Committee Reports > List of Committees > Dáil > 1990 > Committee of Public Accounts > Final Report - Appropriation Accounts 1988

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of Public Accounts)

Dé Céadaoin, 12 Nollaig, 1990.

Wednesday, 12 December, 1990.

The Committee met at 2.15 p.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. P. L. McDonnell (An tÁrd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 33 — AGRICULTURE AND FOOD.

Mr. Michael Dowling called and examined.

Chairman.—The Committee of Public Accounts of Dáil Éireann is this afternoon examining Mr. Michael Dowling, Secretary, Department of Agriculture and Food, in his capacity as Accounting Officer for that Department on the last of our examinations on the 1988 Accounts. You are very welcome, Mr. Dowling. We apologise for the cramped conditions but due to the broadcasting of the House the usual committee room is still not available to us. Paragraph 47 the Comptroller and Auditor General reads:

In 1985, with the sanction of the Department of Finance, a contract for the supply and installation of computer hardware and software to support the disease eradication programme was entered into by the Department in the sum of £1,152,072 including VAT. During 1986 and 1987 a further sum of £794,668 was paid to the same supplier for additional hardware and software and for providing continuing maintenance, bringing expenditure to a total of £1,946,740 including VAT at 31 December 1987.

In 1988 it was decided to expand the computer system to take account of increased volumes of activity on the programme and to provide for an orderly and gradual progression to a movement permit system for cattle. Following this decision, a contract for the supply of additional equipment and software was awarded by ERAD to the same supplier without recourse to public tendering procedures or reference to the Government Contracts Committee. £2,008,839 (including £1,576,188 for hardware) was paid by the Department to the company in December 1988 on foot of this contract. The Department has estimated that, over and above the foregoing expenditure, the development of a movement permit system could cost a further £4m.

I inquired if a review had been carried out in 1988 to ascertain whether the further computerisation needs could be met by other suppliers and whether the views of the Department of Finance, in particular its computer advisory service, had been sought in 1988 on the expansion plan and taken into account before entering into the contract.

I also asked why the specific sanction of the Department of Finance was not obtained and why the contract was not submitted to the Government Contracts Committee for its approval.

Having regard to the volume of business being placed with the company (£4m up to December 1988) I inquired whether price reductions had been negotiated when placing the contract for the expansion of the system and whether the proposed further development to provide for a movement permit system can, if necessary, be achieved without recourse to the current sole supplier so that the Department will not be precluded from adopting a competitive tendering process and realising maximum possible cost savings.

The Accounting Officer informed me that in late 1986 the Department of Finance agreed that the additional hardware then required should be purchased from the original supplier without going to tender. In 1987, when it was again necessary to acquire extra equipment, the Department of Finance requested that oral inquiries should be made of a number of other suppliers to ascertain whether they would be prepared to supply suitable equipment. The three companies which had been contacted replied that it would be pointless to respond because the Department’s configuration was of a particular type and therefore the Department of Finance again sanctioned the purchase of the additional hardware from the same supplier without going to tender.

The Accounting Officer stated that following the establishment of ERAD, delegated sanction has been received from the Department of Finance to allow the National Director to use his budget without the need for sanction for specific items of expenditure, including computer items. In 1988 the Board of ERAD deemed the introduction of a movement permit system to be a matter of extreme priority and instructed the National Director to proceed urgently with the development of the system. To advance that decision it was necessary to specify the computer hardware and software needed to prepare for the expanded system and, on the basis of the delegated sanction, an order for the required items was placed with the same supplier under the procedure as followed with Department of Finance approval in previous years. He contended that this procedure did not entail consultation with the Department of Finance’s computer advisory service and that, in line with the previous Department of Finance approval as to deal solely with the same supplier, the 1988 order was placed with that company without reference to the Government Contracts Committee. The Accounting Officer also stated that significant price reductions on 1987 costs were negotiated for the business placed in 1988. The Accounting Officer assured me that the further development of the system can be achieved without recourse to the current sole supplier. He explained that because the movement permit system would involve nationwide communication using the Government telecommunications network it would be necessary to seek quotations from all suppliers for the supply of a centrally located mainframe computer, local office and communications equipment and associated software. Such equipment would be needed in order to implement the recommendations contained in the Information Technology Study carried out in July 1989 jointly by the Department, its two main computer suppliers and the Department of Finance.

Mr. McDonnell.—Paragraph 47 in my 1988 report is fairly long, as you can see, and deals essentially with the placing of a £2 million contract in December 1988 without, as I saw it, the necessary Government contract procedure being followed. You will see there that there were a number of earlier instalments in the build-up of the Department’s computerised system in 1985, 1986 and 1987, but the one I was concerned about was the 1988 one. Specifically, I was concerned with not involving the Department of Finance, either as the sanctioning authority or in its advisory role and in not seeking competitive tenders, or even in the event that only one supplier could meet the requirements, not submitting what would then be of course a single tender action to the Government Contracts Committee. You are all aware of what the Government Contracts Committee is. It is an inter-departmental committee which operates under the aegis of the Department of Finance.

In regard to the Accounting Officer’s response, which is summarised in the last section of the paragraph, I think one might wonder whether in the first place a general delegated sanction given by the Department of Finance would cover a purchase of this magnitude. There were some indications in the Department’s file that there was some doubt about this. Secondly, the Accounting Officer took the view that the development was merely an extension of the computer system which was already in place and as such did not fall to be put out to tender, but the difficulty I have in reconciling that is that the delegated finance sanction which the Department is relying on in fact included a specific condition that it would be operated on the basis of normal tendering procedures being followed. The third point I want to make, Chairman, is that as to the future, I have been assured by the Accounting Officer that in the further development of the system the Department will not be locked into the current sole supplier. That was another matter that was of concern to me, but I suppose in regard to the extent to which the existing equipment, which now has cost approximately £4 million, can be incorporated into the proposed further development, which is going to cost another £4 million this is something that I suppose we will have to wait a little, before we can see exactly what is going to emerge.

Chairman.—Mr. Dowling, at the end of December 1987, you had spent £1.946 million with the sanction of the Department of Finance. In the following year you spent a little over another £2 million, but on this occasion this was done without public tendering or without reference to the Government’s Contracts Committee. Why was that?

Mr. Dowling.—As explained in the reply to the Comptroller and Auditor General, the ERAD position was that when they sought oral tenders the previous year they were told by the firms they went to that because of the particular configuration of the computer arrangement the other firms were not in a position to tender. Therefore, the position was that the only firm that could supply what was required was the firm with which the contract was placed. The understanding was that because arrangements reached with Finance in the past, had allowed ERAD to go ahead with the one firm, there was no need to go back and get further Finance sanction. They did attempt, and succeeded, in negotiating reductions in the rates with the firm concerned because of the size of the order being placed, but the point was that nobody else, as I understand it, was in a position to supply a quotation of any kind for that particular equipment.

Chairman.—Because they were already locked into that system?

