value for money review fisheries decommissioning ......1.2 background to decommissioning schemes 1...
TRANSCRIPT
Value for Money Review
Fisheries Decommissioning
Schemes 2005-2008
Department of Agriculture, Food and the
Marine
2011
ii
Table of Contents
Page
List of Appendices V
Charts and Graphs V
Tables VI
Executive Summary VII
Chapter 1: Review Introduction
1.1 Introduction 1
1.2 Background to Decommissioning Schemes 1
1.3 Background to Expenditure Review Process 5
1.4 Steering Committee 6
1.5 Terms of Reference 6
1.6 Format of the Review 7
1.7 Introduction to Fleet Policy in Ireland 9
1.8 Rationale for Decommissioning Schemes 12
Chapter 2: Objectives, Programme Logic Model and Methodology
2.1 Introduction 15
2.2 Objectives of the Decommissioning Schemes 15
2.3 Programme Logic Model 15
2.4 Methodology 17
2.5 Data 17
iii
Chapter 3: Decommissioning Schemes 2005/06 and 2008
3.1 Introduction 19
3.2 Background to 2005/06 scheme 19
3.3 Background to 2008 scheme 20
3.4 Changes introduced to the 2008 scheme from 2005/06 scheme 20
Chapter 4: Consultation with Stakeholders
4.1 Introduction 23
4.2 Stakeholder Consultation 23
4.3 Meeting with FIF and IFO 23
4.4 Questionnaire 24
Chapter 5: Scheme Outputs and Efficiency
5.1 Introduction 28
5.2 Scheme Outputs 28
5.3 Re-Entry and Latent Capacity 29
5.4 Rates of Payment 39
5.5 Deadweight 44
5.6 Scheme Administration 47
Chapter 6: Scheme Effectiveness
6.1 Introduction 49
6.2 Quota Availability 49
6.3 Quota Uptake 52
6.4 Fleet Efficiency 56
iv
6.5 Viability of Remaining Fleet 57
6.6 Fleet Impact 60
6.7 Impacts on Compliance 61
6.8 Environmental Benefits 63
Chapter 7: Performance Indicators
7.1 What are Performance Indicators? 65
7.2 Current performance Indicators 65
7.3 Future Performance Indicators 66
Chapter 8: Lessons Learned
8.1 Summary 67
8.2 Lessons Learned 68
v
List of Appendices
Appendix Contents Page
A Programme Logic Model 71
B Review Methodology 72
C Questionnaire Results 75
D Taxation treatment of decommissioning payments 85
E Calculation of the Scheme Premium 88
F Model Parameters for Calculation of Fishing Income 91
G Fishing Income and Costs 2007-2010 92
H Volume and value of fish caught by Irish Fleet 2007-2010 93
I Economic Analysis of Viability 95
J Fuel Prices 2002-2009 98
K Fish prices 2006-2009 101
L Bibliography 102
Charts and Graphs
2.1 No. of vessels in Irish Fleet (excluding pelagic) 11
2.2 Irish Fleet measured in GTs 11
2.3 Irish Fleet measured in KW 12
4.1 Survey: Reason for not applying 25
4.2 Survey: Future Viability 25
6.1 Income from Fishing 2007-2010 58
6.2 Age of Polyvalent Fleet in 2007 60
6.3 Age of Whitefish Fleet 2003-2009 61
vi
Tables
Page
2.1 Generic Programme Logic Model 16
2.2 Programme Logic Model for Decomm. Schemes 16
2.3 Components of the methodology table 17
5.1 Summary of Output Produced 29
5.2 Policy Directives on Usage, Segmentation and Transfer 31
5.3 Scottish Authorities views on Re-Entry 32
5.4 Stakeholders view on Re-Entry 33
5.5 Replacement Rate of Vessels Decommissioned 35
5.6 Fleet Register 2004-2009 37
5.7 Maximum Rates payable under FIFG Regulation 39
5.8 Basic Rates of Payment under 2005 Scheme 40
5.9 Basic Rates of Payment under 2008 Scheme 41
5.10 Staff Costs 48
6.1 Effect of Decommissioned Vessels (in GT and KW) 50
6.2 Comparison of Landings by all >18m vessels in 2004 51
6.3 Comparison of Landings by all >18m vessels in 2007 51
6.4 Quota Uptake by Irish Whitefish Fleet 2007-2009 52
6.5 Aggregate Value of Landings for >18m whitefish fleet 53
6.6 Landings per kg per kw per day 56
7.1 Current Performance Indicators 66
7.2 Future Performance Indicators 66
vii
Executive Summary
Context of this Review:
This Value for Money review is undertaken in accordance with the Department of Finance
Value for Money and Policy Review Initiative which was introduced to secure improved
value for money from public expenditure. VFM reviews aim to analyse Government
spending in a systematic manner and provide a basis on which more informed decisions can
be made on priorities within and between programmes. This review examines the efficiency
and effectiveness of the Whitefish Decommissioning Schemes 2005-2008 and was overseen
by a Steering Group comprised of representatives of D/AFM, D/Finance, BIM, Marine
Institute and the Sea Fisheries Protection Authority.
Terms of Reference:
The agreed terms of reference were that the Review would examine the Fisheries
Decommissioning scheme to:
i. Identify the Scheme‘s objectives
ii. Examine the current validity of those objectives and their compatibility with the overall
strategy of the DAFM
iii. Define the outputs associated with the scheme‘s activity and identify the level and
trend of those outputs
iv. Examine the extent that the Decommissioning Scheme‘s objectives have been achieved,
and comment on the effectiveness with which they have been achieved
v. Identify the level and trend of costs and staffing resources associated with the
Decommissioning Schemes and thus comment on the efficiency with which it has
achieved its objectives
vi. Evaluate the degree to which the objectives warrant the allocation of public funding
on a current and ongoing basis and examine the scope for alternative policy or
organisational approaches to achieving these objectives on a more efficient and/or
effective basis (e.g. through international comparison.)
vii. Specify potential future performance indicators that might be used to better monitor
the performance of a Decommissioning Scheme
viii
Methodology
This review employed the following methodology:
Use of a Programme Logic Model
Survey of grant recipients
Survey of vessel owners still in industry
Discussion with Industry representative groups
Analysis of catch and landing data from 2005-2009
Analysis of Profitability from 2005-2009
Whitefish Decommissioning Schemes 2005/06 - 2008
Fisheries in Ireland is largely governed by the rules of the Common Fisheries policy (CFP).
The CFP originates from the 1957 Treaty of Rome, where fisheries are considered part of the
wider ‗agriculture‘ domain1. The first common measures date from 1970, when it was agreed
that, in principle, EU fishermen should have equal access to Member States‘ waters. Overall,
the Common Fisheries Policy developed in a piecemeal fashion, and indeed it was some 26
years after the Treaty of Rome when the first complete piece of legislation, laying a true
foundation for a Common Policy2, was published. This legislation had the basic purpose of
„establishing a Community system for the conservation and management of fishery
resources‟.
A second significant change occurred in 1976 when the Council adopted a resolution to the
effect that Member States would extend the limits of their fishing zones to 200 miles off the
North Sea and North Atlantic coasts. Thereafter the exploitation of fishery resources in these
zones by fishing vessels of non-member countries would be governed by agreements between
the Community and the non-member countries concerned. Therefore in a single action the
extent of Community Waters was vastly increased. More importantly the concept that EU
fishermen should, subject to the allocation of fishing opportunities to Member States based
on historic activity, have equal access to these new waters was retained and benefits thus
accrued to the Community rather than individual Member States.
1 Article 3 of the Treaty, for example, specifies that ‗The Community shall include ‗a common policy in the
sphere of agriculture and fisheries‘ 2 Council Regulation 170/83
ix
Responsibility for the management of quotas rests with the Member State. Arrangements for
management of quotas to vessel owners varies from Member State to Member State. In the
UK and the Netherlands for example, quotas are privately owned by fishermen or companies
and in effect have become a tradable commodity. In Ireland quotas are a public resource
owned by the State. This is a long-standing policy reflecting the importance of retaining the
economic benefit of fisheries in Ireland‘s coastal communities. Total Allowable Catches
(TACs) are agreed each year at the December Fisheries Council and given legal effect in the
Council Regulation on TACs and Quotas. Ireland allocates quotas to vessel owners in
accordance with established policy and in close consultation with industry representatives.
The TACs set for many of the key economic whitefish quotas has been reducing in recent
years on the basis of scientific advice. This meant that vessel owners could not depend on
increased outtake and it was essential to bring the fishing fleet into balance with available
resources. The objective is to reduce fishing levels in order to build up stocks and deliver
long-term sustainability for the sector.
In Irish fisheries, the situation that had developed meant that viability of many Irish whitefish
vessel owners was poor and consequently in some cases there was evidence of lack of
compliance with the Quota rules with the result that Ireland was threatened with sanctions by
the European Commission. Faced with these difficulties, the Minister for the Marine in 2005
commissioned a Report entitled “Decommissioning Requirements for Ireland‟s Demersal
and Shellfish Fleets”3 which concluded that:
“there is no real economic future for some of the participants in these (demersal) sectors
unless a large proportion of fishing capacity can be taken out so that those remaining can
look forward to working in an industry with good economic prospects and not dogged by one
crisis after another.”
This was recognition that the problems within the whitefish fleet were structural and viability
would not recover within the short-term unless significant action was taken. The Government
accepted this approach and made available €45m under the 2005/06 decommissioning
scheme. The use of decommissioning vessels as a policy tool was already well established
3 Hereafter called The White Report
x
within the Common Fisheries Policy (CFP) and had been given its most recent iteration in the
Reform of the CFP in 2002. Similarly, decommissioning had been used to address structural
reform in other EU Member States with significant fishing industries such as Spain, France,
the UK, Belgium and Holland.
In June 2006, a strategic review of the seafood sector was launched by the Minister for
Communications, Marine and Natural Resources. The review was undertaken within the
framework of the CFP and national fisheries law and was intended to form the basis of the
National Strategic Plan (2007 -2013) for the seafood sector in Ireland. The Report emerging
from this process was entitled Steering a New Course: Strategy for a Restructured,
Sustainable and Profitable Seafood Industry 2007-2013‖4. The 2008 Decommissioning
Scheme was established on foot of recommendations in this Report with the intention of
complementing the 2005 - 2006 decommissioning programme. It also continued delivery of
the central recommendation of the White Report, „that a national decommissioning
programme is the best way of taking out the necessary fishing capacity so that those
remaining in the sector can look forward to working in a fishing industry with good economic
prospects‟.
Scheme Outputs and costs
2005/06 Scheme
The scheme was launched in October 2005. The scheme provided up to €45 million in grant
aid to remove up to 25% (10,937GT) of the >18m whitefish fleet as well as reducing the size
of the scallop fleet5. Sixty-six applications were received seeking €30.1 million in premiums
and these were considered by a Decommissioning Approvals Board (DAB).
