* Mr Dallat replaced Mr Denis Haughey on the latter's appointment as a Junior Minister.
** Mr Doherty replaced Mr Mick Murphy with effect from 1 July 2002.
Mr Murphy replaced Mr Francie Molloy with effect from 4 February 2002

Witnesses:
Ms B Rodgers ) Minister of Agriculture and Rural Development
Mr M Thompson

Mr S McBurney ) Department of Agriculture
and Rural Development

1.

The Deputy Chairperson: I welcome the Minister of Agriculture and Rural Development, Ms Bríd Rodgers and Mr Michael Thompson from the Department of Agriculture and Rural Development. We shall deal with farm subsidies first and then move on to common agricultural policy (CAP) reform, beef carcasses, and the underspending of Executive funds. The Minister will then make a statement.

2.

Ms Rodgers: The Committee saw an advance draft of the code of practice last year. Its purpose is to explain to producers the steps involved in handling their subsidy claims; to highlight what they can expect from the Department and what the Department expects from them; and to set out service delivery targets. The Committee may be interested to hear that 2001 scheme payments worth £165 million have been made to farmers.

3.

As requested by the Committee, the code also contains information on the farm subsidies appeals procedure, including the timescales for departmental response at each stage of appeal. The general substance of the code has changed little since the Committee last saw the document. Any changes that have been made relate to necessary clarifications. The Committee received a list of the material changes, together with an explanation. I invite the Committee to offer final comments before I proceed with publication, which is now planned for September.

4.

The Deputy Chairperson: The Committee had a concern about the backlog of payments, but I see from your paper that those have been fairly well addressed.

5.

Ms Rodgers: The only payments outstanding are those subject to queries or cross-checking at the behest of the European Commission. There are additional cross-checks to do now that were not required before. If a claim is straightforward, it is paid on time.

6.

The Deputy Chairperson: Therefore the only claims that have not been paid are those with queries against them?

7.

Ms Rodgers: Yes. However, 90% of beef suckler payments have been made.

8.

The Deputy Chairperson: The Minister is here for an hour and a half, and we have a large agenda to work through.

9.

Ms Rodgers: You should use the time well, now that you have me on the spot.

10.

Mr Kane: I welcome the Minister and Mr Thompson. Will the Minister inform the Committee of the value of a date-based herd scheme and the animal and public health information system (APHIS) in the registration tracking of the movement of bovine animals from herd to herd? Due to the date-based herd scheme and APHIS, is it pointless for the Department of Agriculture and Rural Development to carry out further checks on animals before making final balance payments of the suckler cow premium, thereby delaying these payments until three weeks after the end of the retention period? Most farmers have waited an extra two months to receive balances of the suckler and extensification premiums. I thought that the purpose was to speed up payments.

11.

I have a couple of other points.

12.

Ms Rodgers: That was a lengthy question, and I am trying to get my head round it. Continue anyway.

13.

Mr Kane: I will wait.

14.

Ms Rodgers: To simplify it, the answer to your question is "Yes". We must delay the payments because we must make the cross-checks. We do not have an option.

15.

Mr Kane: What is the answer to the second question?

16.

Ms Rodgers: What was the second question?

17.

Mr Kane: It is sad to have to repeat questions. I am not going to repeat it. If the Minister cannot answer the first two questions -

18.

Ms Rodgers: I would appreciate it if questions were simpler and shorter, because lengthy questions are hard to follow. I am not sure that Committee members are aware of the other question.

19.

Mr Kane: It must be explained in detail for the Minister to answer the question in the first instance. That is what I have done. I have no further questions, for it is pointless.

20.

Ms Rodgers: The retention checks can be carried out only at the end of the retention period. One cannot check if the animals have been retained until the retention period is over. We do not know before that.

21.

The Deputy Chairperson: Are you happy with that, Mr Kane?

22.

Mr Kane: No, I am not.

23.

Ms Rodgers: It does not make sense to suggest that we carry out retention checks before the retention period is over.

24.

Mr Kane: The Department of Agriculture and Rural Development has positioned itself to avoid criticism by allowing the interdependence of premium payments to create delays. All balances must be paid before extensification payments can be made. Therefore the opportunity is created for deliberate delays in premium payments.

25.

Farmers should have a monthly statement of premiums received, balances due and extensification premium levels, if applicable.

26.

Ms Rodgers: Interdependence is a European Union requirement; we do not have an option. The applications for suckler cow payments close in December. If people want us to shorten the period for making applications, we can do so. However, I do not know whether the European Union will allow us to do that. It would not suit farmers if we gave them less leeway.

27.

We are trying to do several things. We have issued the protocol to help farmers and the Department. We want to make the payments as quickly as possible; we are anxious that farmers know what is expected of them and that they know what is expected of us. If we work together, we will get there. We must go by European Union regulations to avoid being penalised; we do not have flexibility.

28.

Mr Bradley: Coming from south Down, I want to thank the Minister officially for the effort she made towards securing money for the Kilkeel harbour project.

29.

To claim suckler cow subsidy, it is now necessary for herd owners to order a claim form either by telephone or in writing. Is that a European Union demand? How will producers gain from the new procedure?

30.

Mr Thompson: The Department tries to help producers by giving them lists of eligible animals; they can then identify those for which they wish to claim. Both the producer and the Department benefit from using the information in the APHIS format. When the Department does the cross-checks that it is obliged to do against the APHIS database, there are likelier to be fewer queries and, therefore, fewer penalties.

31.

At present, when one applies for the suckler cow premium, the Department takes information off the grants and subsidies database. When it runs checks against the APHIS database - one computer talking to another - there can be queries or inconsistencies. That is one of the problems that the Committee heard about earlier when we discussed cross-checks. Running the claim information against the APHIS database is a cleverer way of helping the producer to list everything eligible on his claim in order to avoid queries at the outset. The information should cross-check because it is derived from that database. It should help the Department to keep payments going and should also help the producer to avoid penalties. That is the Department's aim.

32.

Mr Bradley: Is it a European Union requirement?

33.

Mr Thompson: No.

34.

Ms Rodgers: It is an attempt by the Department to tackle the problems that occur when farmers made mistakes. Mistakes were found when the two computers cross-checked, and that delayed payments. It is an attempt to avoid that by ensuring that claims comply with APHIS from the start.