Mr. Dowling.—Because they were locked into that system for that phase of the work. They are not locked into a single supplier for the expansion of the system and, indeed, we now have a quite a big project under way to finalise the pre-movement computerisation system for ERAD, the farm headage system for the payment of headage and premium grants and in that system we will not be locked into the single supplier and we will be able to obtain quotations from a variety of people.

Chairman.—How much was spent on this system since 31 December 1988?

Mr. Dowling.—I am not certain.

Chairman.—But you did estimate that over and above what has been spent, the development of a movement permit system could cost a further £4 million.

Mr. Dowling.—Yes, that provision has been put in the Vote for Agriculture for the coming year.

Chairman.—So we can take it that since the end of 1988 there has not been a substantial expenditure.

Mr. Dowling.—No, since the end of 1988 any expenditure has been on minor upgrading of the system. I have not got the precise figures but if you want them I can give them to you.

Chairman.—Would you explain for the Committee, Mr. Dowling, what is a permit system for cattle? Would you, for instance, be able to trace a reactor which was, say, found in Tipperary and be able to say that it originated in Galway? Is that the objective of the system?

Mr. Dowling.—Yes. In the event of a TB breakdown, or brucellosis breakdown, you will be able to say on the computerised system exactly what movements have taken place from the farm and what movements have taken place into the farm. It enables you to check on all animals that have been moved over a number of years from the farm and all animals that have been moved in and the farms from which they have come. So it is, effectively, a tool to help control the movement of cattle and to help trace the source of breakdowns where breakdowns take place. One of the traditionally believed reasons for the difficulty in eradicating TB, in particular, has been the high level of cattle movements in Ireland. We have, up to now, been trying to deal with that through pre-movement sanctioning arrangements of one kind or another, but we believe that on a computerised system it will be much more efficient and, indeed, similar systems are in operation in other countries.

Chairman.—Presumably that would be related to the ear tag numbers.

Mr. Dowling.—Yes, it would be related to the ear tag number and the identity card. Effectively it would be an animal passport which goes with all animals.

Chairman.—But that is not foolproof because they can be tampered with. Is that correct Mr. Dowling?

Mr. Dowling.—It is as foolproof as it is possible to be. We have looked at various other ways of identifying animals and nobody has come up with a better way.

Chairman.—Could you tell the Committee why this money was paid in December 1988? What was the significance of the timing?

Mr. Dowling.—I do not know if there was any particular significance in the timing. ERAD had made provision within their budget for a certain amount of money to be spent on developing the computer system and December was the month they paid it. I do not think there was any particular significance.

Chairman.—It was not a question of making the expenditure because you were at the end of the year, before carrying it over into the following year or anything of that kind?

Mr. Dowling.—It would not be carried over in any event. My understanding is that the contract, or at least the arrangement, fell due at that time.

Chairman.—The balance would be carried over and then refunded to the Exchequer as an amount not used. Is that correct?

Mr. Dowling.—Yes.

Chairman.—It was not a question then of just using it up in December?

Mr. Dowling.—No. In any event, it would have had to be spent. The job required to be done. Whether it was done in that year or the following year there would have been a requirement to spend the money.

Chairman.—In reply to the Comptroller and Auditor General you said that significant price reductions on 1987 costs were negotiated for the business placed in 1988. Could you tell the Committee what the word “significant” equates with in monetary terms?

Mr. Dowling.—In 1988 during the initial discussions the firm indicated that a 10 per cent reduction over 1987 prices would apply. Because of the size of the order further discounts were sought and the final price agreed was £1,525 per unit; I think that it is about a 15 per cent reduction.

Chairman.—Mr. Hickey of the Department of Finance, what about the point made by the Comptroller and Auditor General in relation to the general delegation of sanction for such actions? Your Department obviously were not happy with this. Are you satisfied that the Accounting Officer acted within his authority in sanctioning this expenditure?

Mr. Hickey.—That is a difficult question to which to give a straight answer. Let me briefly explain that prior to and during the setting up of ERAD there were continuous discussions between the Departments. In an effort to make things administratively possible those discussions led to a letter from the Department of Agriculture and Food to the Department of Finance seeking certain delegated sanctions. A reply went back to the Department agreeing to those delegations. It seems to the Department of Finance that certain interpretations were put on those delegations that we might find hard to follow for the following reasons.

Firstly there is a departmental circular governing information technology generally and an official letter would never, I think, take precedence over such a circular without a specific reference to it, for example, “notwithstanding the provisions of such a circular” and the like. Unfortunately there may have been room for some misunderstanding because the delegated sanctions spoke of limitations and because the way the letter was drafted those limitations would appear to have applied in certain cases and not in others. Again, it would have been the interpretation of the Department of Finance that the sanction could not in any event, even if it did apply to information technology equipment, exceed £500,000. In those circumstances, Chairman, I find it very difficult to answer your question directly. I am sure that it was not a deliberate attempt but because of the wording of the letters and the wording of our sanction it is possible to misinterpret what exactly is meant.

Chairman.—But you would see it as a misinterpretation?

Mr. Hickey.—I would, Chairman.

Chairman.—You are a member of the board of ERAD.

Mr. Hickey.—That is right.

Chairman.—And were you at the time aware of the procedures being followed?

Mr. Hickey.—I joined the board of ERAD in October of that year, Chairman. When the discussions turned to the question of computerisation, on two occasions at board meetings I specifically drew the board’s attention to the need to consult my Department’s computer section and also of the need to comply with all EC and national regulations and with our own regulations regarding public contracts.

Chairman.—Was the advice of the Department of Finance computer advisory service sought by the Department of Agriculture and Food?

Mr. Hickey.—Subsequent to that it certainly was, Chairman, and that is now going on, but not for the purchase of the equipment in question which may have been ordered, I would have to admit, in advance of my making these statements at board meetings.

Chairman.—What about the first sanction which was given by your Department for £1.946 million? It was put out to tender.

Mr. Hickey.—Could I suggest at this stage, Chairman, that you might like to pose those questions to Mr. Glavey who works on the computer side.

Chairman.—All right.

Mr. Glavey.—Yes, that original acquisition had been put out to tender.

Chairman.—Mr. Dowling, why did your Department not seek the advice of the computer advisory service in the Department of Finance?

Mr. Dowling.—They had sought and got the advice of the computer side of the Department of Finance in regard to the arrangements to apply from 1986 and indeed in 1987. They had sanction in 1986 to purchase without tender. In 1987 they were asked to seek tenders orally. They sought them and, as I said, there was no other firm that was in a position to tender. They believed that since it was an expansion of the existing system there was no need to consult and that the same position was in any event going to apply as in 1987, that is, that only one firm would be in a position to tender. What they did was to do business with the firm on the basis of getting discounts. I have now got the precise figures on the discounts. The firm offered 10 per cent and the final figure arrived at was just under 20 per cent in the case of one set of equipment and just over 23 per cent in the case of the other.

Deputy Rabbitte.—You have put a couple of questions, Chairman, that I was going to put to Mr. Dowling. There is one general question that I would like to ask. The members of the Committee and certainly the public will be interested to know what your up to date comments are on the success of the ERAD scheme.

