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Speaking Points for Minister ICSA AGM

BUDGET

Priorities in the Budget negotiations 

a) To protect farm incomes targeting existing resources at active farmers, especially those in vulnerable sectors

b) To support productivity and the up-skilling of farmers and the food sector

c)  To  ensure the development of the agri-food sector incorporating investment in R+D, food safety, animal welfare and enterprise development in line with Food Harvest 2020

d) Reform and continued drive for efficiency and better service delivery within the Department and associated agencies.

Taxation Measures in the Budget

The measures announced have been designed specifically to:

  • Encourage farming as a career for young people
  • Incentivise farm partnerships and greater productivity at farm level
  • Stimulate land sales and land transfers
  • Facilitate new enterprise opportunities in farming
  • Help agri-food businesses innovate and export

Incentives for Farm Partnerships

For registered farm partnerships, the current rate of 25% stock relief will increase to 50%, and, for certain young trained farmers entering such partnerships, a rate of 100% stock relief will be available.  This new incentive will run until December 2015.

Stamp duty reduction

Budget 2012 reduces the stamp duty rate on agricultural land from 6% to 2%, with immediate effect. In addition, half the rate (1%) will be applicable on transfers to close relatives until the end of 2014.

This change will substantially reduce the stamp duty payable on transfers of farm land by gift or by sale. It will also promote inter-generational transfer, as the cost of lifetime transfer to transferees who do not qualify for the young trained farmer stamp duty relief has reduced considerably.

Capital Gains Tax retirement relief

As of 1st January 2014, for those farmers aged 66 and over, an upper limit of €3m will be introduced on family transfers, compared to an unlimited amount currently.  On non-family transfers, the current upper limit of €750,000 will be reduced to €500,000. Applying the new limits from 1st January 2014 allows farmers already aged 66 and over to plan the orderly transfer of assets in advance of that date.

Changes to CGT and CAT

Rates have gone from 25% to 30%, and the reduction in the CAT tax free threshold for Group A from €332,084 to €250,000.  These changes are necessary in view of the economic situation facing the country.  However, it should be noted that there has been no change to the very important 90% agricultural relief on CAT. This means that farms worth up to €2.5 million will continue to be fully exempt from CAT with regard to transfers to a son or daughter, or a 'favourite nephew/niece'.

Other tax measures

Other significant tax changes which will benefit the agri-food industry include:

  • improvements to the R&D tax credit and a Foreign Earnings Deduction to apply where an individual spends 60 days a year developing markets for Ireland in the BRICS countries (Brazil, Russia, India, China and South Africa). 
  • The VAT rate applied to open farms (such as pet farms) will be 9% rather than the new standard rate of 23%. 
  • The exemption rate for the Universal Social Charge has been raised from €4,004 to €10,036. This will be of particular benefit to low-paid seasonal workers in the farming sector.
  • Farmers will be allowed a double income tax deduction in respect of the increased costs arising from the change in carbon tax (the carbon tax is to increase from €15 per tonne to €20 per tonne from 1 May 2012 for agricultural diesel).
  • An amendment to the VAT refund order for farm construction will allow farmers to claim a refund on wind turbines purchased from 1st January 2012.

Funding the Department for 2012

A total funding of €1,312m is being provided in the Department's Vote in 2012, €1,144m in current and €168m for capital expenditure. On the capital side, the 2012 capital allocation represents an increase of €18m on the National Recovery Plan expenditure ceiling and that this will be boosted by a further €27m by way of carry-over of savings from 2011 to provide total capital funding next year of €195m. This is a very substantial increase on the original NRP allocation of €150m and will allow a very worthwhile capital programme to be implemented next year.

The funding announced in the 2012 Estimates does not include the €1.3b in payments under EU funded schemes which are administered by the Department.

Food Harvest 2020 related measures

Suckler Cow Welfare Scheme

Fully funded from national funds, enough to meet all payments due in 2012 at the current rates.

Beef discussion groups

€5m towards the establishment of a Beef Technology Adoption Programme which will build on the work done to date under the Better Farm Programme.

The Targeted Agricultural Modernisation Schemes

In the case of the Targeted Agricultural Modernisation Schemes (TAMS) operated by my Department, I am glad to be able to confirm that the Estimates for my Department for 2012 will enable these Schemes to be reopened and I hope to be in a position to make a further announcement in this regard within the next few days. The Schemes to be reopened will include the Sow Welfare Scheme, the Dairy Equipment Scheme, the Rainwater Harvesting Scheme and the Sheep Fencing/Handling Scheme and grants will be available on the same range of items as contained in the previous versions of the Schemes. While the Poultry Welfare Scheme will also be re-opened, the approval of any further applications will have to await the outcome of the request to the Commission to extend the date for the completion of work beyond 31 December.

