Senior federal agriculture department officials say even though Ottawa plans to cap annual safety net budgets at $1.1 billion in its new long-term agriculture policy, more money would be available if needed in an extraordinary year.
And the $1.1 billion to be available under the proposed agricultural policy framework, scheduled for launch April 1, will go further than the existing $1.1 billion budgeted this year because farmers will have to spend it on income support rather than saving it for retirement, senior Agriculture Canada finance official Tom Richardson told the House of Commons agriculture committee Feb. 6.
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“We think we’re in the ball park of need,” he said.
Richardson was responding to a suggestion from Canadian Alliance MP Howard Hilstrom that a fixed, inflexible budget means APF will not have enough funding in years of exceptional need.
The exchange came during a two-hour attempt by senior bureaucrats to convince MPs that APF proposals are good for farmers, even if the farm lobby remains unconvinced.
Richardson said the new funding will be more effective, since rules of the new Net Income Stabilization Account plan will force farmers to withdraw their NISA contributions before they receive government funding. Existing rules allow farmers to leave money in NISA as a form of retirement fund, even if their income is dropping.
“We will be getting the full impact of the $1.1 billion every year,” he said. “We have not been getting the full impact in the past when money sat unused in NISA accounts.”
And in years during which there genuinely is a need for more money, Richardson said the department will have flexibility by being able to find extra funding.
Unspent money from earlier years will be rolled forward for use in future years, he said. And the department may be able to “borrow” from future years if there is a need that exceeds existing funds.
“We will have flexibility,” he said. “In extreme situations, we may be able to borrow from future years.”
During the presentation to MPs, departmental official Simon Kennedy ran through the presentation that had been made the previous week in Toronto to provincial agriculture ministers. At the end, nine provinces said they would help develop programs to launch April 1.
The gist of Kennedy’s presentation is that the new NISA with tiers of coverage available to be purchased by farmers, including 100 percent of losses from the production margin reference point, is a better deal for farmers than the current mix of programs.
Federal analysis said there would be a 28.8 percent improvement in stability for grain and oilseeds farmers, 21.9 percent for cattle and 24.5 percent for hogs.
An analysis of 20 “mid-sized” grain and oilseeds farms in Ontario with revenues of $400,000 and net farm income between $40,000 and $60,000 showed that in the deep downturn years of 1998 and 1999, the proposed APF programs would have provided $50,000 or more in additional support.
However, there was less assistance in less severe years than existing programs offer.
Kennedy said federal analysis is available to answer a key question of farm sector skeptics: is the APF better than what now exists?
“When compared to the current approach, the new systems entail significant improvements,” he said.
Hilstrom, for one, was not buying.
He said the proposed programs may be more effective in catastrophic years, but will force farmers to absorb most of the impact of regular smaller declines, which will weaken them.
In the House of Commons, he charged that the built-in ability to roll unspent money forward means the government does not expect to spend all the money on farmers, despite the proposal of $1.1 billion annually.
When agriculture minister Lyle Vanclief said his critic was wrong, Hilstrom replied: “The minister can go on, but the farmers will not be any better off, I can guarantee that.”