Mr. Dowling.—The position is that over the last two years was that the testing programme removed last year 43,000 reactors in 1989 and this year 41,000 reactors. Before that, the testing programme was removing about 30,000 reactors. It appears that one of the reasons that we were not eliminating the disease more rapidly was that we had not been taking out the full number of reactors for a variety of reasons. In other words some infection was still being left in the herd. To the extent that the programme succeeded over the past two years increasing the reactor extraction rate by between 30 and 33 per cent and doing complete rounds of testing, which was not always the case in the past, it has been partially successful. It is not successful enough, as a result of which there will be a very substantial change in the programme for next year in regard to the way in which testing is to be done. It is intended that testing will be done under contract rather than the way it was done in the past. New arrangements will apply which will require two different vets to do successive tests on the same herd and a variety of other improvements will be built in. The programme is being submitted to Brussels so we would expect a substantial contribution from Community funds towards the cost of the farmer compensation element in it since that is now allowable under a Community regulation. As a result of the changes, the expectation is that the full reactor extraction rate will be achieved in 1991 and 1992 which would mean something of the order of 50,000 or so reactors coming out, plus some additional work on removing infected badgers from areas where they appear to be causing problems. A number of other improvements will, I believe, see a fair proportion of the aims that ERAD was set when it was established being met at the end of the four year period. I would have to say that the first two years show an improvement but not a sufficient improvement to indicate that we could have left the programme unchanged. So ERAD are making very substantial changes in the programme to apply in the next two or three years.

Deputy Rabbitte.—Would you explain again for people who might not be all that familiar with it if we had reached the target level of extracting about 50,000 reactors what would that mean for the success of the programme? Does the extraction of virtually the total number of known reactors mean that we are getting close to eradicating the disease?

Mr. Dowling.—It is one of the ways that brings us close to eradicating the disease. The consequence of not identifying and removing all reactors is that disease is being left in the national herd. Not every reactor has TB, but a fair proportion of reactors have turned out to have TB when clinically examined. Therefore a fair proportion of the reactors which should have been identified but were not would have TB and therefore continue to spread it through the herds.

One of the two principal reasons that disease has been difficult to eradicate is that we have not been removing all the sources of infection. Cattle with TB are a source of infection. Wildlife is another source, but a much lesser one. The remaining big problem causing the spread of the disease is the numerous movements the cattle make in the Irish cattle chain.

All those matters are now being tackled consistently, one after the other. The computerisation arrangements, which should be completed by the beginning of the spring 1992 programme, should be the final instalment in the arrangements to deal with movement. The better testing arrangements to apply next year should ensure that we identify virtually all the reactors that are there. If both of those happen then we should have broken the back of the problem.

Deputy Rabbitte.—Finally — you may not have these figures there — the tightening up of the scheme you mentioned for next year obviously must mean that there are some questions about the efficacy of the scheme as it has operated up to now. Did ERAD manage to live within their budget for the current year? There is a contribution now from the farming community. What is that in the order of for 1990?

Mr. Dowling.—The contribution from the farming community is of the order of £22 million or £23 million in the current year and it will go up to £27 million next year. The rates of levy were increased half way through the year so we only got the benefit of one half of the increase. The Exchequer put in an additional £10 million this year and the farmers put in an extra £1 million. The arrangement is that there is to be a two-to-one balance in the funding, between the farmers’ contribution and the Exchequer, leaving aside the administrative costs. The increased levies will be kept in place over a sufficient number of years to re-establish the two-to-one balance between the farmer contribution and the Exchequer. If we get 50,000 reactors rather than 40,000, then we would have some difficulty staying completely within the budget for the coming year and we might have to have recourse to additional budgetary expenditure this year. For future years, if the Commission in Brussels accept the programme, then they should pay 50 per cent of the farmer compensation costs, which run between £16 million and £20 million, depending on what number of reactors are taken out. That should ensure a satisfactory budgetary situation for all future years. We have one sticky year to get through because, while the Commission will approve the programme and will pay 50 per cent of the cost in respect of the 1991 programme, the recoupment may only come in 1992, so we would have one year’s delayed recoupment. We have to find a budgetary way of dealing with that, if the number of reactors that ERAD believe they will extract are, in fact, extracted.

Deputy Cullimore.—In regard to wildlife, the badger has been linked as a source of spreading the infection. Have the Department plans to issue licences to farmers in highly affected areas to remove the badger?

Mr. Dowling.—No to farmers, no. The Department have consistently obtained licences from the Forest and Wildlife Service to snare badgers on a random basis, to identify the extent to which TB exists in the badger population. We have carried out a number of fairly extensive surveys, particularly in parts of Offaly and Galway, where TB in cattle has been an endemic problem, with repeated breakdowns after we appear to have it cleared and where the existence of TB in badgers was at a very high level. The evidence from those intensive campaigns is that when the badger population was eliminated, in a limited area then the incidence of the TB in cattle fell significantly.

We now have Government agreement to do a very intensive and scientific survey into major black spot area to help to confirm, once and for all — and we believe it will confirm it — that the badger is a significant source of infection in some parts of the country — and, I repeat, only in some parts — and that in those parts badger control is necessary if TB is to be eradicated. I repeat what I said here on the last occasion I was here: I do not believe there is any evidence to suggest that the existence of TB in badgers is the major cause of the spread of TB or the failure to eradicate TB in cattle. It is a cause and in some areas you cannot be wholly successful unless you deal with that cause, but it is only one of a number of causes and it would not be anywhere near the top of the list.

Deputy Cullimore.—Is there any method or system whereby a farmer could apply for the removal of badgers from his land if he felt that was the cause of spreading the disease within his herd?

Mr. Dowling:—He certainly could apply, but I doubt if the Forest and Wildlife Service would issue him a licence. The Forest and Wildlife Service are prepared to issue licences on a controlled basis to an official agency who guarantee that they will do things in a certain way and try to avoid unnecessary suffering, particularly at times of the year when the badgers are suckling, because obviously the removal of parents at a time when badger cubs are in the setts could lead to significant suffering. Anything that has been done in the form of badger control has been done in a controlled way. I do not see the Forest and Wildlife Service issuing licences to farmers over whom they would have no control whatsoever with what they did with the licence.

Deputy Allen.—As a city dweller, I continue to be amazed at the apparent failure of the Department to eradicate TB among cattle. We have heard about the badger and other causes in spreading the disease. Is there any evidence of illegal movement of cattle by farmers that have been diagnosed as reactors? If there is, what level of illegal movement takes place? A sum of £30 million has been spent last year on the programme. How much has this programme cost the taxpayer to date, down through the years?

