The Government was warned yesterday by the State's largest farm organisation, the Irish Farmers' Association, not to give in to demands from the unions for compensation payments because of inflation.
Mr Tom Parlon, the IFA president, outlining his organisation's pre-Budget submission at the ploughing championships in Ballacolla, Co Laois, said the goal of the 2001 Budget must be to cut back Ireland's inflation to more acceptable levels.
Low inflation, he said, was critically important for farming because farm incomes were uniquely exposed in an inflationary environment.
"The buoyancy in the public finances must be used to cut the VAT rate from 21 per cent to 17.5 per cent and also to reduce excise on fuel," he said.
Mr Parlon said these tax cuts would moderate the consumer price index by about 2 per cent. Also income tax should be further reduced, and low-income earners removed from the tax net, he added.
"The alternative prescription being proposed by some interests, whereby strong groups would be compensated directly for higher inflation, would, of course, generate further inflation," he said.
Mr Parlon said such a move would further undermine competitiveness and hit vulnerable sectors of the economy. For the farming sector where incomes were not underpinned by the PPF, it would be untenable.
The main EU supports for agriculture - CAP product price supports and direct payments - contained no indexation for inflation, and the marketplace for food, whether in the world commodity market or the retail market, would not compensate for Irish inflation.
Other key proposals contained in the submission include a call for a £150 weekly training allowance for young farmers participation in approved agricultural training courses and an increase in the maximum grant rate of 65 per cent for farmers operating in areas covered by local authority by-laws.
The submission also called for an increase in annual "wear and tear allowance" on plant and machinery from 15 to 25 per cent.
The question of rising fuel costs was highlighted by Fine Gael at the championships where Senator Tom Hayes called on the Government to immediately announce what it is going to do to combat rising fuel costs.
"The oil crisis is having a devastating effect on prices, which in turn is heaping extraordinary pressure on the agricultural sector. No one in Government seems to be taking any notice. I have spoken to a number of farmers in the last few weeks whose fuel bills have increased by up to 30 per cent," he said.
A number of agricultural contractors had gone out of business in the past few months because of the crippling cost increases in fuel coupled with a labour shortage, he noted.