Output: The resultant decommissioning scheme saw the removal of twenty-seven vessels
with a combined capacity of 3,323 GT (30% of the target) from the whitefish fleet at a
cost of €11.8m
2008 Scheme
In December 2006, The Cawley Report recommended that the 2005 Decommissioning
programme be ―extended and developed to bring about a better alignment between fleet
4 Hereafter called The Cawley Report
5 The scallop fleet element of the scheme is outside the scope of this review
xi
capacity and resource availability through the permanent removal of 45% of the capacity of
the demersal fleet 18 metres in length and over, which has been partly achieved through the
2005 decommissioning scheme‖. Thus the revised target for the 2008 Decommissioning
Scheme was the removal of 11,140 Gross Tonnes in addition to the decommissioning already
complete under the 2005 scheme, with a financial ceiling of €42m applied to the second
scheme.
Output: The resultant decommissioning scheme saw the removal of forty-six vessels with a
combined capacity of 6,914 Gross Tonnes (62% of the overall target) at a cost of €36.6
million
The output and costs of the Decommissioning Schemes 2005-2008 is outlined below.
Summary of Output and Costs
Scheme Successful
Applicants
Capacity
Removed (GT)
Capacity
Target (GT)
% of decomm
target
achieved
Ca acity
Removed
( W)
Cost
2005/06 Scheme 27 3,323 10,937 30% 9,152 €11.8m
2008 Scheme 46 6,914 11,140 62% 19,363 €36.6m
Combined Total 73 10,237GT 28,515 €48.4m
xii
Efficiency:
The Efficiency of the scheme was analysed based on the following criteria:
Criteria Steering Group’s Findings
Scheme outputs Both elements of the scheme were under-subscribed, particularly
the 2005 element which met 30% of its output target. This was
improved for the 2008 element of the scheme (62% of target)
assisted by inter alia, a higher premium and the different tax
treatment of decommissioning payments for some applicants.
Rates of payment
The rates of payment for the scheme, which was a key indicator of
how efficient the schemes were, were found to be reasonable. The
rates were analysed using seven different criteria which included:
The fact that both schemes were under-subscribed
Comparison of grants paid to the value of vessels on the
market at the time
Comparison of grants paid compared to fleet value
Opinion of fishermen based on VFM questionnaire.
Comparison of grants paid to value of vessels recently
introduced
What re-entry says about price paid
Deadweight The level of deadweight i.e. how many would have exited the fleet
voluntarily, was extremely low primarily because the management
rules for the fleet mean that there is no reason for a vessel owner to
voluntarily decommission a vessel as the tonnage of a vessel
remains a tradable commodity. Analysis of the fleet from 2006-
2010 shows that no vessels left the fleet voluntarily i.e. they exited
under a decommissioning scheme or because of failure to meet
safety standards etc. In addition, an industry questionnaire
undertaken for this VFM showed that a clear majority (81%)
surveyed disagreed with the question that they: “would have
ceased fishing without the decommissioning scheme being put in
place”
Administration of the
Scheme
The scheme was efficiently run and the staff costs represent 2.04%
of grants paid under the scheme. This is proportionate for a scheme
xiii
of its size.
Re-entry
The issue of re-entry by beneficiaries of the scheme was not a
significant factor, based on an analysis of the net fleet reductions
from 2007-2009. Those that exit under a decommissioning scheme
can re-enter the fleet but can only do so if they purchase capacity
that remained in the fleet. Some beneficiaries of the 2005/06-2008
decommissioning schemes re-entered but it was concluded that
they purchased active capacity so the net real reduction in the
capacity of the fleet was not diminished due to re-entry. Reductions
in the fleet register during these years almost exactly mirror the
output produced by the 2008 decommissioning scheme. There was
negligible displacement into inshore fleet.
Effectiveness:
The Effectiveness of the scheme was analysed based on the following criteria:
Criteria Steering Group’s Findings
Quota
Availability
The contribution of decommissioned vessels in 2004 and 2007 (the years
immediately prior to their decommissioning) represented 17% and 20%
respectively of the landings in the final year in which those vessels were
active. This figure rose to 23% in 2008 which is the last full year prior to
the final element of the decommissioning scheme. This is the first step in
the expected impacts in a decommissioning scheme. Access to freed-up
quotas should improve the long-term viability of the remaining fleet.
Quota Uptake Quota uptake is the key to the effectiveness of decommissioning.
Comparisons between 2007 and 2009 show that the remaining fleet did
not use the extra quota that was made available to them in 2009 by the
decommissioning schemes. This can primarily be explained by the drop
in fish prices. Quota uptake figures for 2010 show that landings by the
remaining fleet have increased significantly showing that, when
conditions are favourable, the benefits of extra quota are realised.
Fleet Efficiency The efficiency of fishing operations has improved considerably. A
comparison between landings in 2007 and 2009 shows fishermen landed
14% more weight per kw per day in 2009. This should mean reductions
in costs such as oil as fishing vessels are fuel-intensive.
Viability While the value of landings fell by 43% between 2007 and 2009, the fall
in fishing incomes fell by 22%. Analysis for this VFM also shows that
incomes in 2010 were back at 2007 levels. This suggests that the
xiv
Decommissioning Scheme can be successful in its objective of offering
better long-term viability to the fleet by minimising the effect of external
factors on fishing incomes. As with other EU MS fishing fleets
profitability fell in 2009, the first full year post decommissioning. A
reduced price of fish was the main factor in this reduction. The
remaining fleet did not increase the tonnage landed to compensate for
the lower price. In 2009 therefore decommissioning had little positive
impact on profitability. However uptake and profitability in 2010 are
significantly improved on 2009.
Fleet Impact
The average age of the whitefish fleet has decreased as a direct result of
the scheme e.g. the average of the polyvalent fleet currently stands at
19.62 years which without fleet restructuring would be 27.44 years.
Similarly the average age of the beamtrawl fleet stands at 21.42 down
from 25.74 in 2003.
Compliance
There are many factors which affect compliance with the fisheries
Regulations and it is not possible to show a direct correlation between
decommissioning and improved compliance. However the increased
availability of quotas to those vessel owners who remained in the fleet
post Decommissioning is an incentive to improved compliance with the
regulations.
Environmental
Impacts
The decommissioning schemes are believed to have brought about
subsidiary ecosystem benefits as a result of removal of fishing capacity
and effort, particularly in the beamtrawl and otter trawl fishery which
saw the highest levels of decommissioning. Reductions in the beamtrawl
fleet in particular have been shown to have wider biological impacts for
example in the area of discards. The reductions in fishing effort as a
result of the decommissioning programmes will have resulted in
commensurate reductions in the absolute levels of discards in the areas
where both of these fleets operate.
Conclusion:
In summary, the Steering Group concluded that:
The decommissioning schemes achieved 71% of their target for capacity reduction by
removing 10,230 GT at a cost of €48.4m.
The rates of payment for the 2005/06 scheme were increased for the 2008 scheme which
resulted in a higher take-up for the 2008 element of the scheme. The rates of payment in
xv
both schemes are analysed in this Review using seven different criteria and the Steering
Group concluded that these rates were reasonable.
The level of deadweight was very low primarily because the management rules for the
fleet mean that there is no reason for a vessel owner to voluntarily decommission a vessel
as its tonnage remains a tradable commodity.
Re-entry to the fleet by beneficiaries of the scheme was not a significant factor based on
an analysis of the net fleet reductions from 2007-2009.
Quota availability to the remaining fleet was improved by the decommissioning schemes
and access to freed-up quotas should improve the long-term viability of the fleet although
this will need to be assessed over a longer period.
Quota uptake by the remaining vessels is the key to the effectiveness of
decommissioning. The extra quota available to the fleet in 2009 as a result of the
decommissioning schemes was not used although this may be explained by the impact of
external factors particularly low fish prices. Quota uptake figures for 2010 indicate that
landings by the remaining fleet have increased significantly demonstrating that when
conditions are favourable the benefits of extra quota can be realised.
The viability of the fleet is hugely influenced by external factors such as fuel prices and
fish prices. Analysis for this VFM showed that fleet profitability fell in 2009, the first full
year post-decommissioning, but has increased in 2010 as has quota uptake. This suggests
that the effectiveness of the schemes in terms of fleet viability can only be properly
assessed after a number of years post-decommissioning and the Steering Group
recommends that the effectiveness measures should be monitored on an on-going basis to
provide a long-term assessment of the scheme.
In addition to the above, the Steering Group concluded that the scheme:
xvi
o Improved the efficiency of fishing operations from 2007-2009 as fishermen
landed 27% more in landings weight per kw per day;
o Positively impacted on the fleet by reducing the average age of vessels;
o Incentivised better compliance with fishing Regulations by making available
additional quota;
o Brought about subsidiary ecosystem and biological benefits, for example
through an anticipated reduction in the area of discards.
Finally, should a fleet re-structuring initiative be considered in future, the Steering Group
believes that certain lessons have been learned from this Review which could inform
future policy in the area. In this context, the Steering Group has made a number of
observations which can be found in Chapter 8.
__________________________
1
CHAPTER 1 - INTRODUCTION
1.1 Introduction
This Chapter sets out the background to the Decommissioning Schemes with particular focus
on the state of the Irish whitefish industry in 2005 as well as the detail of the White Report
and the Cawley Report.
This Chapter also set outs the policy context at both national and EU level with particular
focus on EU fleet policy. In addition, the Chapter analyses the theory behind
decommissioning schemes as well as outlining relevant schemes in other EU Member States.
1.2 Background to the Decommissioning Schemes
In 2005 a Memorandum for Government was submitted outlining the background to the
decommissioning scheme. A large part of the whitefish and shellfish sectors had been
experiencing increasing financial and operational difficulties, mainly due to the adverse
impacts of declining fish stocks and increasing operating costs. There had been a general
decline in many fish stocks and, in the previous 15 years (1990-2005), Ireland had, like all
other European fleets that fished in the waters around Ireland, experienced a gradual
reduction in total quotas. Whitefish quotas, on which most of the fleet were dependent, had
fallen by almost 50% since 1990.
The net effect of these difficulties was that the fleets concerned were simply too large for the
resource then available. Almost all the main whitefish stocks were over fished and the
economic position of the whitefish fleet had deteriorated rapidly. There had been a growing
realisation throughout the industry and in communities all around the coast that unless a large
proportion of the excess fishing capacity was removed, the entire sector would continue to be
dogged by one crisis after another. A major, national decommissioning scheme has been
widely advanced by the fishing industry as the only way of taking out the necessary capacity
and thereby leaving those remaining in the sector with good economic prospects of making a
reasonable living out of the sector. It was estimated at that time that some 25,000 people were
2
employed directly and indirectly in the seafood sector, mostly in places with no other viable
economic possibilities.
Consultancy Study by Mr. Padraic White
The National Development Plan 2000-2006 recognised the need to undertake a measure of
decommissioning to address issues of competitiveness for Ireland's fishing fleet. A provision
of €8.8m (75% EU funded) was included under the Plan and was the basis of the
announcement in April 2005 of a limited decommissioning scheme over the period to 2008.
This announcement gave momentum to the debate within the Irish fishing industry on the
urgent necessity to undertake a decommissioning programme on a much more ambitious
scale. Against both this backdrop and also the strong opposition of scallop fishermen based at
Kilmore Quay in Co. Wexford to new stock conservation measures, the Marine Minister, Pat
the Cope Gallagher, following consultation, engaged Mr. Padraic White in June 2005 to
examine and report on the urgency, scope and cost of the decommissioning requirements for
the demersal and shellfish fleets, including the situation in the scallop fleet. The underlying
objective of this study was to urgently establish a better balance between fleet size and
available fishing entitlements.