35.

Mr Thompson: It is a European Union requirement to check claims; the means, however, is not a European Union requirement.

36.

Mr Bradley: Why are application forms not posted to farmers?

37.

Ms Rodgers: They are not posted because there could be errors.

38.

Mr Thompson: The situation will change. Do you want to know whether forms will be sent out on 1 July?

39.

Mr Bradley: Yes.

40.

Mr Thompson: Some producers will not claim until December by which time the list would be long out of date. It would not be useful to them. The Department tries to make it dynamic. If a farmer were to apply for a premium by a particular date, the Department would give him a list as close to that date as possible; a list that would therefore be as accurate as possible.

41.

Ms Rodgers: The Department had many problems with cross-checks last year, and that delayed payments. The Committee asked the Department to examine that, which it did. Officials considered what could be done to avoid delays caused by cross-checking, and this is one way that the Department has tried to deal with the problem. The Department is working in your interests, Mr Bradley.

42.

Mr Armstrong: Since we are now in the computer age, can the Department, when it is sending out cheques, not include written confirmation of what is due to farmers for their animals? After all, when one deals with a company one knows when it owes one money - and vice versa.

43.

Mr Thompson: It would add considerably to processing.

44.

Mr Armstrong: I believe that information is on-screen when the cheque is written out. It need only be printed.

45.

Mr Thompson: That is not my remit. The Department is proceeding with end-of-year statements for producers that set out their payments for the whole year until that point. I believe that it has been proposed that they should be sent out in June of each year. Do you suggest a more dynamic system?

46.

Ms Rodgers: Do you suggest that every cheque should contain information on what remains to be paid?

47.

Mr Armstrong: I presume that such information is on-screen as the cheque is being written out.

48.

Ms Rodgers: Can you leave that with us? It is not Mr Thompson's immediate domain, but I shall raise it with officials to find out whether it is a possibility or whether it would be too cumbersome and likely to add to delays.

49.

Mr Armstrong: The Department already does the paperwork; therefore including such information in a cheque would lessen the amount of work that the farmer must do. In his dealings with his bank he would be able to tell it how much money the Department has paid him and how much is owed to him. It would be official.

50.

Ms Rodgers: The next time I am criticised for the Department's high administration costs, I hope that Members will keep in mind that I am asked to add to those costs every time I meet the Committee.

51.

Mr Armstrong: It would not add much to administration costs.

52.

Ms Rodgers: Everything adds a little to administration costs. Adding another chore will add to the cost - there is no way round that. It is additional work that must be done. I take your point, and I will consider it.

53.

The Deputy Chairperson: Would a one-off payment simplify matters?

54.

Ms Rodgers: We are not allowed to make one-off payments; we must make them in stages.

55.

The Deputy Chairperson: Nevertheless, would it not be simpler?

56.

Ms Rodgers: We shall have to talk to the European Commission.

57.

The Deputy Chairperson: It would reduce administration costs.

58.

Mr Armstrong: A single payment instead of two or three would reduce administration costs.

59.

Mr Ford: If European Union rules stated that farmers could be paid only at the last possible date, the Committee would probably complain to the Department.

60.

The appeals process was introduced about a year ago, and it would be interesting if we had figures for the number of appeals made and the number that was successful, but it may be unreasonable to ask that question. How and when do you propose to carry out the review of the appeals process that was promised last autumn?

61.

Ms Rodgers: Since its introduction in November 2001, 220 appeals have been received, 47 of which have yet to be determined. I think one appeal was determined yesterday, but I am not sure. Of the 173 appeals that have been determined, 35% have been successful. Fifty-four, 32%, were accepted at first stage. At the second stage, four, or 2·3%, were accepted - 10% of those that were considered. At the third stage, which is the independent panel, four were accepted, or 80% of those that were considered at third stage. Only some appeals had to go to the independent panel, but it is worth noting that it is a little early to interpret trends.

62.

Mr Ford: Were 40% of appeals successful at first stage?

63.

Ms Rodgers: Thirty-two per cent of the 173 appeals were successful at first stage.

64.

Mr Ford: Ten per cent were successful at second stage, and 80% were successful at third stage.

65.

Ms Rodgers: At first stage, 32% of the 173 appeals were successful; at second stage, 2·3% of the 173 were successful; and at third stage, 2·3% were successful.

66.

Mr Ford: Ten per cent and 80% of the appeals that were entered?

67.

Ms Rodgers: At second stage, 10% of appeals that were received were accepted. At third stage, which is the independent panel, 80% were successfully appealed.

68.

Mr Ford: And the review?

69.

Ms Rodgers: There is no information yet on the review.

70.

Mr Ford: The Committee will ask you again in the autumn.

71.

Ms Rodgers: I may be able to give you a clearer picture then.

72.

Mr Douglas: I take your point; I do not want to cause the Department to spend more money. According to press releases, 90% of producers have received their payments. I know of six suckler cow producers on one road who have not received their payments; they find it difficult to understand how 90% have received payment. Does that statement mean that that 90% of the farmers have received payment or 90% of those who are entitled?

73.

Ms Rodgers: It means that 90% of those who have applied and who are entitled to payment have received it.

74.

Mr Thompson: The same applies to suckler herds: one claim per farmer.

75.

Mr Douglas: Is it possible that quite a percentage of larger producers have not been paid because difficulties arose?

76.

Mr Thompson: It is more likely that the claims were made in December when an end rush of suckler cow applications are received; there is a six-month rentention period and we are obliged to check that that has been complied with. That brings us into May, and that is why there is back-end loading.

77.

Mr Douglas: Do the larger producers not get their forms in early enough? I know the Department is working on the matter, but some of the larger producers are concerned that they have not yet received money to which they are entitled.

78.

Ms Rodgers: If they leave their applications until the very last minute, that would cause delay.

79.

Mr Douglas: Another issue I wish to raise is the change in the name of Derry/Londonderry. I come from Londonderry and many people there are dissatisfied with the proposed change. Copies of a memo have been sent to many people in the county describing correspondence sent to the "city at the mouth of the Foyle". First, the city is not at the mouth of the Foyle; it is quite a few miles from it. The memo states that the change has been prompted by a couple of recent pieces of correspondence; if that is the case, many more people will oppose it. Keeping "County Londonderry" would make for continuity and would cause less difficulty.