You will be aware that these Schemes were suspended for new applications on 8 June last. Approvals have now issued to applicants in respect of virtually all applications other than those which are still under query with the farmers concerned. I would urge all farmers to adhere closely to the requirements of the Schemes, particularly as far as the standard of payment claims and supporting documentation is concerned, so that grant payments may be made to farmers as expeditiously as possible following the completion of work.

Forestry

Overall Expenditure for Forestry will be higher than the published figures and will amount to €111.76 million when the published estimate of €84.86m is boosted by a further €27m by way of carry-over of savings from 2011. This increased forestry funding of €112 million will allow afforestation to continue at roughly 7,000 hectares per annum as well as providing for the building of forest roads. There is no change in relation to the rate of payment of forestry premia, which continue at current levels.

Seafood sector

-funding for investment schemes in the processing sector, aquaculture development and fishery harbours,

-an increase in the grant-in-aid for BIM in recognition of the on-going valuable role which it plays in the development of the fishing sector but also in view of the added responsibility which it will have in relation to the deep sea aquaculture.

Animal Health Initiatives

  • A voluntary BVD eradication programme. Legislation will be introduced next year to make it mandatory
  • A new initiative to tackle Johnes Disease, using blood samples that are already being collected for Brucellosis testing
  • Changes to Brucellosis testing for dairy herds, reflecting the fact that the incidence of Brucellosis is greatly reduced

Protecting farm incomes targeting existing scheme resources at active farmers

Disadvantaged Areas Scheme

No changes in either the rates or the eligible areas qualifying for a disadvantaged area payment, despite the fact that expenditure will be reduced by some €30 million in 2012.

Stocking density:   0.15 Livestock Units per hectare goes to 0.30 livestock units per hectare
Retention period
: goes from three months to six month
Non-breeding horses: no longer counted towards stocking density
Land outside disadvantaged area: DAS payment on disadvantaged are lands reduced pro-rata
New limit on land away from the main holding: land must be within 80km of the main holding.

Rural Environmental Protection Scheme 4 (REPS4)

Detailed administrative checks had to be completed on all 30,000 applications before any payments could issue at all. This is in order to meet the requirements of EU regulations. Payments this year have issued earlier than last year with greater numbers being paid their initial instalments. Already over €74 million has issued to 17,000 applicants. These payments represent the initial 75% payment which my Department is allowed to release following the completion of detailed administrative checks, including plan checks which must be finalised on all applications. I also expect that the final 25% payments will shortly commence.

I am aware of the important contribution that REPS payments make to farm incomes and accordingly my Departments will continue to clear cases and make payments over the remaining weeks of December to ensure that as many farmers as possible will receive their entitlements before year-end.

The total spend on REPS in 2011 will be in the region of €250m. While this agri-environment scheme makes an important contribution to protection of the environment I had no option, due to the financial pressures, but to reduce RREPS 4 payments by 10% in future years. This change is of course subject to approval by the EU Commission.

Agri Environment Options Scheme
AEOS 1

The annual financial commitment for AEOS 1 applications is €32 million per full calendar year up to and including 2015. The number of active participants is approximately 8,360.

Payments commenced in August 2011 in respect of 2010 part-year contracts and to date €5 million  has been paid out to date to over 5, 500 applicants.

Payments in respect of 2011, the first full year of the scheme, will commence next week. Payments will issue to farmers who have passed the cross check and who have submitted valid capital investment claims.

AEOS 2

A total of 6,889 applications were received in 2011. 6832 records have been checked and validated by end of September 2011. All applicants have been notified in writing of the status of their application.  Payment of AEOS 2 applications will commence when all the required checks have been completed. The financial commitment for AEOS 2 applications will not exceed €25 million per full calendar year up to and including 2016.

Reform

Between the Department and State bodies there will be a saving of €18m.

Department Review of Expenditure

Re-organisation has yielded the following:

  • Reduction of €12m in administration costs for 2012
  • Reduction of €6m in States Agencies costs
  • Reduction in Department staffing levels; from 4,800 in 2005 to less than 3,600 today, a reduction of over 25%.
  • Reduced the cost of running the Department; by some €60million, or approximately 20%, since 2008.
  • Reduced the number of local offices; when fully completed in 2012, the Local Office Re-organisation Programme will reduce the number of offices from 58 to 16.
  • Commenced a shared services programme for its agencies and other Government Departments.