Mr White having completed his study6 strongly recommended an urgent and comprehensive
decommissioning programme requiring funding of €45m in total. The main conclusions of
his report were as follows:
Decommission 25% of the whitefish fleet tonnage, approximately 11,000 gross tonnes
(economic analysis by DCMNR and BIM on representative vessels demonstrated that
whitefish stocks would need to be 33% higher to yield a viable return to the fleet);
Target the scheme to older and larger vessels (boats > 18 metres and older than 15
years);
Ring-fence the residual capacity into two new segments (greater than 18 metres and
less than 18 metres) and prevent transfer of capacity between the two segments to
preserve the benefits of decommissioning;
6 The White Report
3
Pay decommissioning aid at the maximum EU permitted level. The EU grant levels
reduce significantly for older and bigger boats and bring down the maximum
payment that will apply in the proposed scheme. The EU maximum levels provide a
modest compensation for the loss of the fishing licence (which is a marketable asset
with a high value) and the boat (which must be scrapped). A 21m boat of 25 years
would get a payment of €523,000 and a 26m boat of 30 years would get payment of
€529,000.
Decommissioning in other EU Member States
The problems besetting the Irish fishing industry were not unique. Other EU Member States,
notably the UK, France, Spain and Denmark (the main fishing nations in the EU and our key
competitors), have already faced equivalent imbalances between their fleets and the quotas
available to their fishermen. All those countries had responded over the past decade or more
by implementing major decommissioning programmes with public funds. The level of
decommissioning in those countries has been significant and has also been targeted at
whitefish fleets. In Scotland alone, from 2001 to 2005, £52m (€75m) of State funds had been
spent on decommissioning part of their whitefish fleet.
The Decommissioning scheme in Ireland was aimed at the removal of the older vessels (more
than 15 years) and also those most actively involved in fishing the critically important stocks
(vessels greater than 18 metres in length in the case of whitefish stocks such as hake and
monkfish and greater than 15 metres in the case of scallops). The need to adopt such a
targeted approach was emphasised by the Irish fishing industry and the need to do so was
confirmed by The White Report.
EU penalties
As identified in The White report, one of the main effects of the imbalance between the size
of the Irish fleet and the available fishing entitlements, was the underlying financial pressure
facing fishermen to exceed fishing quotas. This reality prompted the European Commission
to take an increasingly tough line with Member States for infringements of the rules of the
Common Fisheries Policy.
4
The potential liability of Member States in this regard is extremely severe. The European
Court of Justice issued a judgment in July 2005 in a case where the Commission issued
proceedings against France for failure to comply with an earlier judgment of the Court which
found that France had not carried out controls to ensure compliance with Community
measures for fisheries conservation. These penalties amounted to a fine of €20m as well as a
recurring fine of €57.8m every six months until France complied with EU policy.
The White Report had stressed that the recommended decommissioning programme could
save the Government from such potentially large penalties imposed by the European Court
and the damage to the country's reputation from such penalties. By dealing decisively with
the underlying causes of non-compliance through a programme of vessel decommissioning as
recommended, the Government would be reducing the likelihood of EU legal action against it
in future. The White Report concluded that "the cost of the decommissioning programme
should be seen against the scale of potential penalties for non-compliance by the Irish fleet in
an unreformed industry".
A decision to embark on a vessel decommissioning programme was considered by the
Minister to be one of the critical elements in demonstrating Ireland‘s commitment to tackle
the root causes of the problems motivating the Commission to take Ireland to Court.
2007 Programme for Government
The 2007 Programme for Government contained a commitment "to set out a long-term
strategy for the sustainable development of the fishing industry". By far the most important
ingredient in achieving sustainable development was the urgent necessity to establish a better
balance between the fleet size and the available fishing entitlements. The White Report
specifically addresses this issue and concluded "there are too many boats chasing too few fish
in most species. This basic imbalance is the root cause of the ills besetting the industry".
The recommended decommissioning programme was thus regarded as the single most
important step that the Government could take to deliver its commitment to achieve the
sustainable development of the Irish fishing industry to secure the fleet investments already
made and to return the fleet to a viable basis within the available quotas.
5
1.3 Background to Expenditure Review Process
The Expenditure Review process has its origins in the Strategic Management
Initiative and, in particular, the 1996 document on Delivering Better Government7.
Its principal objective is to ensure that analysis is carried out in a systematic manner
of the effects of Exchequer spending and to provide a basis on which more informed
decisions can be made on priorities within and between current and future expenditure
programmes. The parameters and target areas included in the second phase of the
Expenditure Review process were decided by Government decision in April 2002.
The Department of Agriculture, Fisheries and Food, had committed to undertaking a
review in the Fisheries area during the 2006-2008 round but this had not proven
possible at the time. The original topic in the Fisheries area has been changed for the
2009-2011 round to the decommissioning schemes for the following reasons:
They are single schemes with clearly defined and measurable aims and impacts with a
sufficiently large amount of funding involved to justify a detailed VFM.
There has been little or no analysis of the impacts of decommissioning schemes to
date. The industry representatives at a national level are calling for a new scheme and
the Minister has called on the European Commission to provide additional
Community funding for decommissioning.
The Commission has also made the over-capacity of the EU fishing fleet and its
proposed reduction a central plank of the CFP Reform process currently underway so
the issue is likely to remain ―live‖.
A thorough VFM at this stage will help to inform future policy decisions in this area.
The other fisheries schemes are too diverse and would be difficult to analyse in a
single VFM report.
7 Delivering Better Government – A Programme of Change for the Irish Civil Service, Stationery Office, Dublin,
1996.
6
1.4 Formation of Steering Committee
A Steering Committee to oversee the preparation of this Expenditure Review was
established and had its first meeting in December 2009. In all, eleven meetings of the
Steering Committee were held. The members of the Steering Committee were:
Chairman: Jim Beecher
Josephine Kelly, Seafood Policy Division, DAFM
Jill Dunlea, Seafood Policy Division, DAFM (to Sept 2010)
Gordon Conroy, Economics and Planning Division, DAFM
Colm Hayes, Economics and Planning Division, DAFM
Michael Keatinge, BIM
Padraig Gordon, BIM
Dr. Norman Graham, Marine Institute
Conor O‘Shea, Seafisheries Protection Authority
Grainne McGuckin, Dept of Finance
Nelius Lynch, Central Evaluation Unit, D/Finance,
1.5 Adoption of Terms of Reference
The Steering Committee agreed draft terms of reference for its work at its first meeting (see
1.5.1 below). The Committee did not see any reason to deviate from the ―generic‖
terms of reference in the Department of Finance‘s Value for Money and Policy
Review Initiative Guidance Manual in March 2007. These terms of reference were
approved by the Secretary-General of the Department of Agriculture, Fisheries and
Food on 11 January 2010 and received the required approval of the Department of
Finance on 20 January 2010. Accordingly, the agreed terms of reference were:
1.5.1 The agreed terms of reference were that the Review would examine the Fisheries
Decommissioning scheme to:-
i. Identify the Scheme‘s objectives.
7
ii. Examine the current validity of those objectives and their compatibility with the overall
strategy of DAFF.
iii. Define the outputs associated with the scheme‘s activity and identify the level and
trend of those outputs.
iv. Examine the extent that the Decommissioning Scheme‘s objectives have been achieved,
and comment on the effectiveness with which they have been achieved.
v. Identify the level and trend of costs and staffing resources associated with the
Decommissioning Schemes and thus comment on the efficiency with which it has
achieved its objectives.
vi. Evaluate the degree to which the objectives warrant the allocation of public funding
on a current and ongoing basis and examine the scope for alternative policy or
organisational approaches to achieving these objectives on a more efficient and/or
effective basis (e.g. through international comparison.).
vii. Specify potential future performance indicators that might be used to better monitor
the performance of a Decommissioning Scheme.
1.6 Format of Review
In view of the complexity of the Review and the need to separate clearly the descriptive and
historical content of the Review (i.e. Chapters 1-4) from the principal evaluative chapters
(Chapters 5-6), it was found necessary to deal with the subject-matter set out in the terms of
reference in a different format than that which might be suggested by a straight chronological
analysis of the topics concerned. In the adoption of the format of this Review the Steering
Committee agreed to follow as closely as possible the Terms of Reference:
Chapter 2: Objectives, Programme Logic Model and Methodology
This Chapter sets outs i) objectives of the schemes ii) the Programme Logic Model and iii)
the methodology used in the completion of this Review.
8
Chapter 3: Decommissioning Schemes
This Chapter looks at the background to the decommissioning schemes from 2005-2008 and
provides a brief overview of the scheme‘s outputs.
Chapter 4: Consultation with stakeholders
The stakeholder consultation undertaken as part of the VFM is presented here including the
Steering Committee meeting with the industry representative organisations. There is also
discussion of the VFM surveys which were undertaken of both the scheme beneficiaries and
current fishing industry members.
Chapter 5: Scheme Output and Efficiency
This chapter looks at the outputs of the schemes with particular emphasis on the physical and
financial outcomes as well as the impacts on quota availability. It also examines the level of
premium paid for the scheme. This is an issue identified by the Steering Group as central to
the efficiency of the scheme. This chapter also examines the extent to which companies and
individual vessel owners who availed of the scheme have re-entered the Irish fleet with other
vessels. The policy, financial and legal issues surrounding such re-entry are examined here
using comparisons with other EU MS who have had similar schemes, particularly Scotland.
The administrative operation of the Scheme and the issue of deadweight associated with the
scheme are also examined.
Chapter 6: Scheme Effectiveness
This chapter looks at the outputs of the schemes with particular emphasis on the profitability
of the remaining fleet after the implementation of the decommissioning schemes. This is an
issue identified by the Steering Group as central to the effectiveness of the scheme.
Effectiveness will also be measured through the schemes‘ impacts in areas such as
compliance and human resources.
Chapter 7: Performance Indicators
This Chapter outlines performance indicators which should be borne in mind for the full
assessment necessary to analyse the success of the decommissioning scheme.
9
Chapter 8: Conclusions and Lessons Learned
This Chapter contains a summary of the main findings of the Steering Group. In addition, a
detailed list is included of the key lessons learned in this review which could inform future
schemes.
1.7 Fleet Policy in Ireland
Ireland‘s fisheries policy and fishing fleet like that of other EU Member States is governed by
the rules of the Common Fisheries Policy. The main management measures in relation to the
fleet are the fleet reference levels and the entry/exit regime for vessels.
Under the 'entry/exit scheme', capacity, as measured in GT and kw power, is not allowed to
rise above the level at which it was at on 1 January 2003. This ensures that the capacity of
national fleets can never be any greater than it was on that date. Under the CFP, any new
capacity entering a Member State‘s fleet must be matched by the withdrawal of capacity of at
least the same amount – the idea being that any reductions in the fleet are definitive. Another
concept used in fleet management under the CFP is that of reference levels. These are
calculated on the basis of the global final objectives of the Fourth Multi-annual Guidance
Programme (MAGP IV) as established by Article 12 of Council Regulation (EC) No
2371/2002. The total capacity of the fleet expressed in terms of either tonnage or power may
not exceed these reference levels.
The Community Fishing Fleet Register, is a database where all the fishing vessels flying the
flag of a Member State have to be registered in accordance with Community legislation.