80.

Ms Rodgers: As everybody knows, there is a conflict about the name of the Maiden City and the county. In order to be fair to everyone's point of view I have decided that people will receive correspondence in the manner they wish. Therefore somebody writing to me giving an address in "County Londonderry" or "Londonderry" will get a response to that address; likewise, if people write "County Derry" or "Derry" they will get a response in that form. However, for general correspondence, I am using the dual formulation Derry/Londonderry to cover the sensitivities of both sections of the community. I have the discretion to do that - it is fair and recognises both allegiances.

81.

Mr Douglas: This is ridiculous; it is County Londonderry, and nobody can pretend that it is not County Londonderry. I can understand people's point when it comes to the city - I accept that some people wish to call the city "Derry" - but the county's official name is "County Londonderry". This is unacceptable.

82.

Ms Rodgers: I take your point but obviously we are not going to agree.

83.

Mr Bradley: Perhaps we should move it to Newry and solve all the problems.

84.

The Chairperson: The name "County of Londonderry" has not changed; it is the city's name that changed.

85.

Ms Rodgers: I understand your point, Dr Paisley, but if someone in the "city of Derry" writes to me at the Department of Agriculture referring to the "city of Londonderry" I respond in accordance with his wishes, even though the official name is Derry. I do the same with the county even though the official name is Londonderry. I try to be fair to everybody.

86.

The Chairperson: I worry that people want to establish their position when it is not clarified in law. The name of the city was officially changed by patent to "Derry", and we must abide by that; that is the law. However, it does not say that the name "County Londonderry" has changed. People may apply to change it if they wished, but at the moment that has not changed. It seems irregular that a Department should write to a person and change the legal status.

87.

Ms Rodgers: I could also be accused of changing the legal status of Derry city. However, I try to be fair to everyone's sensitivities. A correspondent who gives the address "Derry" or "Londonderry", whether the city or the county, will be respected and will get a reply in the same form.

88.

Mr McHugh: I am happy with the change regarding the walled city in question. It is important that farmers in that part of the world state their address as "Derry"; otherwise their payments might end up in London. However, that is not as important as the correspondence on payments.

89.

We still have a bone of contention with unintentional errors. The Minister mentioned the expectations of the Department and the farmer, but a 35% success rate for appeals is very low. I imagine that most correspondence from farmers concerns unintentional errors. Have proposals been put to the European Commission about dealing with unintentional errors, either North or South? Have they been successsful?

90.

The rules seem to be vey rigid, with no flexibility. Every week, I hear from farmers, who I know have made only a simple error, for example recording a male animal instead of a suckler cow, yet he will be penalised. Must the rest of his payments wait until that has been resolved? After all, the Department can take the money back at any time. Will there be some flexibility?

91.

The computer self-checks have created problems for some farmers. Some problems that were resolved have returned two years later. There should be a better return than 35% from the appeals panel.

92.

Ms Rodgers: The appeals panel was set up because of dissatisfaction with departmental officials making decisions on appeals. That is a fair point, as one cannot be the jury in one's own case. There are three stages in the appeal; the first two stages go through the Department. If a farmer is not satisfied with a decision, the final stage is an independent panel. You believe that a success rate of 35% is low, but clearly not all appeals will be won. It is hard to interpret the trends at this stage, as a full year has not passed. However, the panel is independent and, so far, 80% of those who have gone that far have been accepted. Those who have not gone that far must have felt that it was not worth their while.

93.

The scope for discretion in checks is set down in the European Commission's guidance on what can be regarded as an obvious error. The use of that discretion must be reported to the Commission and, if necessary, defended before the auditors. The panel is not empowered to overturn European Union rules, which are to ensure that claims are made properly. There must be checks when making payments because, unfortunately, a minority will always try to get around them. Some European Union areas, although not I believe Northern Ireland, experienced huge problems with false payment claims. The European Commission introduced penalties and became strict in enforcing the regulations.

94.

Mr McHugh: The Department should give some leeway as it knows most of the farmers. It could identify the false claims from the genuine.

95.

Ms Rodgers: Every letter I get from an MLA about a farmer who has not got his payment states "I know this guy well; he would never break the law: he is absolutely honest." Unfortunately, that is not evidence, and that is why there is an appeals procedure so that someone else takes the decision. There could be the odd hard case, but we try to be fair and set up as independent a procedure as possible.

96.

The Chairperson: Nevertheless, if the Department makes a mistake it is not held to ransom as the farmer is.

97.

Ms Rodgers: When the Department makes a mistake, it will pay the farmer. However, we are all fallible human beings.

98.

The Chairperson: The farmer still suffers for making a legitimate mistake.

99.

Ms Rodgers: If the wrong information is intentional, the matter will go before the Director of Public Prosecutions because it is fraud. There have been a few such cases, but only a few I hasten to add.

100.

Mr Dallat: If the Department or the farmer makes a basic mistake, is there a priority telephone line so that a problem can be sorted out quickly rather than be brought to the Agriculture Committee? In my experience, mistakes have been sorted out quickly.

101.

Ms Rodgers: Yes, 32% were cleared at the first stage of appeal. Of the 173 that were made, one third were accepted and cleared at the first stage.

102.

Mr Armstrong: A number identifies every farmer on the books of the Department of Agriculture, and there is an official address for every person, which should be used. In the Department of Agriculture, I am officially addressed as "William Armstrong" even though I am commonly known as Billy. The Department should use the official address at all times.

103.

Mr Kane: It is definitely not "King Billy".

104.

Ms Rodgers: Would you be offended if I addressed you as "Liam"? I try to recognise the names and addresses that people use. If you received a cheque addressed to "Derry", would you send it back?

105.

Mr Armstrong: Yes: I live in County Tyrone.

106.

Mr Kane: Why were this year's suckler cow premium claims not sent to producers? Instead, producers received notes for guidance, an explanatory leaflet and an application to apply for a claim form. That is bureaucracy gone mad. Farmers are sick of red tape and a Department that does not care.

107.

Ms Rodgers: Mr Thompson has twice explained the reason for that and I have repeated it in response to Mr Bradley. I thought that it was accepted that it was an attempt by the Department to help farmers to avoid mistakes. There is no point in repeating that.

108.

Mr Kane: Talk about improving service.

109.