Semi State Bodies

  • A €10m dividend has been secured from Coillte
  • A €18m reform and savings programme is underway in Teagasc within a 5 year programme
  • Bord Bia and BIM will achieve €2.2m in savings within a 5 year programme.

CAP REFORM

  • The EU Commission proposals, published on 12 October 2011, contain texts of seven draft Regulations covering the three main aspects of the CAP (direct income supports, market supports and rural development) the financing, control and inspection arrangements and transitional arrangements for 2013. 
  • Next stage - Debates at the EU Council of Agriculture Ministers' meetings in October and November, have been general with a more detailed discussion on Direct Payments. A further debate on the rural development aspects will take place at the December Council. There will be a series of WG meetings to begin a detailed technical examination of the proposals.
  • In terms of the timeline - New CAP arrangements are needed after 2013 in light of new EU Multiannual Financial Framework (MFF) for the EU budget from 2014 onwards.  The aim is to have agreement on the MFF under the Danish presidency in 2012 but slippage could bring it into the Irish Presidency in 2013. 
  • The priorities are:
    • To ensure that the negotiations on the next EU budget framework deliver a well resourced CAP
    • To retain Ireland's funding both for direct payments and for rural development in any redistribution of CAP funds between Member States
    • To obtain flexibility for Member States with regard to payment models and transition arrangements for distribution of single payment funds to farmers
    • To ensure that rural development policy includes appropriate targeted measures to support competitiveness and sustainability and
    • To keep CAP processes as simple and as effective as possible and to minimise unnecessary bureaucracy for farmers and costs to the State.
  • We know from the EU budget proposals that the intention is to freeze CAP spending at 2013 levels.  This represents a reduction in real terms but stability in nominal terms.
  • The plan is to retain the current two-pillar structure with pillar one comprising direct income and market supports and pillar 2 comprising more targeted supports for rural development.
  • Commission is proposing that a pragmatic method be used for distributing pillar 1 direct payments that would close some of the gap between those Member States with low levels of payments and those Member States with high payment levels.  
  • Major changes are proposed to the model for direct payments about which I have serious concerns. The individual historic reference will be progressively replaced by a model based on regional or national averages.  
  • My main concern is that the move to uniform regional or national rates will cause massive transfers of payments in Ireland from the more productive farms to more marginal and less productive land and much of this movement is proposed to be front-loaded. My priority is to seek as much flexibility as possible for Member States to determine the payment models best suited to their conditions and to the development of their farming systems. I also believe that a lengthy transitional period is needed if there are to be any changes and I have already conveyed my views on this point to the Commission and to my fellow Ministers.
  • 30% of the payment is reserved for a green element. Although I fully support the idea of encouraging sustainable forms of agriculture, there is a need to keep things simple and avoid creating excessive additional bureaucracy.   
  • Other proposed changes to the payment models include further deductions from the national ceiling to provide for areas of natural handicap - optional (5%), voluntary coupled measures (5%), small-scale farmers (10%) and young farmers (2%).  I welcome the top-up proposed for young farmers.
  • Under the proposal, new payment entitlements will be allocated in 2014 to active farmers who used at least one payment entitlement in 2011. Entitlements will be established for the farmer who declares the land in 2014 and will be based on the eligible area declared by the farmer for that year. There is concern that the proposals could lead to land market distortions and would not be in the best interests of productive farmers. I would strongly urge farmers not to prejudge the situation and not to rush into decisions now that they may later have cause to regret.
  • It is proposed to introduce progressive capping of payments with a sliding scale of reductions ranging from 20% to 100% in respect of payments between €150,000 and €300,000. Capping will apply net of the greening element of the Direct Payment and net of salary costs. Capping is not a major issue for Ireland as most of our farms are small family farms.
  • Changes are proposed both to the process for drawing up and approval of Rural Development plans and for the objectives and measures themselves.   
  • As regards the rural development objectives, Commission’s intention is that rural development policy will have a greater focus on competitiveness, innovation, climate change and the environment.  
  • Many of the rural development measures available under the existing regulation have been retained although there are changes to the details.   

  • An agri environment measure is also provided for and in this round the measure will be compulsory and includes a reference to climate.   

  • A new stand alone organic measure for farmers who convert to or maintain organic farming practices is also of interest with rates of support similar to those proposed for agri environment.
  • My priority for rural development is to maintain support for on-farm investment, including appropriate support for afforestation, to assist the restructuring that is necessary to improve competitiveness and help in delivering the Food Harvest 2020 strategy.   