Member States are obliged to transmit electronically on a quarterly basis all the relevant
information on the characteristics of their commercial fishing vessels together with
information on entries to, and exits from the fleet.
Every year, the Commission produces a report analysing the progress made by the Member
States in ‗achieving a sustainable balance between fishing capacity and fishing opportunities‘.
In its recent reports, the Commission has concluded that EU fishing capacity overall is
declining with on average, an annual reduction of 2-3% over the last 15 years.
10
The implementing rules on the Community Fleet Policy8, as defined in Council Regulation
2371/2002, specifies the Reference Level for each Member State's fishing fleet. The
Reference Levels for the Irish fishing fleet at 1 January 2003 as set out in EU Commission
Regulation 1438/2003 are 88,700 GT and 244,834 kW (see Charts 2.2 and 2.3 below). This
Fleet Ceiling is calculated by adding any increases in tonnage granted under the "safety
tonnage" provisions and subtracting any exits from the fleet financed by public aid, i.e.
through the Decommissioning Schemes, from the Reference Levels. Under EU rules an
increase in the capacity of a sea-fishing boat may be allowed where the capacity increase
results exclusively from safety and other specified improvements and does not increase the
fishing effort of the vessel concerned. Such an increase in tonnage is known as "safety
tonnage".
Each Member State is obliged to send the European Commission an electronic "snapshot" of
its fishing fleet, containing the data specified in Commission Regulation 26/2004 for each
vessel in its database, on a quarterly basis.
8 EU Commission Regulation 1438/2003 of 12 August 2003
11
Overview of Irish Fishing Fleet
0
500
1,000
1,500
2,000
2,500
2005 2006 2007 2008 2009
Year
Fig 2.1 Number of vessels in Irish Fleet
0
20000
40000
60000
80000
100000
2003 2004 2005 2006 2007 2008 2009
Gro
ss T
on
nag
e
Year
Fig 2.2 Irish Fleet measured in GTs
GT ref. level GTs
12
050,000
100,000150,000200,000250,000300,000
2003 2004 2005 2006 2007 2008 2009Fle
et m
eas
ure
d in
KW
Year
Fig 2.3 Irish Fleet measured in kW
KW ref. Level KW
In summary, the total number of Irish vessels in the whitefish/polyvalent fleet has risen from
1,427 to 2,016 between 2005 and 2009. However at the same time, there has been a
significant decline in actual fleet size in terms of GT and KW. The impact of the
decommissioning schemes on this reduction is analysed in greater detail in Chapter 5.
The increase in the number of vessels from 2006 is mainly due to the Special Scheme
for the Licensing of Traditional Pot Fishing Boats, launched in 2003 and which closed
on 11th
August 2006. This Scheme (and its predecessor, the ―3000 ton‖ scheme which
closed in March 2006) was designed to regularise the licensing and registration of
small inshore boats. The licensing and registration of vessels approved under the
Scheme was completed in 2007 and in all approximately 490 vessels came onto the
Register.
1.8 Rationale for Decommissioning Schemes as a policy instrument
A decommissioning scheme can be defined as “reducing fishing capacity, through removing
vessels and licences and relieving pressures on resource stocks, allow vessel profits and
resource rents to rebound, fish stocks to recover and income and wealth distribution to
change through redistribution of access and compensation and transfer payments. The
13
objectives of most buyback programmes often include a mixture of all three goals” (Holland
et al. 1999)
Buyback of fishing vessels or licences are one of the key management tools used to address
overcapacity, overexploitation of fish stocks and distributional issues that arise in fishing.
The definitive work on fisheries buybacks is considered to be Curtis and Squires Fisheries
Buybacks (2004) and they identified eight principal reasons, which are not mutually
exclusive, for a decommissioning scheme:
1. Directly increasing economic efficiency/profitability: this is aimed at enhancing the
profitability of the remaining fleet. This is primarily through providing a greater share
of the available quota for the remaining vessels (excluding external factors which
might influence this such as lower quotas). Other private gains may include an
increased value in the vessel of gross tonnage of a vessel if the owner decided to sell
and gains to crew members from a share of the decommissioning allocation.
2. Modernising fleets and adjusting their structure: The goal of some buyback
schemes include modernisation of vessels and adjusting fleet structure in order to
improve competitiveness, on-board storage of vessels or safety equipment. The EU
Multi-Annual Guidance programmes (MAGP) are an example of this type of scheme.
This was not the aim of the schemes under review here.
3. Facilitating the transition from fisheries with over exploited stocks and over
capacity to private or common rights-based conservation and management: Not
applicable in the case of these schemes.
4. Providing alternatives when individual transferable quotas or common use or
property rights with effective management are infeasible: Not applicable in the
case of these schemes
5. Providing crisis or disaster relief: Not applicable in the case of these schemes.
6. Addressing compensation or distributional issues: Not applicable in the case of
these schemes
14
7. Conserving common resources or fish stocks underlying a fishery: All of the EU
MAGPs include rebuilding over-exploited stocks as one of the intentions of the
programmes as did Ireland‘s scallop decommissioning schemes which was run in
tandem with the 2005/06 whitefish decommissioning scheme. However whitefish
stocks have been under increasing pressure in the last ten years to the point where
“the reality facing the whitefish sector today is that one can have no expectation of
increased catches in the short term...and the focus for vessels in the demersal sector
can no longer be on increased production”9
8. Conserving biodiversity and ecological public goods: Decommissioning schemes,
in addition to improving the economic viability of the remaining fleet, may also have
direct or indirect benefits for the wider marine environment and benthic habitats.
_________________________
9 BIM: 2006 Decommissioning Scheme brochure
15
Chapter 2: Objectives, Programme Logic Model and Methodology
2.1 Introduction
This Chapter sets out the objectives of the Decommissioning Schemes, the logic behind the
schemes and the methodology used to assess if the schemes are efficient and effective.
2.2 Objectives of the Decommissioning Schemes
The previous Chapter has set out the background to the schemes and the conclusions and
recommendations of both the White and Cawley Reports. These reports put forward
decommissioning of up to 45% of fleet capacity as the best response to the challenges faced
by the sector.
While Decommissioning is expected to have a positive effect on compliance with quota
limits and therefore with the management of fish stocks its main objective is to bring about a
structural change in the fishing industry leading to improved long-term economic viability of
the fleet. Many of the factors that influence economic viability of the fleet, particularly fish
price and oil price cannot be predicted or controlled. Movements in these price levels can
dictate whether the industry is viable or not and decisions are constantly made in reaction to
these movements. Decommissioning by permanently removing capacity would be expected
to lead to a situation where fishermen remaining would have opportunities to individually
land larger quantities of fish than before which should improve the long term economic
viability of the fishing fleet.
2.3 Programme Logic Model
The Programme Logic Model maps out the structure and logical linkages of a programme. It
provides a systematic and visual way to present and share understanding of the cause-effect
relationships between inputs, activities, outputs and outcomes (results and impacts) each of
which are arranged to achieve specific strategic objectives.
16
Table 2.1: The Generic Programme Logic Model
Components of
the Programme
Logic Model
Definition
Objectives What was the overall objective of the scheme
Input What goes into a programme – physical and financial resources
Activity Actions that transform inputs into outputs
Output What are produced by a programme
Result Effects of the outputs on targeted beneficiaries in the short or medium
term
Impact Wider effects of the programme from a sectoral/national perspective
in medium/long term
Table 2.2: The Programme Logic Model for the Decommissioning Schemes
Objectives To bring about a structural change in the fishing industry that will
provide for the long-term economic viability of fishermen that remain in
the fleet.
Inputs Exchequer funding/support
Co-funding under the FIFG and the EFF
DAFM, BIM and SFPA staff resources
Activity Designing Schemes
Consultation with Sector
Securing EU State Aid clearance
Processing applications
Verifying Eligibility
Making Payments
Output Fishing Capacity decommissioned
Result Remaining fishermen availing of increased opportunities brought about
by decommissioning.
Impact Improvement in the long term economic viability of the remaining fleet.
17
2.4 Methodology
The methodology to address the evaluation questions in the Terms of Reference was agreed
by the Steering Group at an early stage of the process and was based around the Programme
Logic Model. A methodology table clarifying the main issues to be addressed, the data
required and the sources of this data was agreed (copy attached at Appendix B). The table
below outlines a sample question:
Table 2.3: Components of the Methodology Table
Question Sample
Issue Did the scheme deliver on improved viability
for the remaining fleet
How to measure it Has the % reduction in fleet size resulted in
the same % rise in fishing effort of the
remaining fleet.
External factors State of the stock, effort limitations, oil price,
fish price
Data required Catch data and effort for decommissioned
vessels
Source of data Marine Institute and BIM
2.5 Data
This review made use of the following primary and secondary data in order to address the
questions raised in the Terms of Reference:
2.5.1 Existing Literature
Existing literature and other material, particularly the two reports which brought about the
schemes were examined. These two Reports were:
18
o Decommissioning Requirements for Ireland‟s Demersal and Shellfish fleets: a
report to Marine Minister Pat the Cope Gallagher T.D. (referred to as “the
White Report”)
o Report of the Seafood Industry Strategy review Group (2006) Strategy for a
Restructured, Sustainable and Profitable Irish Seafood Industry (referred to
hereafter as “the Cawley Report”)
2.5.2 Stakeholders’ views
Two questionnaires (Appendix C) were sent to the major stakeholders involved in the
scheme. The questionnaire was directed at both members of the fishing industry who availed
of the scheme and those who were eligible but who chose not to apply. The results of the
questionnaires are used primarily in the analysis in Chapters 6 and 7. The questionnaires
focussed on:
o Motivation for applying for the scheme
o The administration and design of the scheme e.g. eligibility criteria etc.
o Use of the decommissioning grant by recipients
o Impacts of the scheme
2.5.3 Data used in the analysis of Efficiency
o Data on take-up of the Decommissioning Schemes, tonnage removed, level of grants
paid
o Data on re-entry to industry
o Data on Fleet Capacity reduction since 2005
o Data on Administration Costs
2.5.4 Data used in the analysis of Effectiveness
o Data on landings by species, pre and post the second decommissioning scheme. This
included a breakdown of what was landed by the decommissioned boats prior to their
decommissioning
o Survey Data on Income and Expenditure
_____________________
19
Chapter 3: Decommissioning Schemes 2005/06 and 2008
3.1 Introduction
This Chapter outlines the background to both elements of the scheme in 2005/06 and 2008
and builds on Chapter 1 outlining the context to the introduction to the schemes in 2005. The
Chapter outlines the relevance of the White Report and the Cawley Report in framing the
design of the schemes and lists the main changes to the 2008 element of the scheme from the
earlier version in 2005/06.
3.2 Background to 2005/06 Decommissioning Scheme
In June 2005, Padraic White was requested by Marine Minister, Pat the Cope Gallagher T.D.,
to conduct a review with the following objective:
“to examine and report on the urgency, scope and cost of the decommissioning requirements
for the demersal and shellfish fleets and the problems of eligibility in order to urgently
establish a better balance between fleet size and fishing entitlements”.
The Report was published in July 2005 with the central recommendation being that the
Government should implement a decommissioning scheme to remove 25% (10,937 GT) of
the whitefish fleet10. The economic analysis carried out for this review demonstrated that
whitefish stocks would have to be some 30% greater to yield a viable and attractive return for
the boats now in the demersal sector and “accordingly decommissioning on the scale
recommended is needed to provide a secure economic return for the boats remaining”.