Mr Savage: Mr Thompson spoke of two computers talking to each other. If the computers notice a mistake, why must the farmer wait six months to make a query instead of being informed by the Department right away? Why can the farmer not be informed at the time instead of having to wait until he makes a query?

110.

Mr Kane: That is a valid point, Mr Savage.

111.

Ms Rodgers: The Department tries to keep the farmer informed, but there is a huge volume of work. If a great deal of work comes in at the last minute - at the end of December, for instance - a logjam is created. However, if there are problems with a farmer's claim, the Department tries to contact the farmer and make him aware of the mistake.

112.

Mr Savage: I would like that clarified because it is causing a backlog of queries. Several months ago, a rule was introduced ordering farmers to put two tags on their cattle. Over the past 10 days, I have been informed that since the introduction of that rule some cattle have been sent to the factories to be slaughtered and went through without a problem. In one case, four animals were tagged on the same day by the same producer, and some of them were slaughtered under the 24-months scheme. However, one was turned back because the factory had not been notified that the animal had been retagged. That was based on a directive from the Department and probably the European Union, I am not sure. However, the animals had to be tagged twice.

113.

The reason given to the farmer was that the cattle had to be retagged under veterinary supervision. I know that that did not happen. The farmer has now been told that he must hold the animal until it is 30 months old and then take it to be slaughtered.

114.

Ms Rodgers: If Mr Savage writes to me with the details I shall get back to him. I suspect that it has to do with traceability. The Committee will be aware that the Department had a visit from the European Union Food and Veterinary Office recently and that the European Union is extremely interested in ensuring that Northern Ireland's traceability methods are working effectively and that our checks and veterinary supervision are working properly. A demonstration that Northern Ireland does have strict supervision and traceability will be important in getting our exports reopened. I cannot deal with the specific incident, but it may be related to traceability.

115.

Mr Savage: I understand, Minister, but some farmers are caught in this situation. The animals have been tested by departmental vets.

116.

Ms Rodgers: If Mr Savage writes to me about the problem I shall have it looked at.

Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh

Ms B Rodgers ) Minister of Agriculture and Rural Development
Mr M Thompson
Mr S McBurney ) Department of Agriculture and Rural Development

117.

The Chairperson: We move on to the common agricultural policy (CAP) reform mid-term review.

118.

Ms Rodgers: In my letter of 13 June, I described in detail the issues that I discussed with my United Kingdom ministerial agricultural colleagues in the run up to the mid-term review. I outlined my position on these issues, particularly where they differed from that of the United Kingdom Government. Since then, matters have progressed as most of the Commission's ideas for inclusion in the mid-term review have become public knowledge.

119.

My officials are analysing the proposals. Some of them, such as reform of the rice regime, have little relevance to agriculture here, but many, such as the first compulsory modulation of direct payments across all member states, are directly relevant; this will start at 3% in 2004 and increase to 20% over six or seven years. Small farms in receipt of payments below approximately £3,000 a year would be exempt from modulation, which is good news for Northern Ireland. However, large farms would have their payments receipts capped at around £200,000 a year. That is irrelevant to Northern Ireland farmers - I cannot imagine any farmer here receiving £200,000 a year.

120.

Secondly, the decoupling from production of all cereals, beef and sheep direct payments from 1 January 2004. Producers would receive payments based on their historic receipts, independent of the current number of animals or area of crops, subject to new environmental cross-compliance rules.

121.

Thirdly, continuing milk quotas after 2008 without change is ruled out; instead, four alternatives are suggested. These are: to abolish the quotas from 2008; to support price cuts further in order to move towards quota abolition; to separate A and B quotas for domestic consumption and export; and to reduce quotas to bring European Union production and consumption into line. These are options, rather than proposals, and will not be progressed at the mid-term review.

122.

Fourthly, there will be some broadening of the scope of rural development measures that may be funded. This would allow increased emphasis on quality production and introduce the possibility of using additional modulated funds to reduce the rate of match-funding. Fifthly, a 5% uncompensated support price cut is proposed for cereals.

123.

Some of the proposals, such as greater flexibility in the rural development regulations are welcome, but others cause me concern. For example, modulation funds are to be redirected to rural development until 2006, but with no commitment thereafter. Modulation would therefore effectively become degressivity. Secondly, modulated funds would not stay in the member state but would be reassigned according to an objective distribution key, which may be based on agriculture's contribution to gross domestic product and employment. Although the exact meaning of this is not yet clear, it may hinder the United Kingdom's attempt to gain a greater share of Pillar II funds.

124.

The Chairperson: Your paper suggests that all three devolved Administrations have significant reservations about the proposed United Kingdom approach to CAP reform. Can you and your counterparts in Scotland and Wales hope to influence Whitehall?

125.

Ms Rodgers: We certainly hope to achieve consensus. Whitehall favours degressivity, along with Sweden and Germany; Germany has supported that to date. A change of Government may change that, but I suspect not. Our position, and that of the French, Spanish and Irish Governments is quite different. We are making a strong case to the Government that they must take account of the serious difficulties that radical changes would mean for the industry, not merely in Northern Ireland but in Wales and Scotland as well. They must also take account of the fact that our farming and rural communities simply could not adapt to such radical change. Although everybody has recognised that there will be change, it must be at a pace to which people can adapt to ensure that our industry remains viable.

126.

We shall do our best, and we also have an agreement with the Irish Government through the North/South Ministerial Council that our priorities should largely accord with theirs. The Assembly and the Government in the South support that agreement, and the United Kingdom Government must take that into account.

127.

The Chairperson: We understand that the publication of the European Commission's proposals is expected in July. Will you attend the July Agricultural Council meeting for the formal presentation of those proposals? Will you be able to make your views known at that meeting?

128.

Ms Rodgers: I will attend the council meeting, and I will make my views known there. However, the United Kingdom Minister for the Environment, Food and Rural Affairs is the main speaker because she is the member state Minister.

129.

Whenever I have been in Europe I have taken every opportunity to have discussions with the cabinets, and I will do so again. I have had a lengthy discussion with the Commissioner's cabinet at different stages to ensure that it is aware of Northern Ireland's position.

130.

The Chairperson: It could be argued that smaller farmers rely more heavily on subsidies than do larger farmers. Can we ensure that decoupling will not mean losses for them?

