Budget must not impact negatively on farmers

Animal feed merchants have warned that their extension of credit to farmers has reached unsustainable levels. It’s one of the many financial consequences of a year of dreadful weather and a global grain shortage.

Teagasc has estimated that farm incomes could fall back to 2010 levels, slumping 30% compared to last year.

As a result, farm families face Budget 2013 with even more trepidation that the average citizen trying to cope with increased taxes and charges and reduced services.

The Irish Farmers’ Association says the imbalance in the public finance must continue to be corrected, but expenditure and taxation decisions must support economic growth, and not damage the productive sectors.

IFA Farm Business chairman Tom Doyle warns that net Government funding for farm schemes was cut disproportionately in the last budget, and any further cuts would be discriminatory.

Everyone expects a tough budget. What is IFA’s biggest budget fear?

>>The farm schemes are vital to maintaining production. What we have emphasised in our pre-budget submission is that any further cuts would directly impact on farm income and production, undermining the ability of the sector to support jobs and growth. We held a meeting with Minister Simon Coveney last week to discuss December’s budget, and we made this point very strongly. If he needs to find savings he must look elsewhere.

You say REPS, AEOS and the Suckler Cow Welfare Scheme account for 50% of cattle and sheep farmers’ incomes on average. With the EU also talking about agriculture spending cuts, is farming very vulnerable?

>>There is no doubt that big decisions are going to be made in the coming weeks that will have an impact on farm incomes, with the low-income drystock sector particularly at risk.

For this group, any hit on the farm schemes has a direct and negative impact on their income. After a very difficult year, with bad weather and higher costs taking their toll, farm families have nothing more to give.

Apart from Budget 2013, there are fresh proposals coming from Brussels which would take €1bn out of the economy over the next seven years. The Taoiseach must focus on securing a fully-funded CAP for the Single Farm Payment and Rural Development measures, which account for a transfer of €1.6bn into the Irish economy each year. Any attempt to cut Ireland’s allocation must be resisted.

In particular, you want the Government to facilitate farm consolidation and improve land mobility. Can this, or any other budget measures useful for farmers, be done in a revenue-neutral way? 

>>Farm fragmentation presents a serious challenge for agriculture and undermines efficient farm production.

A major remaining obstacle to land mobility is the capital gains tax that applies on the disposal of farmland.

At present, a farmer who has the opportunity to dispose of a parcel of land to buy one adjacent to or closer to his farm will decide not to do so, because of the capital gains tax implications of the disposal. As a result, the Government is not bringing in any revenue, because these transactions are simply not taking place.

To increase farm efficiency, reduce costs and increase farm output we want the Government to introduce relief from capital gains tax relief on land disposals undertaken for the purpose of farm consolidation and for land that has been sold under CPO and subsequently replaced.

If the Government can put in place policies that will improve mobility and reduce the fragmentation, then they will see a return in the increased productivity and profitability at farm level.

Agriculture Minister Simon Coveney has talked about budget savings on the current side of €87m and on the capital side of €27m. Is there anywhere IFA sees scope for him to cut expenditure?

>>As a result of the closure or curtailing of farm schemes, such as REPS and the Early Retirement Scheme, there will be savings from the farm schemes arising in the agriculture budget in 2013.

In recent budgets schemes have taken a disproportionate hit compared to the Department of Agriculture’s own budget, and the overall reduction in expenditure across all of the Government Departments. The minister does not have scope to cut funding any further.

The agri-food sector grew in 2010 and 2011. Will it need everything to go right for it, including the budget and the weather, to get back on the path of expansion?

>>The growth in agriculture and the agri-food sector in 2010 and 2011 demonstrates the ability of the sector to respond positively to market signals and contribute to economic recovery through increased earnings and job creation. There remains huge potential for the sector to continue this growth, and to capture the opportunities that are presented by a growing global population and increasing demand for sustainably produced food. However, the volatility in prices, input costs and weather conditions experienced in 2012 demonstrate the importance of farm schemes and a supportive taxation system to underpin stability and growth in the sector.

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