The Report recommended that the capacity would be withdrawn from that element of the
fleet which is over 18 metres in length and 15 years of age.
The overall cost to the State in the Report was estimated at €45m with €8.8m of this to come
from the existing NDP allocation for decommissioning plus an additional exchequer
contribution of €36m.
10
The Report also made recommendations on the scallop fleet which the Steering Group considered to be
outside the scope of this Review.
20
3.3 Background to 2008 Decommissioning Scheme
In December 2006, The Cawley Report was published with a number of key
recommendations in relation to decommissioning. These included extending and developing
the existing decommissioning programme in order to lead to permanent reduction of 45% of
the whitefish fleet. This Report estimated that this target includes the 10% taken out to date
as a result of the 2005/06 scheme. The Report recommended that this be achieved by:
- An incentive premium for a defined time period
- A selective reduction in the qualifying age of vessels
- Setting aside a proportion of the overall fund for restructuring to support crew
members impacted by the decommissioning programme.
3.4 Changes introduced to the 2008 Scheme from the 2005/06 Scheme:
The Cawley Report also made an important recommendation on the treatment of
decommissioning monies for taxation purposes which, according to the industry feedback
received for this VFM, contributed to the higher take up of this extended scheme, namely;
3.4.1 Taxation:
Some adjustments were made to the taxation treatment of decommissioning monies in the
2008 Finance Act to encourage the up-take of the 2008 Decommissioning Scheme. The three
main adjustments related to the following:
1. Retirement Relief
2. Capital Allowances
3. Costs/Receipts associated with the Permanent Disposal or Scrapping of Vessels
Retirement Relief
Section 598 Taxes Consolidation Act (TCA Act) 1997 provides for retirement relief on the
disposal of ―qualifying assets‖ by an individual who is aged 55 years or over. ―Qualifying
assets‖ include assets used for the purposes of an individual trade which, apart from tangible
movable property, he/she has owned and used for that purpose throughout the 10 year period
ending with their disposal.
21
The changes to 2008 Finance Act reduced the age limit to from 55 years to 45 years and the
periods of ownership and use requirements from 10 years to 6 years for payments received
under the Scheme.
Capital Allowances
Because the vessel ceases to belong to the person remaining on in the fishing trade a
balancing event occurs in accordance with section 288 TCA, 1997. The amount to be taken
into account for the purposes of calculating any balancing allowance or charge is the part of
the decommissioning payment attributable to the vessel plus any payment received on the
disposal or scrapping of the vessel. The part of the payment attributable to tonnage is not to
be taken into account.
The changes to 2008 Finance Act provided that where a balancing charge arising as a result
of payments received under the Scheme it may be spread over 5 years, commencing in the
year in which the payment is paid.
Costs/Receipts associated with the Permanent Disposal or Scrapping of Vessels
These costs are not strictly deductible under section 552 TCA 1997.
The changes to 2008 Finance Act took into account that, as it is a requirement of the Scheme
that decommissioned vessels are permanently disposed of or scrapped, costs incurred for that
purpose may be deducted from the part of the decommissioning payment attributable to the
vessel when computing the gain or loss on the vessel. Likewise any amount received by the
owner on disposal or scrapping should be added to the part of the payment attributable to the
vessel.
Conclusion on taxation:
It is difficult for this Review to calculate the costs to the State which resulted from the
changes to the taxation legislation, as the circumstances for each and every application under
the 2008 scheme may differ depending on the circumstances of each individual. The changes
to the retirement age threshold, did not affect registered companies, and only affected vessel
owners aged between 45 years old and 55 years of age and even then the retirement relief can
only be claimed once by an individual in their lifetime. The changes to the capital allowances
would only have affected those with unused capital allowances remaining (and given the
22
average age of the vessels this may not have been significant) and would only have related to
those who chose to remain in the industry.
3.4.2 Vessel Qualifying age:
In addition to the above changes, the Cawley Report also recommended that the scheme‘s
existing entry age of 15 years be maintained but that the age of entry to the scheme be
reduced to 10 years where the vessels could demonstrate a significant track record of catching
and landing key whitefish stocks.
___________________________
23
Chapter 4: Consultation with Stakeholders
4.1 Introduction
This Chapter outlines the outcome of the detailed stakeholder consultation in which the
Steering Group engaged. This was primarily based around questionnaires sent to individual
fishermen (both those who participated in the scheme and those who were eligible but chose
not to participate) as well as bilateral meetings with the industry representative organisations.
The outcome of these questionnaires is also used where relevant elsewhere in the Review e.g.
section 5.3 on Re-entry and 5.5 on deadweight.
4.2 Stakeholder Consultation
The Steering Group engaged in detailed consultations with stakeholders over the course of its
work with a two-fold approach:
1. Met with the representative bodies, the Federation of Irish Fishermen (FIF) and the
Irish Fishermen‘s Organisation (IFO) at the Group‘s meeting on 10 June 2010;
2. Two questionnaires were sent to individual fishermen, both those who had availed of
the scheme: and to those who would have been eligible for the scheme but who did
not apply. Both of these questionnaires along with the results can be found at
Appendix C.
4.3 Meeting with FIF and the IFO
The IFO and the FIF were invited to the June meeting of the Steering Group to discuss with
their views on the two decommissioning schemes and specifically whether the schemes
represented value for money in their opinion and had been effective in providing a better
balance between the fleet and the available resources. The main issues which the Group
wished to explore with the industry included:
1. Why was there a need for this scheme and was this the only approach possible?
2. In relation to the scheme itself – was it fair and reasonable, particularly in terms of
eligibility criteria and the level of payments.
3. How was the scheme delivered?
4. What impact did it have on:
a. Re-entry to the fleet
24
b. Additional opportunities for remaining fleet.
c. Displacement of fishing effort
d. Impact on local communities.
The main views of the industry associations could be summarised as:
General comments:
Industry views on decommissioning schemes have become more positive over time.
There was clear need at the time to remove some effort from the whitefish fleet which
was operating uneconomically
Overall the schemes worked well and they compared very favourably with similar
schemes in other EU MS because they were better targeted (at specific fleet segments). It
achieved value for money. The scheme was necessary as “public money should
compensate for public policy failings”.
Decommissioning cannot be examined in isolation – external factors such as fuel and
market prices influence the viability of the fleet.
The vessels which have remained in the fleet are those that perceived a viable future in
the sector, as a result of the decommissioning schemes.
The payment rates were fair. The taxation arrangements helped attract some of the
participants to the 2008 element of the scheme. Without this more favourable tax
treatment, there would have been lower take-up.
4.4 Questionnaire
4.4.1 Survey 1: Vessel owners who did not apply for the decommissioning scheme.
This questionnaire was circulated to vessel owners in the relevant fleet segment i.e. whitefish
> 18metres who opted not to apply for the decommissioning scheme. The Group thought it
useful to seek the views of these vessel owners in particular on their main reason for not
applying for the scheme and whether they believed that fishing is now a more viable business
as a direct result of the decommissioning scheme. There was a 49% response rate to this
questionnaire.
25
52% of respondents said that they ―considered applying for whitefish decommissioning
scheme in 2005/06 -08‖ while 48% said they did not consider it. When asked for their main
reason for not applying for the schemes:
Figure 4.1: Reason for not applying for Decommissioning
40%
25%
25%
10% 0%Age and condition of vessel
Level of scheme funding
Business is profitable
Saw an economic future in fishing
Other
The questionnaire also asked vessels owners would they apply if a decommissioning scheme
was run again in the future to which 74% said they would apply and 26% would not. In a
follow up-question, they were asked if, in their opinion, fishing is now a more viable business
as a direct result of the decommissioning scheme:
Figure 4.2 Is fishing a more viable business as a direct
result of decommissioning?
Yes
25%
No
57%
Don't know
18% Yes
No
Don't know
The questionnaire asked those fishermen still involved in the industry whether they
considered fishing a more viable business as a direct result of decommissioning scheme. The
answers are outlined in Fig 4.2 above. This view may be somewhat surprising but can
probably be explained by a difficult operating environment, in terms of high costs in
particular, for fishermen since the implementation of the scheme. The direct impacts of the
decommissioning scheme may therefore be difficult to distinguish for individual vessel
26
owners because of external factors. The questionnaire answers are in contrast to the views
expressed by the FIF and the IFO in discussions with the Steering Group who were strongly
of the view that there is a correct balance now between the fleet and the available quota and
in this regard the scheme can be viewed as a success. The Industry Groups also believe that
their members which remained in the fleet believe there is a much better balance now and
they are optimistic for the future.
4.4.2 Stakeholder feedback on scheme administration:
The stakeholder feedback on the administration of the scheme was delivered in two ways via
a meeting with Steering Group at which the Industry Representative Groups (FIF and IFO)
main views could be summarised:
Overall the scheme was very well run. Some small anomalies and perhaps some
greater flexibility for hard-luck cases might have been possible
Operators in the South West felt that some of the criteria were too onerous e.g.
definition of active
Definition of polyvalent pelagic was too ambiguous and lead to mis-understandings as
to which vessels might be eligible.
4.4.3 Survey Results on scheme design
In terms of the design of the scheme, 57% of respondents who had applied for the scheme felt
that the eligibility criteria for the scheme were fair while 33% felt they were unfair and (10%
did not know). These respondents would also have included some whose applications were
rejected as they did not meet the criteria and so it is natural to assume some bias in the
responses. A clear majority supported restricting the scheme to vessels of 10 years older or
more and the requirement on having carried out a minimum of 75 days fishing activity in the
previous two years - 76% and 89% respectively. However a clear majority (81%) also
strongly disagreed with the rule that vessels eligible for the scheme had to be over 18 metres
in length. This was also the view of the FIF when meeting with the Steering Group i.e. that
there is still over-capacity in the 12-18m fleet and excluding this from the schemes was a
mistake at the time.
27
The questionnaire also asked how satisfied the respondents were with the administration of
the scheme by both the Department and BIM (on a scale of 1-7 with 1 being very satisfied
and 7 being very dissatisfied) and the results were:
1 2 3 4 5 6 7
26% 16% 16% 21% 5% 5% 11%
____________________________
28
Chapter 5: Scheme Output and Efficiency
5.1 Introduction
This Chapter defines and quantifies the outputs of the Decommissioning Schemes and then
analyses the efficiency of the scheme primarily by examining the price paid to decommission
vessels. This Chapter also explores the Re-entry issue, the level of Deadweight and
Administrative Efficiency:
5.1 Scheme Outputs
5.2 Re-Entry, Latent Capacity & Net Outputs
5.3 Efficiency in terms of price paid to decommission
5.4 Deadweight
5.5 Administrative Efficiency
5.2 Scheme Outputs
5.2.1 Definition of Outputs
As set out in the Programme Logic Model the Decommissioning Schemes output is the
fishing capacity removed. As outlined in Chapter 1, fishing capacity is measured both in
terms of GTs and kWh. While it is vessels that are decommissioned, and only vessels > 18m
qualified, the amount decommissioned is not measured simply in terms of the number of
vessels but in terms of the capacity of the vessels removed. For the purpose of
Decommissioning the unit used was GTs.