Mr. Dowling.—I do not think there is any evidence of illegal movement of reactors. Once reactors are identified there is a reactor removal service that removes them. There may well be illegal movement of cattle, which is not quite the same thing as illegal movement of reactors, in the sense of people moving animals where they have not necessarily had the pre-movement test done to show that they are clear. Undoubtedly, movement is a major cause, even legal movement is a major cause and most movement is legal. It is not so much whether it is legal or illegal that is the problem, it is the number of moves of animals out of areas where TB still exists into areas where TB has, in many cases, been largely eradicated.

In regard to the question of costs, the cost of the scheme up to the end of 1989 was £453 million, excluding administrative costs and 1989 would have added £48.5 million to that figure. The administrative costs are of the order of £16 million in current terms; I do not have a figure for administrative costs over the previous years.

Chairman.—Sixteen million pounds per year?

Mr. Dowling.—Seventeen million pounds per year, in fact.

Chairman.—Does that include the cost of TB and brucellosis eradication?

Mr. Dowling.—Yes. The total cost is £460 million. Sales of reactors, disease levies and an earlier contribution from the Community brought in £176 million over the years, so the net cost is £284 million in year-on costs.

Chairman.—Historic costs.

Mr. Dowling.—Historic costs. In addition, administrative costs are estimated at about £170 million over all the years. They are currently running at a rate of about £17 million a year and you can add to that £48.5 million or thereabouts for 1990 expenditure and another £17 million administrative costs, and deduct £23 million for farmers’ contributions.

Deputy Allen.—Is it possible to get a further breakdown on that £460 million by way of what fees are paid to vets?

Mr. Dowling.—Yes.

Deputy Allen.—How is the money spent?

Mr. Dowling.—Over all the years it amounted to £233 million compensation to farmers for reactors, £154 million fees for veterinary surgeons and £73 million for supplies and equipment and travel, bringing the total expenditure to £460 million. In regard to the offsets, about £112 million was paid by farmers in levies, £52 million obtained by sales of reactors, when that was the system of disposal, and £12 million obtained for part of the programme in the early eighties from the European Community, giving a total offset of £176 million and a net cost of £284 million. As I said, the administrative costs historically have amounted to about £170 million and are running at about £17 million a year at the moment.

Chairman.—About £500 million in historic costs to date?

Mr. Dowling.—Well, yes.

Chairman.—About £500 million in historic costs.

Deputy Allen.—At this stage of our programme — and again I am speaking from a relative ignorance of the agricultural sector — has any external assessment been done on the effectiveness of this programme which obviously has cost the taxpayer a shoe and a leg?

Mr. Dowling.—Quite a number of studies have been done as to how the scheme might be improved. Certainly, there was one major interdepartmental study in the early eighties. Recently, we have had people to look at the testing arrangements to see how they could be improved externally. Senior counsel who took submissions from all the main interests involved has made recommendations which are the basis of the improvement in the programme for next year. We have had a recent study done as to whether the money which we are spending in compensation to farmers might be spent in a different way to reduce more significantly the hardship to the farmers who suffer most because of the system. Those at least have been done. I cannot say if studies are done earlier than the eighties.

Deputy Allen.—Finally, in relation to the studies done by senior counsel, have all the recommendations that were published or submitted to the Department by the senior counsel been implemented, or are there major stumbling blocks in relation to important issues?

Mr. Dowling.—None of the main ones has yet been implemented because they were designed to be implemented in the 1991 programme. It was too late to change the programme for 1990, but they are now in a programme which has been submitted to the Commission for funding. Some negotiations still remain with at least two of the interests concerned, one of which is not particularly happy, I have to say, with the balance of the recommendations. It is common knowledge that the recommendations are not wholly welcome to the veterinary union, for instance, and it would wish to see them changed. But as of now the programme is being put in place and we are making the various administrative arrangements, including adjusting computer programmes, to bring it into place at the start of the 1991 programme which would be in February or March, which is the usual time when testing is given out to vets.

Deputy Allen.—Have the vets now accepted all the recommendations?

Mr. Dowling.—No, they have not accepted all the recommendations. The negotiations with them have only begun and I believe that the veterinary associations will accept the recommendations in the end. They are not easy, in fairness to them, to accept but the fact that the recommendations come on the basis of an objective study by somebody who did not have any particular vested interest in the outcome helps. Also, we know that the type of programme that would result from those recommendations is the type that the veterinary authorities within the EC Commission wish to see put in place if they are to support the programme with European taxpayers’ money as well as Irish taxpayers’ money, that will, I think, ensure that the negotiations will be successful.

Deputy Allen.—I am sure that the taxpayers are praying that these negotiations will be brought to a conclusion within the figures we have here.

Deputy M. Ahern.—Let me continue outside the paragraph. Over the years Northern Ireland has been held up as an example that we should follow to get rid of TB. Is there not a problem there now, as well, which is likely to have an effect on us?

Mr. Dowling.—They might argue that we might be having an effect on them. I do not think that the situation in Northern Ireland will have any adverse affect down here. Northern Ireland did get the disease down to a much lower level than obtained here, for a variety of reasons. Perhaps the principal one is that cattle movement is very limited in Northern Ireland. The incidence of the disease is beginning to rise again and they are not sure why this is happening. They believe that perhaps some of it may be due to animals imported from the south and we have new arrangements in place for the testing of animals going north which should allay their fears on that score. They now think that perhaps wildlife is a problem with them as well, but again it is a small problem. There fact that the incidence of the disease was down to a very low figure and that they had not done anything about the wildlife problem may indicate that that in one of the principal reasons the disease is one the increase again. I repeat that it is from a low figure and that may indicate that the wildlife problem stops you getting down below a low residual figure, but you have to do all the other things right in order to get as far as the low residual figure and that is what we are saying here. We need to change the programme to improve it and to ensure that we get all the other things right, including getting rid of the various types of infection that have remained within the herd. I was with the Department of Northern Ireland Agriculture only two or three weeks ago — we have biannual discussions on matters of common interest — and they said that they are not still certain why it is beginning to rise again and they are putting in a more extensive programme for next year — at least, they were assessing the costs of a more extensive programme for next year and assuming that that is agreed, they will go ahead with it. Having got to a low level, the fact that it is beginning to rise again is a worry for them.

Chairman.—Given the expenditure on hardware and software to support the disease eradication programme and the additional expenditure that you are proposing to make, have you a target year in mind for the elimination of the problem, or at least for bringing it down to a minimal level?

Mr. Dowling.—The original aim was that over the four year programme ERAD would work to halve the rate of the disease.

Chairman.—Four years, from which year to which year?

Mr. Dowling.—It would end in 1992, so we are halfway through it, effectively. We have two years to go. That remains the aim. It may be a slightly ambitious aim at this stage out what ERAD put in place now in regard to the now programme does achieve what they believe it can achieve in terms of reactor extractions and of doing something about the other residual problems, then 1993 should see a significant drop in the incidence. Whether that drop will be as much as 50 per cent nobody can know at this stage. On the way the programme is going now the major effect in terms of the reduction in the incidence of disease should become apparent from 1993 onwards.

Chairman.—But you are not on target to halve it by the end of 1992?

Mr. Dowling.—It depends on how you measure it.

