asked the Minister for Agriculture the steps he proposes to take to improve producer milk prices.

Producer milk prices are largely governed by the outcome of the annual EEC negotiations on agricultural prices. As a result of this year's price negotiations and a further Green £ adjustment this month, the support prices for milk have been increased by 7.5 per cent. The extent to which an individual milk producer benefits from increases in the support prices depends, of course, on a variety of factors, such as the efficiency of his own production and of the processing plant to which he sells, the range of products for which the milk is used and the strength of the market for those products.

(Limerick West): The Minister has indicated that one of the factors is efficiency in production. Is he aware that because of recent decisions of his Government efficiency of production is being set back?

I would not agree with that. We expect something like a 5 per cent increase in milk production this year, despite the diabolical weather during spring and early summer. That is an indication that producation methods are improving and that production is increasing.

(Limerick West): Is the Minister aware that this increased production having taken place notwithstanding the inclement weather is due to the implementing by the previous Government of the calved-heifer subsidy scheme, as a result of which there has been an increase in the number of cattle?

I do not think that one can attribute this increase to one particular scheme. A whole series of measures have been in operation over a number of years. It is more likely to have been caused by a combination of special measures rather than any one measure.

A final supplementary question from Deputy McCartin.

Is the Minister aware that the Irish milk price as a percentage of the European guide price is the lowest in all Europe and has been a source of constant discouragement and irritation to Irish dairy farmers over the years? Would the Minister please have an in-depth inquiry carried out into the reasons for this constant gap between Irish prices and all other European prices? Could he also indicate how much of the present price increase he expects the processors and retailers to pass on to farmers in this year?

That is a separate question.

The answer to the latter part of the question is up to the individual co-operative society concerned. It will vary from one to another. Regarding the earlier part of the question, it is a matter of concern which repeatedly comes up at Question Time. It can be attributed to many factors, one being that our competitors in Europe have a large liquid milk market at their disposal. In some cases, as in Britain, this accounts for 50 per cent of the total market. There is a lack of diversification here as regards utilisation of milk products. We would have better prices if we had greater diversification. We have a problem in relation to transport in that it costs us more to get our products on to the market. The butter fat content in Irish milk is lower that it is in milk produced on the Continent.

In his reply the Minister stated that milk prices had increased by 7.5 per cent. Does he accept that that is false and will he tell us what milk prices increased by? What have input costs increased by this year? Does the Minister agree that the abolition of the farm modernisation scheme has substantially increased input costs as regards milk production?

I do not think that is related to the question.

It is. We are talking about the production of milk.

Order, please.

Let him answer the question.

I was asked about milk prices and I have answered the question. The increase we got from Brussels was 2.33 per cent. As a result of the first Green £ devaluation we got an increase of 3.75 per cent. As a result of the more recent devaluation we got an increase of 1.22 per cent. Overall that is an increase of 7.5 per cent.

Is it 7.5 per cent to the farmer?

It is a general increase of 7.5 per cent.

We cannot debate at length the price of milk.

The price in Europe is high because of the high levels of VAT refunded. Would the Minister consider reducing VAT here in order to bring us into line with the Europeans? The Minister mentioned diversification but how in God's name can we diversify without a change in policy? Intervention is geared towards butter and skim. That is the major cause of the problem in the dairy industry.

A question, please, Deputy.

We are losing out on products which we should be manufacturing.

Diversification is primarily a matter for the firms involved. A number of them are involved in diversification and with great success. I wish some others would do likewise.

I should like to tell the Minister there is no way a firm can diversify——

The Deputy cannot tell the Minister anything.

The farmers will not get a return.

Of course they will.