5.2.2 Output targets
In 2004 the capacity of the over 18m fleet in gross tonnage was 35,481. The 2005
Decommissioning Scheme target, based on the White Report, was the removal of 25% of the
whitefish (>18m) fleet or 10,937 GTs. The 2005 Scheme did not achieve its target and the
Cawley Report recommended that the total tonnage to be removed be increased to 14,463 or
an additional 11,140GT - if the 3,323GT already removed by the 2005 scheme is taken into
account. This would have brought about a 45% reduction in the capacity of the >18m
demersal fleet.
29
5.2.3 Output from Decommissioning Schemes
The 2005 decommissioning scheme saw the removal of 3,323 GT from the whitefish fleet
(vessels over 18 metres and 15 years of age) or 30% of the target set in the White Report. The
2008 decommissioning scheme saw the removal of an additional 6,913 GT or 62% of the
target set in the Cawley Report. In total, this represented 71% of the combined total target for
capacity reduction.
Table 5.1 Summary of Output Produced
Scheme Successful
Applicants
Capacity
Removed (GT)
Capacity
Target (GT)
% of decomm
target
achieved
Capacity
Removed
(kW)
Cost
2005 Scheme 27 3,323 10,937 30% 9,152 €11.8m
2008 Scheme 46 6,914 11,140 62% 19,363 €36.6m
Combined Total 73 10,237 28,515 €48.4m
5.2.4 Gross Outputs Vs Net Outputs
The table above shows that the two decommissioning schemes removed 10,237 GT from the
fleet. Two related issues below, Re-entry and Latent Capacity, were examined to see if the
gross tonnage removed was diluted to any extent by these issues. The next section examines
these two issues and reaches a conclusion on the net capacity removed by decommissioning.
5.3 Re-entry and Latent Capacity
5.3.1 Overview
Re-entry can be defined as the beneficiaries of a decommissioning scheme coming back into
the fleet with a different or new vessel. It has been noted as a common issue in many fisheries
decommissioning schemes around the world.
Latent Capacity is capacity that is not in active use at the current time but which can be
reactivated at any time subject to the licensing Regulations. Rules have been introduced to
minimise unused capacity in the fleet but it may be difficult to completely eliminate. As will
be explored below in the section on Deadweight there is no incentive to completely exit the
30
industry as the licence continues to have a value even if the vessel is not in active use. The
Department tackled this by introducing a range of measures including a two year ―use it or
lose it‖ rule in 2006 whereby capacity taken off the Fishing Boat Register must be re-
introduced onto the Register within 2 years, otherwise the entitlement will be lost to its
owner. Rules have also been introduced to prevent capacity from transferring into segments
of the fleet that are targeted for decommissioning (for a summary of these rules see Table 5.2
below).
If a fisherman decommissions a vessel and wants to re-enter he has to purchase capacity from
a fishermen that remained. If the capacity he purchases is from an inactive vessel (part of the
possible pool of latent capacity) then the net effect of a decommissioning scheme is reduced
as the re-entrant activates previously inactive capacity. This section explores the re-entry
issue itself and the extent to which the combination of re-entry and latent capacity may
reduce the real net effect of the decommissioning schemes.
31
Table 5.2: Policy Directives on Usage, Segmentation and Transfer
The White Report of 2005 recommended that measures to ring-fence the
residual fleet capacity need to be implemented hand in hand with
decommissioning. This recommendation, which was subsequently implemented
would involve the segmentation of the polyvalent vessels into two size
categories:
Vessels of 18 metres in length overall and greater
Vessels less than 18 in length overall.
Policy Directives
Between 2003 and 2006, successive Ministers introduced a series of policy
directives which impact directly on the capacity available for re-entry to the
over 18 metre whitefish fleet.
Segmentation
Ministerial Policy Directive number 1 of 2003 (section 3) states that
―Segmentation must be fully respected – the replacement capacity must be
taken out of the segment of the fleet into which the vessel is being introduced”.
Two-year Rule
Ministerial Policy Directive number 1 of 2003 (section 4) and Ministerial
Policy Directive number 2 of 2003 (section E) state that: ―In future, capacity
taken off the Fishing Boat Register must be re-introduced onto the Sea Fishing
Boat Register within 2 years of its removal from the fleet register, otherwise the
entitlement will be lost to its owner. The two year rule will also apply to all
existing “off register” capacity from 1/1/04”.
Inshore potting capacity
Ministerial Policy Directive number 2 of 2003 (section L) states that: ―The
capacity of inshore potting vessels licensed under the new scheme will be ring
fenced within the polyvalent segment and will not be eligible as replacement
capacity. This means that neither the boats, their capacity nor their licence
may be traded on, transferred or otherwise used‖.
Need to avoid capacity transfer into sectors targeted for
decommissioning
Ministerial Policy Directive 1 of 2006 addressed the need to avoid the transfer
of capacity into the sectors of the fleet being targeted for decommissioning by
re-segmenting the existing polyvalent and specific segments as follows: The
further segmentation of the polyvalent vessels (excluding the already ring-
fenced potting sub-segment and the vessels with pelagic wet storage capacity)
into two size categories, vessels less than 18 metres in length overall and
vessels of 18 metres in length overall and greater, and the introduction of five
sub-segments (i) the potting sub-segment, (ii) vessels with pelagic wet storage
capacity (tanks) (iii) the scallop sub segment, (iv) other polyvalent vessels less
32
than 18 meters in length overall and (v) other polyvalent vessels equal to or
greater than 18 meters in length overall, with the further stipulation that other
than as provided for, the transfer of capacity between segments and between
sub-segments of the fleet will be prohibited, and, other than as specified ……
the replacement capacity must be taken out of the segment and sub-segment of
the fleet into which the vessel is being introduced.
5.3.2 The concept of Re-entry in isolation
The fleet policy discussed in Chapter 1 outlines how the size of the Irish fishing fleet is
limited through the EU ceilings on tonnage and kw power. These ceilings are permanently
reduced when a decommissioning scheme is implemented and so the overall trend in the fleet
size is downwards (see Figs. 2.2 and 2.3 in Chapter 1). Therefore if a fisherman that
decommissioned a vessel subsequently re-enters the industry there is no net effect on the
capacity of the fleet as in order to re-enter he has to buy capacity from a fisherman that
remained. In terms of decommissioning capacity re-entry in isolation is not an issue. This
view is shared by the Scottish authorities and by the fishermen‘s representative organisations.
Their views are contained below in Boxes 2 & 3 respectively. One of the downsides of re-
entry is when it is linked with latent capacity and one of the representative organisations also
expressed the opinion that re-entry can distort competition by capitalising vessel owners that
want to re-enter the fleet.
Table 5.3: Scottish Authority view on Re-entry
Contact was made with the Scottish Government (Marine Scotland Directorate) to
examine their experiences from their last (2003) whitefish decommissioning scheme
on the issue of re-entry. Seafood Policy Division had also undertaken similar
discussions with Scottish counterparts in 2005 during the design of the first part of the
Decommissioning scheme here in order examine how the issue of re-entry had been
treated there. The views of the Scottish Government could be summarised as:
a) Decommissioning is about the removal of fleet capacity/fishing effort, not about
the removal of individuals from participation in the industry. It is largely immaterial
who owns a boat, provided capacity - in the form of vessel licences/entitlements - is
permanently removed from the system;
b) If individuals do elect to come back into the industry, they would need to acquire
one or more licences or entitlements to permit them to fish commercially. Given the
closed nature of the UK licensing regime, this would mean utilising remaining
33
existing capacity (i.e. another vessel or entitlement owner would need to sell up). So
there would be no addition to offset what has gone out via decommissioning.
Indeed, licence transaction/aggregation penalties may apply - which would mean
more capacity would come out as a consequence of any such subsequent movement in
ownership/licensing;
c) Allied to the preceding point, the UK fleet was already 'partitioned' so that
capacity in key sectors was indeed ring-fenced;
d) Suggested possible risk of legal challenge if efforts were made to exclude people
from making a living by undertaking their chosen profession by banning them from
re-entering the industry (at whatever level) - not least because of the arguments above
that there would be a permanent fleet capacity reduction; and
e) In any event, it would be extremely problematic (particularly for what would be an
ongoing requirement well beyond the life of the decommissioning scheme) to track
whether individuals had indeed taken on ownership of a new vessel - which could, for
example, be registered in the name of a company, spouse or partner etc.
Table 5.4: Stakeholders view on Re-entry
Industry Meeting with Steering Group: There are different views on the issue of re-
entry to the fleet amongst industry and individual fishermen. In its meeting with the
Steering Committee, the FIF expressed the view that there is a common mis-
conception about re-entry in terms of the effect which it can have on the benefits of
decommissioning Scheme. The FIF believes that re-entry cannot have a negative
effect on the impacts of the scheme as ultimately the decommissioning results in a
permanent reduction in the available tonnage and therefore the fleet size. This means
that any re-entry to the fleet requires the purchase of existing tonnage from the Irish
fleet and so the net effect is positive. However this fails to take into consideration
whether the newly purchased tonnage was active or latent. The IFO view was
different and they believe that re-entry is a significant problem on two fronts:
1. It undoes some of the benefits of the decommissioning scheme
2. It distorts the competition for available tonnage by capitalising vessel owners
through the decommissioning scheme who wish to re-enter the fleet.
In the IFO‘s opinion, the 2008 scheme worked better in this regard as there was much
less re-entry than the 2005/06 scheme. The IFO also believes that the issue lies with
DAFF‘s licensing policy i.e. if somebody withdraws one large vessel and replaces it
with three smaller vessels then each of the smaller vessels will get the same quota as
the larger vessel11
. The IFO also believes that two-year ―use it or lose it‖ rule on
active tonnage is causing owners to think about selling it to non-Irish owners from
other EU MS.
11
Seafood Policy Division Seafood Policy Division has clarified that the premium was available to vessels that
had a recent active pelagic history as was set out in the brochure for the scheme.
34
5.3.3. How many re-entered?
Many vessel owners that decommissioned whitefish boats are known to have permanently
left the fishing fleet. However, it is also known that a number of successful applicants
subsequently purchased replacement vessels, and in some cases, re-entered the over 18 metre
whitefish fleet. A variety of strategies were employed by vessel owners during the two
decommissioning schemes; it is convenient to look at a number of these under general
headings:
Category 1: Single Vessel: Full exit – Without Replacement: in this case the owner
possessed only one vessel which was decommissioned and it is assumed that the
owner left the fishing fleet.
Category 2: Multi Vessel: Full exit – Without Replacement: in this case the owner
possessed more than one vessel at the time of decommissioning. In every case these
owners decommissioned at least one vessel and retained at least one vessel.
Category 3: Single Vessel – With Replacement: in this case the owner possessed
only one vessel which was decommissioned, however the owner subsequently
reinvested in a fishing vessel in the over 18 metre whitefish fleet.
Category 4: Multi Vessel – With Replacement: in this case the owner possessed
more than one vessel at the time of decommissioning, however, in every case at least
one vessel was decommissioned and at least one vessel was retained, and in addition
at least one replacement vessel was purchase after decommissioning.
Category 5: Inshore Replacement: in this case the owner possessed only one vessel
which was decommissioned, however the owner subsequently reinvested in a fishing
vessel in the inshore (under 15 metre) fleet.