Chairman.—Will you have halved it by the end of 1992?

Mr. Dowling.—No. Let me explain; it depends on how you measure it. If we have a very big reactor extraction rate in 1991 and 1992, then obviously we will not have halved it by the end of 1992, because the incidence would be relatively high if you take out a lot of reactors. But the result of the programme could be a reduction to those sort of levels in 1993, whether that means we have achieved the aim at the end of 1992, if the aim is achieved as a result of what has happened in 1991 and 1992, but not achieved until 1993, is a matter of definition. Nobody could, at this stage, say with certainty whether that aim will be achieved. We believe that the programme that has run for the last two years was a significantly better programme than what was there before. The programme which will be in place for 1991 and 1992 will be significantly better again. It should result in a significant reduction in disease from 1993 onwards. Obviously we have to wait and see if that occurs.

Chairman.—It is your job as Accounting Officer to ensure that Government accounting requirements are met when you are spending taxpayers’ money. Please ensure for the future that they are met, because they are there for very good reasons — to ensure that the whole accounting procedure operates properly and adequately and, ultimately, that this Committee is satisfied as to how taxpayers’ funds which the Dáil raised are adequately and properly spent. It is very important. They are not just there as an inconvenience; they are there to be met.

Mr. Dowling.—There are clear procedures in place to ensure that any purchases of equipment by the Department, whether by ERAD or anyone else, will comply with the requirements laid down by the Department of Finance. As evidence of that, the major computer expansion is now being got under way in full consultation with the computer side of the Department of Finance and fully in conformity with Government tendering arrangements. That situation will not change.

Chairman.—It think we can note this paragraph. Paragraph 48 of the Report of the Comptroller and Auditor General reads:

Subhead L. 4.—Financing of the Common Agriculture Policy — expenses in connection with Market Intervention and the financing of other FEOGA (Guarantee) Section measures

Subhead M. — Appropriations in Aid

The member states of the European Community administer the Common Agriculture Policy (CAP) in accordance with Community Regulations which require each member state to set up an Intervention Agency for this purpose. Under Statutory Instrument No. 24 of 1973, the Minister for Agriculture and Food is the Irish Intervention Agency and is therefore responsible for administering all market regulation and production support measures provided for under the CAP. Expenditure on these measures is met by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (FEOGA). FEOGA transactions are separate from the Vote transactions shown in the Appropriation Account but are, in all respects, subject to the same accounting and internal control procedures as departmental expenditure.

On the basis of revised financing arrangements introduced at the end of 1987, expenditure on the payment of direct production and marketing subsidies such as export refunds, production aids, aids for private storage, premium schemes, etc. is initially funded by borrowing undertaken by the Minister for Agriculture and Food and recovered from FEOGA after an average period of 6 weeks has elapsed. The cost of the borrowing is met from Subhead L.4 of the Vote and the EC provides an interest subsidy towards this cost which is brought to account as Appropriations in Aid.

Expenditure on market intervention incurred by the Department in buying, storing and later disposing of specified agricultural commodities offered to it in accordance with EC Regulations is also financed by borrowings which are repaid when the produce is sold. Any profits on sales are credited to FEOGA while any losses are met by FEOGA. The cost of transport, handling, storage and financing, etc. is met from Subhead L.4. and FEOGA contributes towards these costs at standard rates, the amounts received being brought to account as Appropriations in Aid of the Vote.

The total borrowings outstanding at 31 December 1988 in respect of FEOGA guarantee expenditure and intervention buying was £743.2 million.

Notes:

(a)The receipts and expenditure figures are not directly comparable because of the time lag in recoupment.

(b)At 31 December 1988 the total expenditure met by the Department exceeded the amount received from FEOGA by £136.6 million. The corresponding figure at 31 December 1987 was £132.5 million.

Schedule 4

The charge to subhead L.5 in respect of losses by accident, deficiency, disallowance by EC, etc. is made up as follows:

Mr. McDonnell.—The purpose of this paragraph is simply to give an indication of the scale of the Department’s activity on FEOGA operations and how it in some respects interrelates with the Vote. It outlines, as you will see, in general terms how the Common Agricultural Policy is operated and there are various schedules which give details of the total FEOGA guarantee expenditure during 1988 and also intervention activity during the year, and things like the value of stocks at the end of the year and the costs borne on the Vote as against the amount received from the European Commission. That is on the incidental expenses. You will see that the net result is that for 1988 the Department paid out just over £1 billion on behalf of FEOGA and collected £24 million in levies. I should say a small amount of that £1 billion was paid to the Department in recoupment of expenditure which it had already incurred. You will see also that the value of intervention stocks at the end of the year was £177 million. That was down from a much higher figure of £714 million at the end of the previous year. You will also see that at the end of schedule 3 the shortfall between what the Department had incurred on incidental expenses and what it had recovered from the Community had accumulated over the years to a total of £136 million at the end of 1988. I want to emphasise that this is partly due to differences between the actual costs incurred and the standard rate of recoupment and partly also due to the time lag in recoupment. You will remember that the Committee has, on a number of occasions in the past, discussed this particular aspect in great detail.

Chairman.—Under the FEOGA scheme, the net payments made by your Department, Mr. Dowling, as agent on behalf of the Commission, was £1,038 million in the year in question. Any shortfall at the end of the year is usually met by the Commission within weeks. Is that the usual procedure? Is it six weeks?

Mr. Dowling.—No, the Commission recoups expenditure on the market organisations on the so-called guarantee side of FEOGA within not less than six weeks of the expenditure taking place, which means that member states carry that cost for a minimum of six weeks, but in the case of the four poorest member states in the Community the Commission pays interest on the cost of what we are carrying.

Chairman.—The cost to you then, is minimal in administering the system?

Mr. Dowling.—No, the cost of administering it is not minimal.

Chairman.—The financial cost—

Mr. Dowling.—There are a very large number of people who have to be paid to administer it.

Chairman.—Administrators and so on, but the financial cost of interest and things of that kind is substantially recouped?

Mr. Dowling.—Financial costs are largely recouped. The way in which this operates is that the expenditure which we make is recouped within six weeks for straightforward schemes. In the case of public intervention, that is purchasing into store, we borrow the money because it is the member state which has to find the capital cost for that. We borrow the money, the Community pays us interest on the borrowings, we get the money back, either when the stocks are depreciated or from the loss on sale when they are sold. Traditionally, the interest rates which the Community has paid — because they are a sort of average for the Community — have been less than the cost at which we raise money, although in recent years we have managed to raise money at about the same rate and, indeed, perhaps in one year at a slightly lower rate. Also, the Community recoups storage costs, freezing costs and handling costs for product which is moving into store and while it is in store. Again, the Community recoups that at standard rates, which are fixed on average for the Community, and it happens that fairly often the average rates that they recoup at are less than the rates we have to pay in Ireland. Traditionally, there would be some loss, but that loss, due to a variety of factors, particularly the more favourable rates at which we can borrow money, has gradually been reducing. It used to be quite significant, but it is gradually reducing. In the 1991 Book of Estimates we are showing that we estimate it will cost us £85 million directly to administer intervention operations and that the EC recoupments will come to £85 million as well. We should be able to do it at zero costs in 1991.