131.

Ms Rodgers: It is good news for us that the move to decoupling will be based on historic payments, because that will ensure that there are not winners and losers. The Committee will remember that we had great difficulty when we changed from headage to area payments. We do not know all the details, but I presume that the Commission will take any three years, for example, and consider the historic payment over that time. If that were the case, the farming community in Northern Ireland would be well protected.

132.

The £3,000 cut-off point for modulation, below which there will be no change, will be good news for Northern Ireland. My officials are analysing all the information to ascertain what it means.

133.

Mr Mc Hugh: The outcome of the CAP reform is probably one of the most important factors for farming in the North.

134.

You say that you were against degressivity, as well as aspects of the United Kingdom Government's position on abolition, particularly concerning quotas. However, most of the vision document demands that farmers drive towards world prices. If that leads to our producing without payments it may as well be called "degressivity". I foresee a time when we will not have an agriculture production industry; we will have a processing industry, because farmers can access raw produce from outside. The Administration of the United States does not support the drive towards world prices because it gives subsidies to its own farmers.

135.

We are emerging from a bad year in which we had the BSE and foot-and-mouth crises, so we cannot agree to most of what is being pushed forward. Low-cost produce is brought here from other parts of the world, seemingly because of competition and world prices. However, enlargement will have massive environmental effects in Argentina and Brazil as well as in Europe.

136.

Will farmers benefit from European Union enlargement?

137.

Ms Rodgers: I do not have an hour to deal with all the deep issues raised concerning the World Trade Organization, European Union enlargement and world markets.

138.

The vision document was absolutely essential to help us face the realities of changing world markets. That change is happening regardless of whether we like it. It would be nice if we could stay as we were, but we cannot. One lesson I have learnt from attending food fairs in mainland Europe and from my other travels is that we are now competing in a global market; if we do not compete, we shall disappear.

139.

The commodity market is no longer safe for us. What has happened to dairy farmers because of the fall in milk prices in recent years is a very good example. We are very dependent on exports, and when global markets collapse, we are badly affected. The vision document is intended to examine what we must do to meet the changing demands of consumers and markets to ensure that our producer and processing industry remains viable.

140.

I agree that there is a great deal of concern about the US Farm Bill, since it amounts to aid for farmers, whatever the Americans call it. Mind you, I understand that some Northern Ireland visitors to the US recently found that US farmers do not feel that way. They are quite unhappy at what is happening, and they do not consider themselves to be receiving aid. I know that EU Agriculture Commissioner Franz Fischler has met the US Agriculture Secretary Ann Veneman about the issue. That will all be brought into play when we come to the negotiations.

141.

Enlargement presents a problem, though I admit that my party and I are in favour. Our political view is that enlargement is good for Europe. However, it certainly brings challenges with regard to pressures on the agriculture budget. Of course, enlargement will also bring opportunities; it is not all one-way traffic. Other countries will come in - though I understand that some have a long way to go to reach even our standards. Nevertheless, enlargement also presents opportunities. You are expressing legitimate concerns, Mr McHugh; many people, particularly farmers, are voicing them. My job as Minister is to ensure that we can meet the challenge of changes that will happen regardless of our wishes in a way that protects our industry.

142.

Mr Ford: I should like to start with the Minister's letter of 13 June, which sets out a position that I have no real difficulty in accepting. However, it clearly raises issues for the UK, and what the Minister has said this morning about the Commission's position adds considerable concerns to that. However, we shall probably have to start by supporting the stance the Minister has taken so far. You referred to a modulation exemption of "under 3000" - was that pounds or euro?

143.

Ms Rodgers: I have converted all my figures to pounds sterling.

144.

Mr Ford: Thank you. One section of your letter refers to modulation. The issue that we must develop is clearly the potential for variable modulation within the UK. If modulation is to be compulsory, is there any prospect under the new regime for setting different rates of modulation in different regions?

145.

It is clear that modulation can only work in Northern Ireland if there are coherent and justifiable measures, which are also aimed specifically at farms rather than other aspects of rural development. We must have measures that can apply on farms to maintain farm incomes.

146.

You say that

"The other Devolved Administrations have similarly reserved their positions."

147.

Does that mean that they have also reserved positions or that they have similar reservations to yours?

148.

Ms Rodgers: Three per cent modulation will be compulsory for the whole of Europe. Individual countries can then decide to have more modulation. On foot of the Curry report, it is clear that the UK wants to move to 10% modulation. It cannot move to 10% modulation without the agreement of the regions. That is perhaps the good news. We would also have a serious problem in Northern Ireland if we were to move to a greater rate of modulation and the South were not. That would create an unlevel playing field and would be totally untenable. It would also distort trade, so that is an added reason for us to resist it.

149.

Modulation is a state position. Within the regions there can be flexibility as to how we use the modulation, but not whether we modulate. Anything greater than three per cent modulation cannot be imposed on the regions. The regions must agree it, and the UK cannot go for it unless the regions agree it.

150.

In relation to modulation applying to farmers, as far as I know, the Commission's intention is that modulation could be applied to broader rural development. The use of the money has yet to be decided.

151.

Mr Ford: My concern is that that will create significant difference for farms if it is not retained in farms.

152.

Ms Rodgers: I would like to see the modulated money, which is money taken off the direct subsidies, going back into the farming community.

153.

Mr Ford: My other question concerned the nature of the reservations in Scotland and Wales.

154.

Ms Rodgers: They have similar industries, and on the whole they have similar reservations. If there is modulation, they want 100% Treasury match funding. They are opposed to degressivity. Their reservations are the same as ours.

155.

Mr Savage: I want to ask about the price cuts and the quota abolition in the dairy regime. You spoke about the regions, which is important. What if Northern Ireland refuses to do away with the dairy quota? I know that the UK wants to do away with it. I am on another Committee in Brussels. The issue of quotas went to a vote one day, and it voted against abolishing the dairy quota. This year particularly has been a glaring example because people produced way over the quota, and we are now facing the consequences of reduced milk prices. If the quota is done away with, I understand that a payment for the dairy cow will take its place.

156.

Ms Rodgers: There are as yet no proposals on the milk regime. Options have simply been set out. Clearly, there will be much negotiation and differing views on those options. However, at the end of the day, the EU Commission will make the decision after going through negotiations with the different member states.

