REPORT TO THE COUNCIL on the application of Council Regulation (EEC) No 2990/82 concerning the sale of butter at reduced prices to persons receiving social assistance.

(presented by the Commission)

REPORT TO THE COUNCIL

on the application of Council Regulation (EEC) No 2990/82 concerning the sale of butter at reduced prices to persons receiving social assistance.

1. Background

The market situation for milk in general and for butter in particular has in the past required a whole range of disposal measures notably for butter in order to increase the internal and external sales and consequently diminish the purchases into public intervention storage. The scheme allowing for the sale of butter to persons receiving social assistance has been in operation since 1978 and Article 3a of Council Regulation (EEC) No 2990/82, as last amended by Regulation (EC) No 2442/96, requires that the Council, on the basis of a report from the Commission shall decide before 31 December 1998 whether the subsidised sales under the above mentioned Regulation are to be continued. Reports previously forwarded to the Council have on 5 occasions resulted in the continuation of the scheme for two consecutive years, ending 31 December 1998. Up until now the Regulation has only been applied in Ireland, and the following therefore refers to this Member State only.

2. Criteria for the determination of entitlement

Persons entitled to benefit from the scheme are those in receipt of social assistance payments as defined in Part III, Section 118 of the Social Consolidation Act 1993. This covers the following schemes operated by the Irish Department of Social Community and Family Affairs:

- Unemployment Assistance,

- Pre-retirement Allowance,

- Old-Age (non-contributory) Pension,

- Blind Pension,

- Widow's and Orphan's (non-contributory) Pension,

- Deserted Wife's Allowance,

- Prisoner's Wife Allowance,

- Lone Parent's Allowance,

- Carer's Allowance,

- Supplementary Welfare Allowance,

- Back-to-Work Allowance,

- One-Parent Family Allowance,

- Disability Allowance,

- Infectious Diseases (Maintenance) Allowance (persons eligible under the Department of Health Schemes).

The above categories retain eligibility under the Scheme while participating in the Community Employment Development Programme (CEDP).

3. Procedure for implementation and control of the scheme

A system of vouchers entitling one pound of butter per month to be purchased at the normal retail price, less the amount of the subsidy, are supplied to those persons found eligible under the criteria set out in point 2 above. Vouchers are also supplied for each qualified dependant of the social assistance recipient. In the case of long-term beneficiaries, a book of vouchers covering a twelve-month period is issued. Loose vouchers are issued for short-term beneficiaries such as recipients of unemployment assistance. Vouchers are valid for three months.

The system of control involves checks of water marked and security printed vouchers, numbers, amounts, quantities and eligibility of the numbered vouchers. These checks will, together with declarations from the retailers selling the butter and on the spot checks carried out by the competent authorities, ensure that the scheme is not abused.

4. Developments in the butter and yellowfat market in Ireland

Information concerning the developments on the butter and yellowfat market as well as market shares of butter, low-fat butter, margarine and fat mixtures received from the Irish authorities shows the following developments between 1987 and 1997:

>TABLE>

* Provisional estimates

The total yellowfat market between 1987 and 1997 shows a decline of 2 100 t or 4.3% while the blends have taken a continuing higher market share compared to that of butter. The blends generally contain butter or cream and vegetable fat and have been principally marketed on the basis of improved spreadability vis-à-vis butter. The introduction of reduced fat butters and dairy spreads has, although the quantities are decreasing, also led to a reduction of the market share of full fat butter. However, it is noted that the important yearly decline in the consumption of full fat butter experienced in the 1980's has disappeared since 1990 showing a stable market share around 25%.

5. Developments of sales, financial costs and number of beneficiaries

Ireland has operated the aid scheme as provided for in the above mentioned Regulation since 1978 and the scheme has accounted for important shares of the internal Irish butter consumption. Between 1992 and 1996, the subsidised consumption exceeded 7 000 tonnes amounting to more than 60% of the total Irish butter consumption but to less than 6% of the production. In 1997 the maximum monthly subsidised quantity per beneficiary was reduced from 1 kg to 0,5 kg and the annual uptake under the scheme was with unchanged aid level, reduced to 4 500 t corresponding to around 40% of the total consumption and to less than 3% of the production. In 1998, the subsidised sales are estimated to decline to around 3 500 t.

The total estimated cost calculated as the subsidised quantities multiplied by the aid level is estimated to ECU 6.25 million and ECU 4.9 million in 1997 and 1998 respectively.

The development in butter sales, costs and number of beneficiaries since 1987 is indicated below:

>TABLE>

* Provisional and after application of the switchover coefficient

** Calculated on the basis of vouchers issued.

It is noted that the subsidised consumption has dropped since 1995 while the unsubsidised butter consumption has increased.

6. Conclusions and recommendations

The application of Council Regulation (EC) No 2990/82 in Ireland has continued to be a successful means of maintaining sales to the social assistance categories indicated under point 2 which in the normal course of events would, for economic reasons, be at the forefront of change to cheaper substitutes. However, it is noted that the decline in the subsidised sales caused by the decrease in the maximum monthly quantity per beneficiary to 0,5 kg has not been fully reflected in the development of total butter consumption in Ireland, as the unsubsidised consumption has increased since 1995.

The purchase of butter into public intervention has been very limited in 1997 and 1998 and the scheme has, from a market point of view, become less important compared to the past. Considering that the scheme will reduce the risk for sales into public intervention and that it has been well perceived by less favoured groups of the society, i.e. unemployed, old age pensioners, etc., it is proposed that the scheme be prolonged for 12 months ending 31 December 1999 pending the outcome of the Agenda 2000 discussions for the milk sector. The proposed extension does not prejudge decisions that may be taken subsequently for the milk sector nor does it prejudge the Council's position on the Commission's programme to repeal the Regulation in the framework of the codification of Council Regulation (EEC) No 804/68. Further it is proposed to align the aid level to other internal disposal measures within the milk sector. The maximum limit for consumption of 0.5 kg per beneficiary shall be kept unchanged by the Irish authorities when implementing the scheme.

The Commission therefore proposes a continuation of the scheme for an additional 12-month period ending 31 December 1999 with a reduced aid level of ECU 100/100 kg.