I am pleased to inform the House that despite the on-going serious difficulties in the public finances, Tuesday’s expenditure announcement for my Department and yesterday’s Budget were a strong statement of this Government’s support for the agri-food sector. I see them as recognition of the contribution which the sector can make to economic recovery and future growth in the Irish economy. From the outset of the budget negotiations, my priorities have been
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.
This Budget sends out a positive message about the agri-food sector. I hope that farmers, their families and the farm organisations will see it as an indication that this Government has confidence in the ability of the sector to do much more in terms of generating growth and employment.
Taxation Measures
The taxation measures announced in Budget 2012 reflect this Government’s commitment to the agri-food industry and in particular to the expansion planned in the Food Harvest 2020 strategy. 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
The main measures in the Budget which will benefit the agri-food sector are as follows:
Incentive for Farm Partnerships
One of the most significant new measures introduced in Budget 2012 is the new stock relief incentive to encourage 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.
I am supporting farm partnerships because I believe that collaboration through partnership can improve farm structures generally, facilitating farms to operate more efficiently, increasing scale on farms, and bringing more innovative and energetic young prospective farmers into farming. More farming partnerships are required to increase productivity and meet the Food Harvest 2020 targets.
I am confident that providing an additional incentive to farm partnership formation will encourage farmers to consider more closely the benefits of farm partnerships to their farming business and in providing a better work-life balance.
Encouraging farm partnerships will also support the dairy herd expansion required over the coming years, enabling Irish farmers to avail of the opportunity presented by the abolition of EU milk quotas in March 2015.
Stamp duty reduction
I am particularly pleased that 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 should stimulate a stagnant land market – currently only 0.5% of total agricultural land is offered for sale annually – and ensure that land transfers to more active producers. 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.
I am confident that this measure will give younger, progressive, commercial farmers a greater opportunity to purchase land and thereby increase their farm size, which will make the farm more competitive.
Capital Gains Tax retirement relief
Budget 2012 has restructured the retirement relief available on Capital Gains Tax in order to incentivise the earlier transfer of farm assets to the next generation, and to encourage the sale of land by those farmers with no successors. 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.
It is important to remember that these new measures do not mean that a farmer has to cease farming altogether beyond the age of 66, but it allows them to plan for a phased gradual transfer of assets to the next generation.
We are restructuring retirement relief in order to encourage farmers around the normal retirement age, who have successors, to transfer their land and holdings to young, innovative, ambitious, prospective farmers. This restructuring will also encourage farmers with no successors to sell some of their land before normal retirement age. This measure will encourage an improvement in the age profile of farmers, and should ensure that farmland is put to more productive use.
Changes to CGT and CAT
There has been some criticism of the increase in the rates of Capital Gains Tax and Capital Acquisitions Tax 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:
The Budget includes additional supports which will benefit the food industry including 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%. This will be of significant benefit to such farms, which offer an important opportunity for farm diversification. It brings the treatment of open farms into line with the VAT rate applied to museums and other cultural attractions.
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.
Consistent with the commitment in the Programme for Government on carbon tax, 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
I am pleased to announce a range of measures which will support the Food Harvest 2020 objectives, contributing to jobs and growth in the agri-food sector.
Suckler Cow Welfare SchemeThe Suckler Cow Welfare Scheme will continue to be fully funded from national funds. In particular, despite the financial constraints faced, I will continue to provide the necessary funding to meet all payments due in 2012 at the current rates.
Beef discussion groupsI have allocated €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 roll-out of the Beef Discussion Groups will give beef farmers access to a range of additional skills to increase productivity. This programme was a key recommendation of the Beef 2020 Activation Group.
The Targeted Agricultural Modernisation Schemes
I am re-opening the Targeted Agricultural Modernisation Schemes (TAMS) which had been suspended earlier in the year because of the uncertain budgetary situation. I am providing funding in 2012 to enable all of the schemes to re-open – Poultry and Pig Welfare, Dairy Equipment, Sheep Handling and Rainwater Harvesting Schemes, as well as the Bio-energy scheme. In addition to providing an incentive for farmers to invest in their enterprises and secure their futures, these schemes will make a worthwhile contribution to job creation and to the maintenance of existing jobs in rural areas.
ForestryIn forestry, I am anxious to deliver on the Government’s commitment to afforestation and to support a sector which contributes to job creation and to the maintenance of jobs in rural areas and which has a vital climate change role. 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
The marine and fisheries sector is particularly important to coastal communities. In addition to funding for investment schemes in the processing sector, aquaculture development and fishery harbours, I am providing for 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.
HarboursThe Fishery Harbour and Coastal Infrastructure Development Capital Programme provides funding for works at the six State-owned Fishery Harbour Centres, (Howth, Dunmore East, Castletownbere, Dingle, Ros a Mhíl and Killybegs) as well as other Local Authority owned harbours and landing places around the coast.
Funding allocated under this programme will be used for the improvement of the Fishery Harbour Centres to ensure the future viability of the fishing industry, bring the Fishery Harbour Centres up to a best in class standard, reduce congestion and improve safety for all harbour users.
This programme enhances harbour infrastructure, provides much needed employment in coastal communities during the construction phase and establishes a platform to create and support sustained employment in the fishing, aquaculture and marine leisure sectors.
Milk levyI am beginning the consultation process for the introduction of a milk levy in the new year. The funding will be ring fenced for dairy products promotion through Bord Bia, including identifying new markets and opportunities to cater for the expanded output from 2015.
Animal Health Initiatives
I am pleased to announce a number of initiatives in relation to animal health including:
· 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 SchemeThere will be 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. This lower financial limit will be achieved by the introduction of targeted reform in the Disadvantaged Areas Payments, which will be achieved through reform of the stocking density, retention period and other elements of the scheme. The changes being introduced will favour active farmers and are subject to clearance by the European Commission.
REPS 4
While the agri-environment schemes make an important contribution to protection of the environment, I had no option, due to the financial pressures, but to reduce payments by 10% in future years. This change is subject to approval by the EU Commission.
AEOS
I will consider the question of the re-opening of AEOS in 2012 on a limited scale early in the New Year. The full year cost of funding a new scheme will fall to be met in 2013 and the decision to re-open for applications in 2012 will be taken in the context of the Department’s expenditure ceiling for 2013 as agreed by Government and, in particular, on how a new scheme might be funded within the reduced funding and the resulting pressures on the Vote in 2013.
Reform
I am determined to ensure that all schemes and services are delivered by the Department as efficiently and effectively as possible. The Comprehensive Expenditure Review which was completed earlier in the year was a rigorous exercise involving a thorough review and analysis of all elements of expenditure. Between the Department and State bodies there will be a saving of €18m.
Department Review of ExpenditureThe Department is engaged in a major and ongoing programme of significant re-organisation at all levels which will result in further significant reduction in the Administrative Budget in 2012. This has been facilitated by: changes in the manner in which schemes are administered by the Department; considerable reductions in disease levels resulting from more intensive and targeted controls; the advanced use of information technology; and a programme of internal reviews of business units, including a root and branch review of the local office network, which has led to improved business processes and greater operational efficiency.
This 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
To conclude I remain extremely upbeat about the prospects for the agri-food sector in 2012 and beyond. All the indications are that the sector will continue to outperform other sectors of the economy and continue on an upward trajectory, creating new jobs and building further on the outstanding export performance in 2011.
· 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.