157.

As for people saying that they will refuse to accept the decision, I am afraid that the bottom line is that he who pays the piper calls the tune. If the EU Commission is making payments and it comes to a decision after a series of negotiations on how it is going to operate the scheme, it will not be possible for people to opt out of it.

158.

Mr Savage: But a payment for the dairy cow comes in if the quota is done away with?

159.

Mr McBurney: Under the current system, that is the proposal for the year 2005-06. It was part of the Agenda 2000 proposals that there will be a premium payment and a reduction in the support level for milk.

160.

Mr Savage: If the quotas are done away with?

161.

Mr McBurney: No, this is still within the current system.

162.

Ms Rodgers: That is part of the current system.

163.

Mr McBurney: It is part of the current Agenda 2000 proposals, but will not implemented until 2005-06.

164.

Ms Rodgers: The Commission is considering a further change, which will take place in 2008; otherwise, those proposals will come into operation.

165.

Mr McBurney: Yes, they might be considered beyond that.

166.

The Chairperson: We must move on.

167.

Mr Savage: It is a complicated issue.

168.

Mr Bradley: How will compensation for cereal growers operate if there is a cut in cereal support prices?

169.

Ms Rodgers: A cut in cereal prices would suit Northern Ireland, because since we are not a large cereal-growing area but are dependent on buying feedstuff, any reduction in the price of the feedstuff would help farmers here. We would be opposed to an uncompensated cut, given the difficulties that those who depend on it are having. Other than that, I cannot say. I do not know the details. All we have now is a leaked proposal - in fact, as of two or three days ago, we have the actual proposals, which my officials are looking at. Without the advice of my officials as to the implications of those proposals, I cannot answer the question, except to say that what is being proposed would be good news in the sense that the price of feedstuffs would be reduced. Nevertheless, I would like to see those cuts compensated.

170.

Mr Dallat: Are there any other issues of concern regarding CAP reform, apart from the six issues on which the discussions have concentrated?

171.

Ms Rodgers: I am not aware of any. Those are the main issues of concern. There are others relating to the rice regime that are of no interest to us; I have concentrated on the matters that have implications for Northern Ireland farming.

172.

Mr Kane: Can you explain in detail what co-operation you have sought from your counterparts in other devolved Assemblies in the UK in relation to all those issues?

173.

Ms Rodgers: I have had several meetings with the Scottish Minister, and with the Scottish and Welsh Ministers together. I correspond with them, and their correspondence to the UK Minister is copied to me as mine is to them. We are well aware of each other's positions, and we keep in regular contact. From time to time, when in London for UK Ministerial meetings, I have a separate meeting with the Welsh and the Scottish Ministers beforehand.

174.

Mr Armstrong: How advantageous have you found the Executive Office in Brussels, set up in conjunction with the Assembly, to be? How has it helped you to lobby other EU countries for the benefit of our farmers? I am thinking of milk quotas. The UK Government's ambition is to abolish them, but we know that milk quotas are good for Northern Ireland. As Mr Savage said, other countries also favour them. There must be a way to lobby the EU regime. What do you think can be done?

175.

Ms Rodgers: The Executive Office in Brussels has not been in operation for very long. We hope to have someone from the Department there in the near future. I do not know what stage we are at with that proposal. I welcome the fact that we have an office there. It will be useful in several ways. The officials there will be able to keep a watching brief on everything that is happening, and will be able to facilitate the MEPs, as well as my departmental officials. Anyone who is going to Brussels would welcome a briefing from the office on what is happening.

176.

From my short experience of Europe, I know that networking is central to the whole system. The real importance of having an office there is that our officials will be able to keep in constant touch with what is happening and officials in the cabinets. Officials will also be able to push the Northern Ireland point of view and network with officials from other countries. As a physical centre, the office will facilitate the necessary networking of our own people, be they MEPs, who are there on a regular basis, the Department or Northern Ireland groups, including unions.

177.

Mr Douglas: Currently, there are no proposals on the table as regards milk quotas. You said that the position on milk quotas is UK-wide. However, as the majority of farmers, the Ulster Farmers' Union and groups in Northern Ireland are all in favour of retaining milk quotas, will you use every opportunity to put across that that would benefit us?

178.

Ms Rodgers: I have already done that, both in private and in public, to Minister Beckett, who is aware of our position. However, it is not an immediate issue and will not come up in the mid-term review.

179.

Mr Douglas: My other point concerns the decoupling of livestock payments, which is a very serious issue for Northern Ireland. I am sure that you have discussed it with Scottish and Welsh representatives. Conacre will affect Northern Ireland farmers much more than other regions. Your paper acknowledges that there will be winners and losers. Who will be entitled to those payments? Will it be farmers who have leased land in the past, or will it be lessors?

180.

Ms Rodgers: Those are matters of detail. As you are aware, the actual proposals have only been issued in the last few days. My officials are considering them, but I am not yet aware of all the details. However, it is important that the issue of winners and losers must be addressed. Conacre is an issue that will be addressed.

181.

Mr Douglas: Minister, I hope that you will keep that issue to the fore. It is very important, more so for here than for any other region.

Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh

Ms B Rodgers ) Minister of Agriculture and Rural Development
Mr M Thompson
Mr S McBurney ) Department of Agriculture and Rural Development

182.

The Chairperson: We will consider beef carcasse-dressing specifications and the Executive underspend in unison.

183.

Mr Kane: I should have declared the issues that I have interest in at the start of the meeting. I apologise.

184.

The Chairperson: Your apology will be recorded.

185.

Ms Rodgers: I will answer questions on beef carcasse specification.

186.

Mr Savage: Why should a special case be made in Northern Ireland for exporting of beef? I have no objections to extra trimmings being taken from animals provided that farmers will get a better price for their beef, but that does not seem to be the case. Processors seem to be getting away with it and do not seem to be paying any attention to it.

187.

Ms Rodgers: The scheme is not yet in operation. The new EU requirement on dressing specification is not currently in use in Northern Ireland, other than for intervention. My officials have been talking to the Department of Environment, Food and Rural Affairs and the Commission, and it is in operation in GB, although it is unclear whether all areas of GB are operating the scheme.

188.