Results
Thirty-seven Category 1 vessels (50.7% of the total by number) decommissioned
by way of Full Exit while a further eight in Category 5 decommissioned and
35
subsequently re-entered the inshore fleet; that is, they did not re-enter the over 18
metre whitefish fleet
Sixteen owners in Category 2 did not replace there decommissioned vessel but, as
they retained other vessels that did not apply for decommissioning, remained
involved in the over 18 metre whitefish fleet by way of their existing ‗other‘
vessel(s).
The remaining 12 applicants in Categories 3 and 4 (16% of the total by number),
introduced eleven > 18 metre white fish vessels after decommissioning.
Table 5.5: Replacement Rate of Vessels Decommissioned
Remained in the over 18
metre whitefish fleet after
decommissioning
Decommissioned Introduced
Replacement
Rate
Vessels GTs Vessels GTs %
1: Single Vessel: Full exit –
Without Replacement. No 37 4,856
2: Multi Vessel: Full exit –
Without Replacement.
Yes 16 2,424
3: Single Vessel –
With Replacement. Yes 10 1,561 9 1,221 78%
4: Multi Vessel –
With Replacement:
Yes 2 319 2 290 91%
5: Inshore Replacement
(under 15 metre)
No 8 1,077 8 73 7%
Total (over 18 metre) whitefish
capacity 73 10,237 19 1,511 15%
In the case of categories 3 and 4, the replacement rate (Capacity introduced / Capacity
decommissioned) was high: 78% for category 3 (Single Vessel – With Replacement), and,
91% for category 4 (Multi Vessel – With Replacement). Overall (and discounting inshore
vessels), the replacement rate was 15%.
36
The 8 inshore vessels introduced by owners availing of decommissioning grants were all less
than 15 metres in length (overall) and had a combined capacity of 73 gross tonnes. In 2009
the total capacity of the whitefish fleet less than 15 metres amounted to 8,178 gross tonnes.
Thus the 73 gross tonnes identified in the decommissioning analysis presented here amount
to less than 1% of the sector (whitefish fleet less than 15 metres). There is no evidence to
suggest that either the 2005 or 2008 decommissioning schemes brought about anything other
than negligible displacement (<1%) into the inshore sector of the whitefish fleet.
5.3.4 Was the replacement capacity used by re-entrants “active” or “latent”?
If all the replacement capacity identified in this analysis, and required to introduce 11 vessels
to the over 18 metre whitefish fleet (categories 3 and 4), was hitherto inactive, the net output
produced by the two schemes would no longer be 10,237 gross tonnes, but 10,237 minus
1,511, or, 8,726 gross tonnes and the capacity reduction would fall from 71% of the original
target to 60%. Put differently, the fleet register, for the over 18 metre whitefish sector, would
decrease, not by 10,237 gross tonnes but by 8,726 gross tonnes.
The result of the directives set out above in Table 5.2 was that, from late 2005, 1) the
majority* of any hitherto ‗latent‘ capacity was rendered ‗lost to its owner‘ and 2) over 18
metre replacement polyvalent capacity could not be sourced from under 18 metre vessels, nor
from ‗polyvalent potting‘ boats, nor from any capacity outside the over 18 metre polyvalent
sub-segment. As a consequence it is expected that most12
of the 1,511 gross tonnes of over 18
metre whitefish capacity introduced by decommissioned Re-entrants was acquired from
―operational‖ over 18 metre whitefish vessels. In consequence it can be reasonably surmised
that ‗replacement‘ amounted to a ‗passing on‘ of decommissioning grants by way of
‗payment‘ for replacement capacity.
In 2004, when the original pre-decommissioning analysis of the fleet was undertaken, the
capacity of the over 18 metre whitefish fleet stood at 35,481 gross tonnes and 95,091 kW.
The capacity of this fleet at the end of 2009 was 23,922 gross tonnes and 60,914 kw.
12
It is possible that some over 18 metre capacity introduced in 2008 was inactive for a period of up to, but not
exceeding, 2 years at the time of introduction
37
Table 5.6 Fleet register 2004-2009
FLEET REGISTER
Over 18 metre whitefish fleet Capacity
(GT) Capacity (kW)
2004 35,481 95,091
2006 30,828 79,999
2009 23,922 60,914
Difference 2004-2006 -4,653 -15,092
Difference 2006-2009 -6,906 -19,085
Difference 2004-2009 -11,559 -34,177
DECOMMISSIONING SCHEMES
Scheme Capacity
Removed (GT) Capacity Removed (kW)
2005 Scheme 3,323 9,150
2008 Scheme 6,914 19,356
Combined Total 10,237 28,506
Between 2004 and 2006 capacity declined by 4,653 gross tonnes and 15,092 kW while the
output of the 2005 decommissioning scheme was 3,323 gross tonnes and 9,152 kW.
Thereafter between 2006 and 2009 capacity declined a further 6,906 gross tonnes and 19,085
kW while the output of the 2008 decommissioning scheme was 6,914 gross tonnes and
19,363 kW. Reductions in the fleet register between 2006 and 2009 almost exactly mirror the
output produced by the 2008 decommissioning scheme. While these figures support the view
that very little if any re-entrants from the 2008 scheme purchased latent tonnage they do
suggest that re-entrants from the 2005 scheme were more likely to have purchased latent
tonnage.
38
5.3.5 Conclusions on Re-entry, Latent tonnage and Net Outputs
The overall aim of a decommissioning scheme is about removing capacity from the
industry not people.
Even if it was desirable to prevent the re-entry of the scheme beneficiaries back into the
fleet this would require a significant and ongoing resource to track individuals and the
grant paid. In addition it would be unlikely to be legally successful for the reasons as
outlined by the Scottish Administration above. It is also generally considered to be
impossible in any sense as there is nothing to prevent a relative, business associate or
company investing the money on a scheme beneficiary‘s behalf.
The issue of re-entry was considered fully in the design of the scheme and Seafood policy
Division and BIM can be considered to have explored all possible scenarios.
In terms of decommissioning and reducing capacity, Re-entry only has a negative effect
on net capacity reduction if the replacement capacity used to re-enter was latent or
inactive.
The owners of the 73 vessels decommissioned introduced 11 new vessels to the over 18m
whitefish fleet.
10,237 GTs was removed from the over 18m segment and re-entry accounted for 1,511
GTs. If all of the replacement capacity was inactive then the real reduction in capacity
would have been 8,737 GTs. However because of the rules introduced on inactive
tonnage and the restrictions on transfer between segments it is concluded with confidence
that the net tonnage removed is much greater than 8,737. It is not possible to put a precise
figure on the Net Output for the decommissioning schemes other than to say that it is in
the range of 8,737 to 10,237 and based on the evidence it is expected to be in the upper
end of that range.
39
5.4 Efficiency in terms of rates of payment
The sections above have established the unit of output and the estimated quantity of output
produced. Efficiency is a relative concept and is measured by the ratio of inputs to outputs.
For the decommissioning schemes the primary input is the grants paid. The key efficiency
question is therefore answered by forming a judgement on whether the amount paid for the
tonnage removed was reasonable and this is addressed in 5.4.2 below.
5.4.1 Grant paid
EU legislation governing the permanent cessation of fishing vessels as they pertain to the
Schemes covered in this VFM are set down in:
1. Council Regulation (EC) No 1263/1999 of 21 June 1999 on the Financial Instrument
for Fisheries Guidance (FIFG);
2. Council Regulation (EC) No 1198/2006 on the European Fisheries Fund.
The FIFG Regulation set down, via a supporting Regulation13
, the maximum rates which may
be paid by member States to decommission fishing vessels, as follows:
Table 5.7 Maximum Rates payable under EU FIFG Regulation:
GT Premium per vessel
0 < 10 €11 000 per GT + €2 000
25<100 €4,200 per GT + €82,000
100<300 €2,700 per GT + €232,000
300<500 €2,200 per GT + €382,000
500 and above €1,200 per GT + €882,000
This EFF Regulation also sets out the conditions under which the premium for
decommissioning may be paid and how it should be calculated: i.e. ―public aid paid to the
13
Council Regulation (EC) No 2792/1999 laying down the detailed rules and arrangements regarding
Community structural assistance in the fisheries sector.
40
owners of fishing vessels shall apply to the vessel‟s fishing capacity and, where appropriate,
to the fishing licence associated with it”.
However, in terms of the calculation of the premium, the EFF allows Member States to fix
the rates at their discretion following some guidelines, namely that:
“The level of public aid is fixed taking into account the best cost/effectiveness ratio on the
basis of objective criteria, such as:
a) The price of the fishing vessel recorded on the national market or its insurance value
b) The turnover of the fishing vessel
c) The age of the fishing vessel and its tonnage expressed in GT or engine power
expressed in KW”.
The rate of payment for the 2005/06 and the 2008 decommissioning schemes offered
premium payments as follows:
Table 5.8 Basic rate of Payment under 2005/06 Scheme:
GT Premium per vessel
25<100 €4,200 per GT + €82,000
100<300 €2,700 per GT + €232,000
300<500 €2,200 per GT + €382,000
500 and over €1,200 per GT + €882,000
In addition, there were adjustments depending on the age of the vessel with vessels age 16-29
years deducted 1.5% from the basic rate for every year over 15 and vessels aged over 30
years reduced by 22.5%.
41
Table 5.9 Basic rate of Payment under 2008 Scheme:
Premium per vessel
€3,500 per GT
Plus
a catch incentive premium of up to €3,000 per GT based on the declared landings of specified
whitefish stocks.
Note: This maximum level of €6,500 per GT could be increased to €7,500 in the case of qualifying vessels over
65 feet
These changes came on foot of recommendations in The Cawley Report which recommended
that vessels with a demonstrable track record of targeting pressure stocks be prioritised. There
were also significant changes to the taxation treatment of premium payments and these are
outlined in Chapter 3 with the full details to be found at Appendix D.
In fixing the premium level the Irish Authorities submitted a detailed State Aid application to
the European Commission in September 2007 outlining the basis for calculating the
premium. This included a snapshot of vessels introduced to the Irish whitefish fleet in the
previous year setting out the capacity, age, purchase price and cost of capacity (licence).
5.4.2 Assessing Efficiency based on Grant amount paid
This Efficiency question is addressed here by looking at the price paid from a number of
perspectives and forming a judgement based on this set of indications:
a) The fact that the schemes were not oversubscribed
b) Grants paid compared to value of vessels recently introduced
c) Grants paid compared to value of vessels on the market at the time
d) Grants paid compared to Fleet Value
e) Opinion of Fishermen‘s representative organisations
f) Opinion of Fishermen from Questionnaire
g) What re-entry numbers say about the price paid
42
5.4.2 (a) Schemes were not oversubscribed
The 2005 Scheme only achieved 30% of its decommissioning target. The 2008 scheme fared
somewhat better by reaching 62% of its target. While there are many factors affecting scheme
take-up, the fact that the schemes were not close to being oversubscribed indicate that the
grant offered was reasonable. Based in part on the relatively poor response to the 2005/06
Scheme, the 2008 Scheme offered a higher level of grant. The grant per GT in 2008 was
€5294 or 1.5 times the grant per GT in 2005 of €3551. This is broadly in line with the
recommendations of the Cawley Report. In overall terms, while the 2008 scheme was clearly
more expensive, it was also under-subscribed.