  • The draft Rural Development regulation also contains the Commission's latest proposals for the delineation of Less Favoured Areas or Disadvantaged Areas as we know them. (These are now to be renamed areas of natural constraint.)  

  • The majority of the existing rules on market support measures will continue unchanged and the proposal incorporates some dossiers already under discussion in the Council on quality policy, marketing standards, contractual relations in the milk sector and alignment of legislation with the Lisbon Treaty. 
  • It is proposed to abolish sugar quotas from 30 September 2015.  I strongly support this.  
  • The provisions dealing with emergencies and serious disturbances of the market are extended.  I support this. 
  • Attempts at simplification are very modest in these proposals and indeed in some important respects they would add to the complexity of the CAP. There are a couple of changes to the regime for cross compliance but no real streamlining that would impact at farm level. 

BEEF SECTOR

  • Given the tight supply situation, it is not surprising that average cattle prices to date this year are up by between 15% to 18% than for the same period in 2010. All categories of livestock – from prime steers and heifers to young bulls and cows – are benefitting from the current upswing in prices.

  • Reflecting tighter cattle availability nationally, export volumes for 2011 are also expected to fall back by about 8% to 460,000 tonnes. The main destinations for Irish beef continue to be the UK, France, the Netherlands and Italy. Between them, these markets account for almost 80% of our beef export trade. But Germany, the second largest consumer market in Europe with a vibrant economy and over 82 million inhabitants, offers good  opportunities for Irish beef.
  • Facilitated by the promotional work of Bord Bia, the industry has been highly successful in expanding sales in Germany over the past 12 months. This year Irish beef exports to the German market should reach 15,000 tonnes, an increase of 56% on last year, and this could double to 30,000 tonnes by 2015. The key to realising this potential will be to differentiate Irish beef from its competitors by trading on the green and sustainable image of Irish farming. We are already seeing some encouraging results with 4 of the top 5 German retail groups, now stocking Irish beef. This provides a major platform to further develop and broaden the footprint of our beef products in the high-end retail market.
  • In my view, positive developments like this highlight the effectiveness of Bord Bia’s marketing strategy to reposition Irish beef in the high-value segment of the European marketplace. Only by embracing this market-oriented approach can we grow this vital industry as a national champion, secure greater returns for beef producers and, at the same time, export our way to economic recovery. Linking in with this policy at the practical level for farmers, in assisting them to breed a higher quality animal we are continuing in 2012 with measures such as the Suckler Cow Welfare scheme and Beef Discussion Groups.  
Suckler Cow Scheme/Beef discussion groups

  • With regard to the Suckler Cow Welfare scheme I am delighted to have secured national funding of €25 million for this important scheme for 2012. The purpose of the scheme is to improve the quality of the national herd and thereby allowing farmers to get a higher price for a better quality animal. What is clear from the experience of operating the scheme is that the practices it encourages

  • On the question of beef discussion groups here also I am delighted to have secured funding of €5 million to extend this very successful concept first introduced for dairy farmers in 2010 to livestock and suckler farmers.

SHEEP SECTOR

  • The sheep sector makes a valuable contribution to the overall agri food sector and I am pleased to see that it has experienced renewed confidence in recent times. It is no exaggeration to say that the survival of this sector is crucial for producers in both lowland and hill areas.
  • The results of the National Sheep and Goats Censuses for the years 2006 to 2010, show that there was a decline in the national sheep flock between 2006 and 2009 but that the decline appears to have bottomed out with a modest increase in 2010. This modest increase also applies to the breeding flock for 2010. This reversal of the trend in sheep numbers is both welcome and necessary in order to ensure the survival of the sheep industry and it shows that this sector has responded positively to the price improvements in the market which occurred over the past two years and to other measures which have been introduced to help the sector. I am confident that the recovery in the sector will continue, given a continuation of favourable returns from the market.
  • 2010 saw a welcome boost in lamb prices which averaged 17% ahead of the previous year. This trend is continuing in 2011, with prices for the year to date running at 9% ahead of 2010, on average. I am confident that Irish sheep farmers will respond to the improved prices on offer by taking steps to increase production and ewe numbers in the future and there is some evidence that this has already begun.
  • The Food Harvest 2020 report set a target of an increase in output value of 20% for the sheep sector by 2020. I am confident that this can be achieved given favourable market conditions and provided the recommendations set out in the Strategy are taken on board by all stakeholders.