Some processors in the GB, although perhaps not all, have brought in the new dressing specification, saying that the market demands it. If the UK market demands it, our processors will have difficulty in marketing beef. The issue is currently with the Commission. We want a level playing field all round, preferably on the basis of what is presently being done under the EU dressing specification in Northern Ireland rather than the new dressing specification.

189.

Mr Savage: I am glad to hear you say that we are entitled to a level playing field. We do not have that at the moment.

190.

Ms Rodgers: They have not changed the dressing specification here.

191.

Mr Savage: A lot of the processors have changed it for their own advantage. Our farmers have been losing out.

192.

Ms Rodgers: My officials have spoken to the Northern Ireland Meat Exporters Association (NIMEA), DEFRA and everyone else concerned. It has not yet been brought in within Northern Ireland. It has been brought in in GB, and there is a move towards bringing it in here so that meat can be marketed if there is a demand for the new specification. It would create an uneven playing field from a marketing point of view. My officials have met with the Commission, and we hope that it will require the same specification everywhere.

193.

Mr Savage: I hope that we will have a level playing field because we do not have that at present with other aspects of the beef market. I welcome your statement.

194.

Mr Kane: Why is this a matter for persuasion for the meat plants, rather than a mandatory issue?

195.

Ms Rodgers: Why is what a matter for persuasion?

196.

Mr Kane: The processing plants are being persuaded to go down that avenue. Why can it not be made mandatory?

197.

Ms Rodgers: The processing plants are not being persuaded. The requirement for dressing specification, other than intervention, is not operative here. I do not know who is trying to persuade the meat plants: certainly, I am not trying to persuade them. The meat plants want to move in that direction to meet market demands in the UK, where processors are operating the new system. I want to persuade the Commission to try to create a level playing field for everyone.

198.

Mr Armstrong: If part of the animal is trimmed - and every animal is trimmed to the bone anyway - that will be another trimmed-off part that will be sold. It would be a different matter if the abattoirs were not selling that part of the animal. Farmers have a right to be paid by the abattoirs for any part of an animal that can be sold.

199.

Ms Rodgers: Good point.

200.

Mr Bradley: Will beef dressing reduce the amount payable to producers, or is there a hidden potential? Will the producers receive less money?

201.

Ms Rodgers: I cannot regulate the commerce between the producers and processors, or vice versa. I want to improve co-operation along the food chain so that everyone gets a fair crack at the whip. NIMEA has had discussions with the farming unions, and has undertaken to ensure that producers are not financially disadvantaged for any change to the dressing specification. I cannot comment any further, or influence it.

202.

Mr McHugh: I thought that people from outside pressed for this, because people on these islands seem to prefer a certain amount of fat on their beef. However, the UK market and the processors are pushing for it. What proof is there of demand? Are there any figures available? The Minister may not have the entire responsibility for it, but stakeholders and the food chain are involved.

203.

Ms Rodgers: That is a commercial issue, and the processors want to go down the road of the new specification. Although we have no statutory responsibility for the commercial aspect, we understand that processors have been in discussions with the unions, and that the UK supermarkets are now looking for this specification. If UK processors go along with that, it will disadvantage Northern Ireland processors. We have done what we can as regards the specification. My officials have been in discussions with DEFRA and with the Commission. The issue is with the Commission and we will await the outcome.

Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Ford
Mr Kane
Mr McHugh

Ms B Rodgers ) Minister of Agriculture and Rural Development
Mr M Thompson
Mr S McBurney ) Department of Agriculture and Rural Development

204.

Much misunderstanding has been created - some deliberately for political reasons, and some unintentionally. At a meeting with farmers in mid-Ulster a few days ago, one farmer asked if they could not have the £1 million per day that is being underpaid, as wet weather payments. That was a total misunderstanding of the position.

205.

The position is as shown in table 4 of Dr Farren's statement of 1 July on the June monitoring round. My Department is recorded as having an underspend of £11·3 million last year - 6·3% of its available resources. In part, this arises because it is essential not to overspend; if we underestimate costs and overspend, we would have to stop paying our staff. Public sector spending ceilings are absolute. We always have to err on the side of caution to ensure that we are not overspent.

206.

Monitoring rounds, carry over and end-year flexibility exist to deal with underspends. That happens in the South, the UK, and in all Governments. We have done well from monitoring rounds in the past two years. We picked up £49 million from the monitoring rounds - the underspends in Departments, which go back into the Department of Finance and Personnel and are reallocated on the basis of priority and need. That is how we got the additional money for the foot and mouth emergency.

207.

In the June 2002 monitoring round we declared no easement. We obtained £14·2 million of additional resources, which had been underspent by other Departments. The situation is that the £11·3 million underspend is for the whole year - and it has not been lost. The year ends on 31 July, so by that stage the amount may not be as high as the estimate.

208.

The Chairperson: The general public's perception is that a large amount of money has not been spent. Given the present situation, people are asking why it was not spent. You are saying that as far as agriculture is concerned, though there was an underspend, that money did not go back into the kitty; rather, you carried over that money and used it during the next spending round. Is that correct?

209.

Ms Rodgers: Some money will be carried over. For instance, capital funding, which has not been spent, will carry over. If you are halfway through a capital funding project then you cannot stop just because you have not spent all of the money.

210.

The Chairperson: What percentage is that of the total underspend?

211.

Ms Rodgers: It would be approximately £7·8 million. The farm waste management represents £2 million - that money is not lost, it will be carried over. The sum of £1·9 million for new science laboratories will be carried over.

212.

The Chairperson: How much money have you had to hand back?

213.

Ms Rodgers: We have not yet handed back any money.

214.

The Chairperson: How much money will you have to give back to the general kitty?

215.

Ms Rodgers: We expect to return a maximum of 3·6% of the resources that were allocated to the Department last year. However, that is not unusual. That we over-budgeted was a necessary precaution - had we under-budgeted, we would be in a worse position. It must be remembered that funding that the Department hands back is not lost; it goes to end-year flexibility, and the Department can bid for that money for its future priorities.

216.

The Chairperson: A proportion of the money must be returned and, therefore, will not be included in this year's spending.

217.

Ms Rodgers: That is true. There are always reasons for failure to spend money. It could be that there are delays because of EU state rules. Last year, for example, the Department could not implement the beef quality initiative because its resources were committed to the foot-and-mouth issue. There will always be programmes that, for one reason or another, cannot be implemented. That does not mean that they are lost; the Department can either re-bid for them or, if they are capital expenditure, carry them over to the next year.

