Editorial: next Government must tackle economic divide

Solid economic growth, an unemployment rate of less than 5% and a projected budget surplus for the years ahead all point to a strong economic performance by the outgoing Government, led by An Taoiseach Leo Varadkar. However, as they go to the country seeking a third term, the problem facing Fine Gael is that the rising economic tide has not lifted all boats.

Large swathes of society have seen little in the way of a financial dividend from consecutive years of economic growth – either in their income or in the availability or quality of public services. Nowhere is this disconnect more pronounced than throughout rural Ireland and within agriculture.

It is a fact conceded by the Taoiseach. When announcing the dissolution of the 32nd Dáil on Tuesday, he said: “Many people don’t feel the strength of our economy in their pockets … We have a plan for fairer taxes, for future jobs and for rural Ireland to put that right.”

It’s now quite clear that there are two distinct economies in Ireland.

The first is a vibrant multinational sector, directly employing over 10% of all those at work and paying the average full-time employee €66,000 per annum. This sector grew by 13% last year.

The second is the indigenous sector, of which agriculture is the largest part. This grew much more slowly and pays its participants much less.

In a recent lecture, Ibec CEO Danny McCoy clearly spelled out what is happening. He compared the role of the multinational sector in Ireland with the role of the natural gas industry in The Netherlands after the oil price explosion in the early 1970s.

In both cases, a large, highly profitable sector is driving up costs, rents, wages and regulatory burdens while the indigenous sector, especially export-dependent farming, finds it more and more difficult to compete.

We should welcome what multinational investment has delivered but we must also recognise how it has fundamentally changed the sectoral balance of the country.

Another unknown for Fine Gael is the extent to which the performance of Minister Creed will influence voting decisions

The upcoming election provides the opportunity for political parties and various strands of society to debate and decide on policies that can at least partly restore the balance. It is a key question that should be put to those canvassing for rural votes over the coming weeks. We look forward to details of policies aimed at closing the economic divide being outlined in the manifestos of the political parties and the farm organisations.

Another unknown for Fine Gael is the extent to which the performance of Minister for Agriculture Michael Creed will influence farmers’ voting decisions. Minister Creed has had a bumpy ride in recent years made all the more difficult by the fragmentation of farmer groups. His slow response to issues – such as the need for a tillage crisis fund after a disastrous 2016 harvest, and a fodder crisis fund following exceptional weather conditions in 2018 – saw him fall foul of farmers. Both situations left him accused of being disconnected from the realities that farmers were facing on the ground.

But for many, his handling of the Beef Exceptional Aid Measure (BEAM) last year was the source of greatest frustration. The conditions attached to the scheme saw farmers access only €76m of the €100m fund. Returning €24m back to the Exchequer at a time when beef farmers were facing severe financial hardship saw any chance of the minister getting the credit for the hard work in securing initial funding evaporate.

It was a similar pattern to many of the schemes announced under Minister Creed’s tenure – often the complexity of the schemes and delays in rollout eroded any positive bounce from the increased funding provided.

Of course, the minister will argue that he delivered market access to China, developed new live export markets and oversaw the successful expansion of the national dairy herd and more besides.

It will also be highlighted that it was Fine Gael who nominated Phil Hogan for the crucial European Commission agricultural portfolio – which sees him now retain his influence in Brussels as the commissioner that can deliver a Brexit trade deal.

Ultimately, when the 33rd Dáil is formed, farmers will be looking for a government that places the same importance on agriculture as was evident during the years of the economic crisis. The new Government and indeed the newly appointed minister for agriculture will be called into immediate action to defend farm incomes as Brexit negotiations, CAP reform and new climate policies are coming down the tracks quickly.

Glanbia’s move to stay away from a levy on new milk will be a relief for those suppliers considering entering dairying in the east and northeast of the country.

It’s a credit to the structures within Glanbia that feedback from regional committees continues to inform and shape board policy around key issues.

Also positive and significant is the start of a move to distribute profits from Glanbia Ireland unconditionally to all members in a new monthly milk payment.

Trading bonuses will continue to form a significant part of the milk price returned back to farmers. It is important that Glanbia provides the necessary transparency to their suppliers to ensure that they are not paying for trading bonuses through inflated input prices. Dairy farmers must also be comfortable with the ongoing direction of travel where Glanbia will have a greater influence over the profitability of their business, controlling the price of inputs and value of output.

In other markets, the erosion of competition brings with it the risk of inflated cost structures, lack of innovation and poor customer service – all of which is carried by the consumer. An independent audit to ensure input prices charged to farmers in the Glanbia trading scheme are competitive with open market prices would give farmers a level of comfort.

As part of the European Commission’s Green Deal, a farm-to-fork strategy is being developed for the agricultural sector under the watch of health commissioner Vytenis Andriukaitis. It will be important that Ireland engages robustly with the Commissioner on comments made around the need to reduce fertiliser use.

For most of Europe, this will affect crop production more than the livestock sector, where the tendency is for animals to be either housed on intensive grain-fed diets or graze marginal land extensively. With our grass-based model, Ireland operates a very different system.

While accepting spreading chemical fertiliser on unresponsive fields is wasteful, restricting fertiliser use on a pan-European basis will only force the Irish dairy sector in the direction of a less carbon efficient, high-input system that reduces profitability and creates a greater dependency on imported grains. It is important that this is highlighted at the development stages of any new EU strategy.

The IFA AGM to appoint Tim Cullinan as president is not until 27 January, by which time we will be just days away from a general election. Given the challenges facing the sector, it is crucial that the IFA mounts a strong campaign over the next three weeks to ensure the challenges facing farmers are front and centre when a new government is formed. Cullinan is now in the strongest position to deliver this. The IFA should consider bringing its AGM forward and giving Cullinan the reins immediately.

As the scramble continues to respond to the challenges of climate change and the need to meet emissions reduction targets, there is a sense that the stability and focus of research is being affected. We must always ensure that research directs the policy agenda. In the rush to find quick-fix solutions, there is the risk that we could see policy pass out research – resulting in the research agenda focusing on validating rather than shaping policy – a scenario that would leave farm incomes exposed.