Chairman.—Are you talking about financial costs?

Mr. Dowling.—At zero financial costs, not administrative costs.

Chairman.—In relation to the question of the reduction in intervention stocks, there was a significant reduction between 1 January 1988 and 31 December 1988 — tonnes of beef down from 120,000 tonnes to 76,000 tonnes; tonnes of cereal down from 80,000 tonnes to 15,000 tonnes and tonnes of dairy products down from 156,000 tonnes to 33,000 tonnes. The Comptroller and Auditor General tells us that in value there has been a reduction from £714 million to £177 million. Are intervention stocks still this low or have they crept up again?

Mr. Dowling.—Unfortunately, no. They went lower again in fact in 1989 for most of the year. In fact some of the stocks became zero, or as near to zero as made no odds. At the end of December 1989, the stock of beef was at 69,000 tonnes; stock of cereals was zero and dairy products was only 3,000 tonnes, the value dropped to £93 million. Because of the changed market situation this year, stocks have been rising very substantially. I do not have current stock figures with me, but butter is of the order of about 75,000 or 76,000 tonnes, up from virtually nothing; beef is 88,000 to 90,000 tonnes and skim milk powder is of a similar order. We have not had to have cereals intervention because of both the improvement in the Community market and the effects of the US drought the summer before last. We would expect to have to buy in cereals this year again. The overall levels of stocks is up very substantially.

Chairman.—What value would you put on it, Mr. Dowling?

Mr. Dowling.—I cannot put a current value on it. To pay for intervention operation this year, we will have borrowed about £915 million. The value of the stocks will not be as much as that because they are significantly depreciated on entry into store by the Commission with a recoupment of part of the cost at that stage. They are usually depreciated again at the end of the financial year, and so I do not have the precise figure. If you would like the figures there is no problem sending them to you.

Chairman.—Perhaps you would send them on, but again we are back to the £700 million plus.

Mr. Dowling.—Yes, we are probably now historically at the highest level of stock we have ever had.

Chairman.—£800 million or more?

Mr. Dowling. In terms of quantity in stock we are at the highest level but not in terms of value because the Community has changed its method of depreciation in recent years. Previously it only depreciated at the end of the year and not necessarily at the end of every year, so that the value of stock, very largely, was kept in place until you sold out of intervention at, usually, world prices and then the loss on sales was recouped to the member state. They have changed those arrangements over the last two years or so in regard to stock depreciation, to have an initial depreciation in stock when it goes into store and a further depreciation at either the end of the financial year or the beginning of the following financial year so that the stocks are shown closer to their real value in Community statistics then they were previously. Previously they were shown at artificially high levels which were never going to be realised on sale, anyway.

Chairman.—So something less than £900 million is the——

Mr. Dowling.—The value will be much less, but I am saying that the quantities in are probably at the highest level they have ever been in my experience.

Chairman.—In terms of quantities, obviously the dairy products have had an enormous jump. How did the stocks reduce so significantly? Was it a question of world aid, or free distribution? What was the reason?

Mr. Dowling.—There were a number of reasons. The principal reason in the case of dairy stocks was that when the Community introduced quotas on how much farmers could produce and then reduced the quotas by 8½ per cent over the years from 1986 onwards, the level of Community exports on to the world market dropped quite dramatically. The world market improved, the level of surplus in the Community fell to the point where we were not buying in at all and because the world market had improved it was possible to dispose of most of the stocks at reasonable prices on the world market. The same thing happened for a period on beef and cereals, largely as a result of the American drought of two summers ago where the American supplies on the world market virtually disappeared for a while and the Community was able to sell off most of its stock.

Chairman.—What about the question of, say, the Soviet Union? Obviously the argument of market structures is that if you flood somewhere with food, then the production system goes astray. At a national or European level, has consideration been given to the difficulties that have been faced in places like the Soviet Union while we continue to have these artificial levels of intervention stocks?

Mr. Dowling.—The answer to that is, yet it has. What the Community is attemppting to do at the moment is to get an agreement that within the member states that about a billion ECUs, which is about £800 million, which will not be spent in the agricultural budget this year in the Community will be carried over into 1991 to provide an aid measure for the Soviet Union which will probably take the nature of about one-third of the money going on straightforward food aid and two-thirds going on credits to enable the Soviet Union to purchase food products, from the Community since it will be Community credits that they will be using. That should reduce the stock currently in store. The Soviet authorities are certainly interested in purchasing large quantities of meat, principally beef, some quantities of butter and quantities of wheat. They have already obtained direct quantities from Germany where much of the overhanging stock in what was the former GDR territory was shipped at concessionary prices to the Soviet Union in the early autumn. The Community is also looking at the possibility of giving similar assistance to a number of the other Eastern European countries too.

Deputy Allen.—I have just returned from the Soviet Union and seen the chaos there. Are you satisfied that much of the food aid going there will not be just wasted because of the breakdown in the distribution network there? Has any consideration been given to more positive aid in the area of agricultural technology?

Mr. Dowling.—The arrangements for the transfer and movement of the product both to and within the Soviet Union are being organised by the Commission. My understanding is that it is satisfied that arrangements can be made to ensure that it is distributed. Obviously there are distributional problems in the Soviet Union anyway, otherwise they would not be in the difficulty that they are in since there are parts of Soviet territory in which there are plentiful supplies of food but they do not have the necessary distribution network. The Commission is satisfied that what will go from the Community will be dealt with and that arrangements are being made to ensure that it will be distributed. Parts of the overall financial arrangements are likely to include measures which will enable Community operators to invest in various parts of the agricultural economy in the Soviet Union and people who have well developed technology in Europe will bring that technology to the Soviet economy, so that over a number of years one could expect both the distributional problems of the economy to be solved and also some of the technological problems. It is not something that would happen overnight, clearly.

Deputy Allen.—Hopefully it will happen, Chairman, but what will be the net cost of the programme to the Exchequer?

Mr. Dowling.—The Irish Exchequer? If the Community spends £1 billion we contribute 0.9 per cent or so of the cost of any measure. It would be very small. That is not extra anyway; cost in any event. The idea will be that, assuming we find an institutional solution within the Community to do so, savings of expenditure not used in agriculture this year will be transferred into next year’s Community budget, so the cost would already have been included in the Irish contribution to the Community budget for this year.

Deputy Allen.—About £10 million?

Mr. Dowling.—Yes if that is 0.9 per cent of £1 billion.

Chairman.—Finally, Mr. Dowling, could you tell the Committee what is the cost of storage on intervention stocks? What is the cost to the State on an annual basis?

Mr. Dowling.—The cost of all the intervention activities next year will be £85 million. That is what we are providing for the cost of running the market intervention system. It is not all storage, but mostly, it is. We expect Community receipts next year to more or less equal that, so it is a net financial cost, leaving aside the cost of administering the system.