218.

The Chairperson: Can the Executive guarantee that they will reallocate the funding that the Department had to return?

219.

Ms Rodgers: Nothing is certain in this life, but if funding is not reallocated to the Department, it will not be for the want of trying. Every Department has underspent, and I took grave exception to hearing a particular person say that all the moneys that were wasted by Departments should be allocated to the Department of Health, Social Services and Public Safety and the Department of Education. Those Departments have also underspent. Therefore, that person was suggesting that Departments, which are already underspent, should get more money to underspend. All Departments are underspent.

220.

The Chairperson: Neither the public nor some of the commentators have any idea of our business. I know from Westminster experience that there are always rows about underspending. However, whether we like it or not, money that was allocated to the Department of Agriculture and Rural Development had to go back to the kitty. It is to be hoped that with the Committee's influence you could say that that money was allocated to the Department; it was not the Department's fault that it did not spend it; and it really needs it.

221.

Ms Rodgers: A maximum of 3·6% will go back. However, the Department will bid for resources for the vision action plan, and it is to be hoped that it will be allocated a portion of another Department's share. The process must cut both ways.

222.

The Chairperson: I hope that your hopes are fulfilled, Minister.

223.

Mr Dallat: Just over a year ago, the Department faced a crisis when the foot-and-mouth outbreak was discovered, and it implemented emergency plans that cost millions of pounds. Have similar resources been set aside to ensure that the Department would have the necessary reserves to manage another crisis?

224.

Ms Rodgers: It is not really a question of reserves, which is why Departments have the quarterly monitoring process, through which unspent money is given back. The monitoring rounds ensured that the Department was allocated the additional millions to enable it to deal with the foot-and-mouth crisis. Therefore, there is a bright side to the monitoring process.

225.

Mr Dallat: If the Department spends its full allocation and there is an emergency, would there be no money to deal with it?

226.

Ms Rodgers: No. There are often emergencies, such as those in the health sector. The December monitoring round showed the amount of money that was underspent, and, therefore, a huge sum of money was allocated to the Department of Health, Social Services and Public Safety to deal with hospital waiting lists. Therefore, the monitoring rounds identify available funding, which is often used for unforeseen emergencies.

227.

Mr Dallat: In a nutshell, underspending can be a good thing.

228.

Ms Rodgers: It can be a good thing. It is a housekeeping exercise.

229.

Mr Savage: I am glad to hear the Minister state that there is always money around.

230.

Ms Rodgers: Do not get carried away, though. There are always lots of people looking for it, too.

231.

Mr Savage: The decisions were made a month ago, and a lot has happened since. For example, the inclement weather has left crops in a serious situation. However, it is an opportunity for the Minister to take the initiative in doing something about the bad weather. I am also glad to hear that money can be set aside for the farm waste pollution initiative.

232.

The Chairperson: Minister, will you apply to Europe for weather aid money?

233.

Ms Rodgers: I raised that at the last UK ministerial meeting, and we have another one next week. I am keeping that under consideration, as the weather is appalling and does not seem to be improving. The Irish Government have also been considering applying to Europe, though I emphasise "considering". It is reasonably early in the season, so we hope that the weather will improve. It is impossible to make a judgement until we see how it goes, but I will keep it under consideration. I have already raised the issue with the Secretary of State for the Environment, Food and Rural Affairs, Mrs Beckett, who looked at me as if I had ten heads because the sun was splitting the rocks in London on that day.

234.

The Chairperson: All of the other member states are in on those things. They are always pushing for them, even if they do not always get them. The time has come for us to push for that, irrespective of Mrs Beckett.

235.

Ms Rodgers: As Mrs Beckett is the Minister for the member state, she would have to push for it. However, if things continue as they are, we will seriously consider that, but it will not be easy.

236.

Mr McHugh: It would be wonderful if every House could save £1 million a day on housekeeping. Is it normal practice for the Department to build up a war chest of £11 million? Is that level of saving necessary? Is it the responsibility of the Executive rather than the Department, or does the Department not make bids? Why must there be a saving or war chest of 6·3%? Where does the responsibility lie?

237.

Ms Rodgers: A week ago this Committee was pushing me to bid for more funds. The more problems we have, the more money it takes to administer them. As a Department we have to take those things into consideration.

238.

The answer to the first part of Mr McHugh's question is, yes, it is normal from Departments to underspend. As I have said, the 6·5% will change by the end of July when we get the final figures. There is £3·5 million reserved to match moneys modulated from farming subsidies, and £2·6 million recorded as an underspend in running costs. However, the latter is likely to wiped out as the accounts are finalised.

239.

Some £2·7 million is recorded against the decommissioning scheme, but too few claims had been accrued to enable those funds to be utilised. However, that is not to say that they will not be accrued and the money will not be spent. The Department has a relatively small amount of underspend on resources; those are dependent on external factors, levels of demand, EU approvals, and state aid rules, so we cannot spend them until we get permission to do so.

240.

Some £1·3 million is recorded against rural development, but full utilisation of its budget is dependent on the demand. There are several areas where the money is not lost and will be used. The decommissioning scheme is a case in point. Some areas have not yet been sufficiently approved.

241.

Mr McHugh: If £3 million goes back to the Executive, my concern is that it will go towards health and education.

242.

Ms Rodgers: We will honour commitments where we have made them, and we will require the money to honour them.

243.

Mr Bradley: I thank the Minister for her explanation about the underspend. It has clarified the matter, and it has satisfied me. When you look for a slice of the collective underspend, I hope that you will revisit some of the proposals that I would like to see funded. For example, a cull scheme should operate in dairy herds that are restricted because of TB or brucellosis. Everyone in the Committee may not appreciate that, but retaining stock in closed herds is a major problem in South Down. Perhaps you could keep that in mind if you re-examine the collective fund.

244.

Ms Rodgers: I hear what you are saying. I am afraid that I have to go to another meeting now.

245.

The Chairperson: You will have to see the Minister some other time.

246.

Mr Savage: I will see you outside that door.

247.

Ms Rodgers: No you will not, because I have another meeting. [Laughter].

248.

The Chairperson: Thank you for your attendance today.

20 June 2002 / Menu / 20 September 2002