120 or 121?

1397. Deputy Hyland.—Under Subhead L.4—Deficiency of Income from Untenanted Land — I presume that refers to the pool of land earlier mentioned which has not yet been allocated by the Land Commission. I would like to ask Mr. O’Mahony does he not consider that a deficiency of £1,550,000 is a very, very unacceptable figure bearing in mind that this land is set on an annual basis and some farmers pay up to £100 per acre at the annual letting of the land. Yet, we seem to have a figure of £1.5 million of a deficiency there. Does it cost that amount of money to administer the small land pool which the Land Commission have in their possession at present and is it not time to urgently dispose of this land because of the cost to the Exchequer and because the land is urgently needed by small farmers?

Mr. O’Mahony.—The sum shown is not in respect of administration but in respect of the gap between what the land bonds that paid for this land cost to service and the receipts from letting it at the best rates that can be obtained. This brings out one of the big problems in regard to the old operations of the Land Commission as they developed in the late seventies and early eighties. The Land Commission bought land at a very high price, they paid for it in land bonds which carried a very high rate of interest and the amounts that could be received for the land either when it was sold or let were completely inadequate to meet the ongoing cost of servicing the land bonds. This is why there is such a large deficit. I agree with the Deputy that the land should be disposed of as rapidly as possible. As I mentioned earlier in reply to a question from Deputy Naughten, we are working on and have reached an advanced stage in regard to ways in which we will get rid of the land on hands. However, I would have to make the point that even when we dispose of the land the losses will continue to be incurred because it is most unlikely that the price we will get for it will be sufficient to meet the cost we are incurring in servicing the land bonds. What will happen is that the amount shown under Subhead L.4 will be moved up to Subhead L.2 which is the subhead from which losses on Land Commission land each year are met.

Chairman.—The Vote under Subhead M.4 — Market Intervention - Incidental Expenses — was £82 million. What items are covered under this?

Mr. O’Mahony.—It is a rather inappropriate title I think, Chairman, for what in effect are expenses that total such a huge sum. It would cover the various headings shown in paragraph 43 of the Comptroller and Auditor General’s report, namely, the financial interest charges, the deboning allowances, transport costs and handling, freezing and storage costs. This is the gross sum that we would incur and against which we would recover a substantial proportion from the EEC.

1398. Chairman.—Is that the breakdown of the figure in paragraphs 43?

Mr. O’Mahony.—Yes.

The witness withdrew.

The committee adjourned.