Chairman.—That was the £85 million you spoke of earlier. Are there any further questions on this particular paragraph?

Paragraph 48 is noted.

Paragraph 49 of the report of the Comptroller and Auditor General reads as follows:

EC Regulations require member states to send to the EC Commission each quarter a list of irregularities involving expenditure under the CAP which have been the subject of primary administrative or judicial findings of fact. The list must indicate, inter alia, the nature and amount of expenditure involved, the practices adopted in committing the irregularity, the manner in which the irregularity was discovered and the possibility of recovery of amounts paid. The following information regarding cases reported by Ireland has been furnished by the Department:—

The expenditure incurred has been met from FEOGA and the question of disallowance, which would result in the charge being transferred to the Vote is only considered when the cases are regarded as being definitively closed by the EC. Since 1980, disallowances amounting to £76,000 have been made and the charge transferred to the Vote in respect of two cases. Investigations have not been completed by the Irish authorities in 12 cases.

Mr. McDonnell.—The Committee will be aware from previous discussions that member states can be held accountable by the Community for payments wrongly made and if the Community refuses to accept the accounts as a charge against FEOGA and if the intervention agency and in member states cannot recover the amount from the beneficiary, that the National Exchequer can ultimately be held responsible for bearing the cost. It must be remembered that in many cases the recovery can be effected through forfeiture of securities which have been put up in advance by those claiming the subsidies. You will note from the paragraph that so far only two cases, that is at the date of my report have been processed to the stage of final disallowance by the Community and the amount involved was the relatively small figure of £76,000. In other cases recovery was effected from the trader. There were at that stage a number of cases outstanding. From my information, the indications are that at the end of the day the losses may be quite small because the Department have been fairly successful in recovery from the traders.

Chairman.—Arising from this, Mr. Dowling, I want to ask you about the examination of boxes of meat under the APS scheme. When you were last before the Committee in January of this year you outlined some details of the beef examination programme undertaken by your Department in conjunction with the customs authorities on beef produced under 1988 APS scheme. You later indicated that product from the nine contractors who were responsible for almost all of the meat produced under the scheme was examined. In the case of four contractors, infringements were observed, while the other five were regarded as satisfactory. Two types of infringements were noted. The more prevalent was that pieces of meat were not individually wrapped. On a much lesser scale was the inclusion of pieces of scraps and trimmings. At that stage you were unable to put a figure on the likely financial impact in terms of any possible disallowances or penalties. I understand from correspondence we have had with you since, that your Department have been having discussions with the EC Commission in an effort to finalise the issue. Perhaps you are now in a position to give the Committee the up-to-date state of play and, in particular, to give the Committee a figure for the amounts in dispute which you have been discussing with the EC Commission.

Mr. Dowling.—I would like to correct one of the points I made in the letter to you when we said that four of the nine firms were involved in some form of irregularity or infringement. The figure now is actually five. There was a type of wrapping called serpentine wrapping which we would not have regarded as an infringement of the rules but the Commission do regard it as an infringement of the rules. I am not exactly sure how you would describe serpentine wrapping. It does not apparently go the whole way round the individual piece of meat, it separates one form the other but it does not go the whole way around. There are five firms involved rather than four.

The position is that we have supplied, in great detail, to the Commission the results and the work sheets, the data on which we based our calculations, etc. Because it is a very detailed and complex case, and one of the first of its kind, they have decided to go through it very carefully and in a very detailed way. The method to be applied to recover sums wrongly paid and to include some penalty element, has proved more difficult than we initially envisaged in agreeing with the Commission, because there are a number of points of principle. It is difficult for them, too. Those dicussions are not concluded but we would expect, or hope at least, that at a meeting taking place tomorrow there will be final agreement on the methodology. I am not in a position to say precisely what the figure is other than to repeat what I said the last time — that it will certainly be a figure of some millions, but it will be in a single figure of millions.

Chairman.—It will be less than £10 million?

Mr. Dowling.—It should be considerably less than £10 million. Hopefully, we will know that figure this month if the methodological discussions tomorrow are completed. I will be happy to send you a note indicating the total amount and the amount against each of the five companies, without naming them — I mean A, B, C, D and E and an amount.

Chairman.—Why would you be hesitant to name the five companies concerned?

Mr. Dowling.—It is departmental policy that we do not name individual companies.

Chairman.—But you know it is the power of this Committee to send for persons, papers and records and the Committee may decide to name those companies.

Mr. Dowling.—Yes, but this is a policy laid upon me by Department precedent and policy that we do not——

Chairman.—This Committee has, in the past, named companies and if we decide to name companies in the future we will send for the records, and if those records are not provided that matter will be reported to the Dáil and you, if you are not in keeping with the orders of this Committee, will be reported to the Dáil as well. This has gone on for far too long and I am very surprised this meeting is taking place tomorrow. Previously, when we were meeting with the Court of Auditors, we were to have information the day before we met them, and I received the FAX in Luxembourg before the meeting with the Court of Auditors to say this matter was still under review. Here we are, almost 12 months later, and you are meeting with the Commission officials tomorrow. That is not satisfactory. It is totally unsatisfactory and as far as the Irish accounting system is concerned we must be careful to ensure that, in Brussels and, indeed, in Luxembourg where the Court of Auditors operate, they have confidence in the system as it operates here so that it is not going to put us at a disadvantage in the future. It is a serious matter in my view that this has gone so long.

Mr. Dowling.—There have been repeated meetings with the Commission at a technical level to try to arrive at recovery sums which (a) eliminate any possible gain that the firms involved could have got and (b) involve a degree of penalty which is reasonably proportionate to the irregularity. It is not easy because the situation in Community and in Irish law is not terribly clear about how you can recover in these circumstances. We believe that we will, with the Commission, arrive at a fair figure which does involve a significant penalty on the firms involved. It was not of my choosing that the meeting with the Commission was scheduled for tomorrow; it was of the Commission’s choosing and we could do nothing about that. It will, I hope, resolve the issue. I repeat, all that remains to be resolved are the precise figures which are to be recovered. Everything else has been done in terms of completing the survey, reporting the results to the Commission, having them examined by the Commission over a four or five month period in great detail. We cannot force, in fairness, the relatively small number of people who work on that side of the Commission to finalise the thing any more quickly.

Chairman.—Yes, but bearing in mind that this arises from a 1988 examination and we are now heading into 1991, this Committee should at this stage know the figure you are talking about. All we know is that it is less than £10 million. We still do not know what the actual figure is and there are now five contractors involved, not four. Whatever about the penalty side of it, which is a matter for agreement between yourselves and the EC Commission, the actual amount of money involved in these irregularities should be public knowledge by now.

Mr. Dowling: But the amount of money involved in the irregularities is the recovery figure.

Chairman.—Plus penalties?

Mr. Dowling.—The recovery figure will be the total amount. It will include a penalty figure. The actual gain out of the irregularities as calculated is something less than, in my view, £1 million — that is, the actual possible gain to the firms concerned. As to how much above that will be required to be recovered depends upon the final decision on the methodology that we are to use. As soon as that is agreed, this can be finalised quickly. I repeat, I will have no difficulty supplying the information to you at that stage. The reason I cannot give you the figure is that I do not know it. It is not a desire to be unhelpful, it is just that I do not know the figure.

Chairman.—So, for the five contractors then the irregularities will have totalled less than £1 million.

Mr. Dowling.—The possible gain out of the irregularity is something above £500,000 and less than £1 million. How you decide to recover in the case of an irregularity is not clear-cut and more than that certainly will be recovered, significantly more will be recovered from the firms.

Chairman.—Because of penalties?

Mr. Dowling.—Because of penalties and the way in which the Community will apply the rules on recovery. I repeat, it is not an open and shut case as to how you do it.

Deputy Rabbitte.—May I ask you, Mr. Dowling, what is the ratio of culpability as between, A, B, C, D and E and the serpentine syndrome?

Mr. Dowling.—The serpentine syndrome has no gain in it, as far as I could see. The lowest amount recovered will be in respect of the serpentine thing. It may be one-tenth of the figure, or less.

Deputy Rabbitte.—But is one of the companies the main offender, or do they share equally? Is the practice more prevalent in one company than in the other four, or in two more than the other three, or whatever?

Mr. Dowling.—There will be probably two where the figure to be recovered will be significantly higher than the others.

Deputy Allen.—Could Mr. Dowling remind us of the status of the Garda squad investigation at this stage? At what stage is it, have any reports been submitted to his Department and what action, if any, has been taken?

Mr. Dowling.—This particular case has not yet been referred to the Garda. It will be referred to them as soon as we are finished our discussions with the Commission.

Chairman.—Mr. Dowling, we will expect to get a detailed note on this very soon because it has gone on for some time.

Mr. Dowling.—Yes, I accept that. The investigation began in April 1989. It was completed during the year. We would certainly have much preferred it to have been completed long before this, as indeed would the firms involved. Obviously there is something hanging over their heads which they cannot determine at this stage, either. It is not in anybody’s interest that this continues. We certainly have not been trying to continue it.

Paragraph 49 noted for now.

Chairman.—On subhead B.2 — Research and Testing — I understand that there is a terrible problem with mink destroying crops and that in some parts of the country it is at epidemic levels. What is the reason for this and what steps have been taken to deal with it?

Mr. Dowling.—In so far as there is a problem, I understand that it is likely to relate to their killing of lambs or other small animals and fish, not crops. The problem stems from minks escaping from specialised mink farms.

Chairman.—Escaping or being turned loose?

Mr. Dowling.—Escaping, I believe.

Chairman.—I understand that there is a problem with some unsuccessful mink farms simply turning minks loose, that they breed very quickly and that there actually is quite a serious epidemic developing in parts of the country. Is this under examination?

Mr. Dowling.—I am not aware that the problem was caused by minks being turned loose. My understanding was that minks escaped and I am not aware that it is a very serious problem.

Chairman.—I will get some information sent on to you about that matter and you can have a look at it. My understanding is that it is an epidemic in certain parts of the country, a very serious problem.

Mr. Dowling.—Certainly, if you have information I will be glad to have a look at it.

Chairman.—In regard to the rest of the items, are there any questions on items A.1 through to C.2?

Deputy Taylor.—On subhead B.1 — National Botanic Gardens — what was the expenditure there and what work has been going on there? What is the present position regarding the Botanic Gardens?

Mr. Dowling.—The expenditure represents the administrative cost of running the gardens.

Deputy Taylor.—Is there not major renovation work being undertaken?

Mr. Dowling.—Yes, there is to be major renovation work on the main glasshouses which is now about to begin under money provided by the Office of Public Works.

Chairman.—Are there any other questions on subhead C.3 to K.8?

Deputy Cullimore.—Under subhead F.2 — Interest Subsidy Scheme for Farmers in Severe Financial Difficulty — how many farmers were helped, how were they selected and on what basis? Did repayments of interest take place?

Mr. Dowling.—The scheme was to provide an interest subsidy. Claims were made in respect of 7,700 applicants and I gather that it was confined to farmers who could be shown to be able to reach viability as a result of the scheme. That was the criterion used.

Chairman.—Are there any questions on Subheads L.1 to L.10? On Subhead M.—Appropriations-in-Aid — your Department made an out-of-court settlement in the case involving Purcell Meats Limited. What was received in this out-of-court settlement by the Department?

Mr. Dowling.—The position on Purcells was, as the Committee are aware because we discussed it previously, that we withheld payment on about £3.5 million in refunds which we regarded as wrongly claimed. Purcells made a claim in court to have us ordered to pay. The court agreed to that, but put a stay on the proceedings to allow us to make a counter-claim, which we did. Effectively, the claim was by the company for their £3.5 million plus interest, which at the time of the settlement would have brought the total sum up to just over £5 million. Our legal advice was that in cases of this kind it is extremely difficult to prove all of the cases in court and that we would be likely, at best, to be able to prove about 60 per cent. The firm’s counsel approached our counsel on the morning of the court case to suggest a settlement. There was a negotiation and the settlement agreed was £1.3 million, each side to carry its own costs. We sought the approval of the Commission in Brussels to make a settlement on that basis. The Commission had always indicated that it wished the case pursued very strongly but that if there was a settlement of in or around that order they would be prepared to accept it. We got the Commission’s agreement and we settled, so the basis of the settlement was that in regard to the £3.5 million plus interest which the firm was claiming, which came to about £5.1 million, they agreed to waive all claims on the basis of a payment of £1.5 million.

Chairman.—So you refunded to them £2.2 million?

Mr. Dowling.—No, we paid them £1.3 million.

Chairman.—You kept the £2.2 million.

Mr. Dowling.—Yes. Each side carried its own costs.

Deputy Taylor.—So what would be the costs?

Mr. Dowling.—The cost has not yet been settled, but I gather that we expect it to be about £200,000.

Deputy Taylor.—£200,000.

Chairman.—Also in the case of the Goodman International Limited subsidiary, Deltena Limited, they paid something over £1 million. What about the Garda investigations in this case? Have they been completed?

Mr. Dowling.—The matter is still with the Garda. The investigations have not been completed. The figure is just short of £1.1 million.

Chairman.—It is still with the Garda.

Mr. Dowling.—It is still with the Garda.

Chairman.—That completes the examination. I wish you, the Department of Finance officials present, your own officials, the journalists who covered the meetings for the year, the Comptroller and Auditor General and his staff, the staff of the Committee and all the members of the Public Accounts Committee and the staff of the House of the Oireachtas who have worked with us throughout the year, a very happy Christmas. I am sure you will be looking forward to your next appearance in the new year.

Mr. Dowling.—Thank you very much. On behalf of all the people you have mentioned I would like to say that we also wish you a very happy Christmas and a prosperous New Year.

The witness withdrew.

The Committee adjourned.