5.4.2 (b) Grants paid compared to value of vessels recently introduced
The 2007 State Aid application showed that the cost per GT of vessels introduced to the Irish
whitefish fleet ranged from €4,585 to €9,630 with an average of €6,207. The average grant
paid under the 2008 scheme (€5,294) was therefore 84% of the cost of vessels recently
introduced. To calculate this rate14
, BIM collected information on 12 fishing vessels that had
been introduced into the Irish whitefish fleet in the 18 months prior to the scheme. All were
whitefish vessels, from the second-hand market, and represented typical examples of the type
of boat traded by the whitefish sector. BIM also considered a further 6 vessels then available
on the second-hand market. While these vessels had not been introduced to the fleet they
none-the-less represented typical examples of the second-hand market for fishing vessels
available to the Irish catching sector.
5.4.2 (c) Grants paid compared to the value of vessels on the market at the time
The 2007 State Aid application also showed that the average cost per GT of vessels for sale
was €8,062. The average grant paid per GT is 66% of this figure. One would have to question
the value of this indicator as the asking price for vessels for sale is near the top end of the
range of prices for vessels introduced.
14
A more detailed note on calculation of the premium rate can be found at Appendix D
43
5.4.2 (d) Grants paid compared to Fleet value
Analysis for the 2007 State Aid application calculated the predicted value of every fishing
vessel in the Irish fleet that would be eligible under the proposed scheme plus the cost of
capacity/licence at €105m. If all vessels were to decommission at the rates provided these
vessels would have been decommissioned for €87.5m. Such calculations are open to question
but suggest that the rate was reasonable.
5.4.2 (e) Opinion of Fishermen‟s representative organisations
The Industry representative Groups (FIF and IFO) both expressed the opinion that the
payment rates were fair but that ultimately it was the different taxation arrangements in 2008
which helped attract many of the participants to the scheme. Without it, there would have
been lower take-up.
5.4.2 (f) Opinion of Fishermen from questionnaire
25% of those that did not apply for decommissioning cited the level of funding as the reason.
80% of those that applied for the scheme received an offer and of those 88% accepted the
offer. Half of the remaining 12% did not accept as they thought the offer was too low. These
figures indicate that there was a subset for which this scheme was attractive and that it
probably would have required a substantial increase in the grant to entice more to apply.
5.4.2 (g) What re-entry numbers say about price paid
As set out above, 11 vessels were introduced to the over 18m fleet by owners that had availed
of decommissioning. This is consistent with a response to the survey of vessel owners where
11% gave their main reason in applying for the decommissioning scheme as ―upgrade to a
more modern vessel‖. This level of re-entry suggests that for some the decommissioning
grants were quite attractive as they were able to improve their position by decommissioning
from the > 18m fleet and re-enter the > 18m fleet.
5.4.3 Conclusions on Efficiency based on Rates paid
Most of the indicators above, point towards a conclusion that the rate that was paid was
reasonable.
The 2005 and the 2008 schemes took place in an environment where whitefish vessels
44
continued to trade in a second-hand market, and where there remained a demand for such
vessels.
It was evident that the scheme had to ‗compete‘ on price with a normal ‗market‘ for
second-hand whitefish vessels, and the decommissioning grants offered would be
compared by prospective applicants against the perceived value their own vessel might
have in such a market.
A complex target group – The indicators above also show that the target audience is quite
diverse and complex and is not going to be attracted in block by a single rate. If that were
the case the schemes would have been over-subscribed. The group demonstrates
behaviour that is consistent with a classic sloping supply curve. As the price offered
increases more are willing to participate in the scheme. The 2005 scheme picked off those
that found a lower grant attractive. If there was only one scheme and the rate was the
2008 rate those that participated in the 2005 scheme would have received an amount
beyond what was needed to entice them to exit. There are also indications that if one was
to try to reach the target level of decommissioning, and a flat rate was to be used, the rate
might have to be increased substantially as only 25% of those that did not apply cited the
grant level as their reason.
Given the complexity of the target group the flat rates were reasonable.
5.5 Deadweight:
Deadweight occurs when an activity grant aided by the State would have happened in any
event, even in the absence of that grant assistance. The level of deadweight is the portion of
output that would have happened anyway irrespective of the scheme. In other words how
many fishermen would have voluntarily exited without an incentive?
As outlined in Section 1.7 of this Review, the overall capacity of the Irish fleet has been
capped under EU fleet management rules15
, and the consequent introduction of an entry /exit
regime, anyone wishing to bring a vessel into the fleet must acquire the equivalent amount of
capacity (by buying it, trading for it or being gifted it). Fleet segmentation rules also apply –
the transfer of capacity between segments is prohibited and capacity must be acquired from
the same segment or sub-segment of the fleet into which a vessel is being licensed.
Ministerial Policy Directive 2/2003 introduced a further rule that capacity taken off the Sea
15 The total capacity of the Irish fishing fleet is limited to 88,700GTs and 244,834kWs under EU Regulation
1438/2003.
45
Fishing Boat Register must be re-introduced onto the Register within 2-years, otherwise the
entitlement will be lost to its owner – this so-called use it or lose it rule is designed to ensure
that a maximum amount of capacity is available to the fleet and not merely banked and off-
register indefinitely.
All of the above has led to a significant trade in capacity which has become a valuable
commodity. This means that the capacity of a vessel continues to represent an asset to the
vessel owner when the vessel is inactive. As a consequence, there is no incentive for a vessel
owner to voluntarily decommission a vessel and take the resulting capacity off the national
register and such action would not likely happen without public funding.
5.5.1 Capacity reductions and Decommissioning
While changes in the fleet register between 2006 and 2009 almost exactly balance capacity
reductions brought about by decommissioning the same is not true for the period 2004-2006.
Between 2004 and 2006 the over 18 metre whitefish fleet register declined by 4,653 gross
tonnes while the 2005 decommissioning scheme reduced capacity by only 3,323 gross. There
is thus evidence to suggest that owners left the fleet without decommissioning aid; a result
that might be construed as suggesting some level of ―deadweight‖ were it not for the a further
factor present in 2005 and well documented in the White Report:
“Alongside the fishing restrictions which face fishermen, another challenge has been on their horizon
since December 1997, namely, tough new standards for their boats. ..Boats over 24 metres long, are
not eligible to be licensed as a fishing boat from 1st July 2005 unless they comply with the EU
Mandatory Certificate of Compliance standard set down in an EU Directive setting up a harmonised
safety regime within the Community… The existing fishing licences which boat owners had were for 3
years ending June 2005 so all these need to be renewed since midnight of June 30th if the boats are
to continue fishing and landing at Community ports. As of now, the majority of the 136 vessels on the
fleet register over 24m cannot set to sea from 1 July as they are not in a position to apply to the
licensing authority with the required certificate. The 24 metres and over boat owners without a
fishing licence after 1st July 2005 are presented in some cases with a difficult scenario. In the case of
the scallop fishermen, and some whitefish fishermen the restrictions on their fishing effort puts a
question mark over the economic viability for them of fishing and means that the cost of meeting the
new safety requirements for their boats could not be justified or afforded in many cases…
46
It can be concluded therefore that while the exact amount of capacity that left the whitefish
fleet in 2005 because the vessels concerned failed to meet the EU Mandatory Certificate of
Compliance standards has not been established for this report, it is known that a number of
vessels were so affected. Between 2004 and 2006 the capacity of whitefish vessels over 18
metres in length on the fleet register declined by 4,653 gross tonnes of which 3,323 gross
tonnes are accounted for by the 2005 decommissioning scheme. The balance, 1,330 gross
tonnes, is approximately 8 – 10 vessels. These or most of these, were most likely vessels that
failed to meet the EU Mandatory Certificate of Compliance standards and failed to meet the
qualifying conditions of the decommissioning scheme.
In summary the reduction in capacity post 2006 closely matches reductions that were
incentivised by decommissioning schemes and a significant majority of the capacity
reductions between 2004 and 2006 are accounted for by a combination of decommissioning
and exits due to new safety standards. The level of voluntary exit is therefore minimal.
5.5.2 Survey of grant recipients
The VFM survey of grant recipients was also used to estimate the level of deadweight by
asking what would have happened if the recipients had not received the decommissioning
premium. 80% of respondents either disagreed or strongly disagreed with the suggestion that
they would have ceased fishing without a decommissioning scheme. A similar response was
received to a question on what they would have done without the decommissioning scheme.
80% would have either continued fishing or didn‘t know, the remaining 20% would have sold
the vessel.
5.5.3 Conclusions on Deadweight
There is a low or negligible level of Deadweight associated with Decommissioning
The low level of deadweight is clearly a direct result of tonnage having some potential as
a tradable commodity, even when un-used for a period.
Figures on capacity reductions between 2004-2006 and post 2006 confirm that there is
47
little voluntary exit from the fleet.
Responses from the survey of fishermen confirm that there would be little voluntary exit.
The decline in the size of the whitefish fleet, not due to decommissioning, is mainly due
to vessels failing to meet EU to meet the EU Mandatory Certificate of Compliance
standards and failed to meet the qualifying conditions of the decommissioning scheme.
5.6 Scheme Administration
The scheme was largely designed and implemented by BIM with the approval of the Minister
for Communications, Marine and Natural Resources (subsequently the Minister for
Agriculture, Fisheries and Food after the transfer of functions in 2008).
5.6.1 Staff Costs16
:
Table 4.1 below shows the cost of the various staff from the Department and the relevant
Agencies (BIM and the Sea Fisheries Protection Authority) involved in designing, managing
and implementing the schemes from 2005 to 2009 including time spent working on the White
and Cawley Reports. Pay increases agreed under the national pay agreements17
which were
implemented during these years have been included.
16
Staff costs are calculated based on Appendix F in revised RIA Guidelines from June 2009 17
Sustaining Progress, Report of the Public Service Benchmarking Body and Towards 2016
48
Table 5.10: Staff Costs
Grade18 Number
at Grade
Median
Salary19
% of
time
Median
Salary
Direct
Salary20
Total
Salary21
Total Staff
Costs 22
Asst Sec 1 €625,360 4% €25,014.40 €27,703.45 €35,737.45 €52,534.05
PO 2 €413,750 15% €62,062.50 €68,734.22 €88,667.14 €130,340.70
AP 4 €328,835 38% €124,957 €138,390.21 €178,523.37 €262,429.35
HEO 6 €235,295 110% €258,825 €286,648.13 €369,776.09 €543,570.86
Total €164,050 €521,476.01 €672,704.05 €988,874
These costs represent just over 2% of the level of grants paid (€48.4m) over the course of the
scheme in both its design and implementation (2005-2009). Providing a benchmark for these
costs is problematic. The closest may be similar grant-aided schemes in DAFF which have
used the same methodology to calculate staff costs as is applied in this review.
Staff costs conclusion:
The staff costs as illustrated above compare favourably in percentage terms when compared
to similar grant-aided schemes in DAFM. This is important as the level of stakeholder
interaction involved in this Decommissioning scheme particularly by BIM in dealing with
scheme queries and decision-making would likely be higher than similar schemes in the
agriculture area. However, the volume of applicants is lower and the grant paid per applicant
higher. Overall the administration of the scheme can be said to have been both efficient and
successful in that it managed to have avoided high cost while at the same time providing a
scheme design and brochure which was largely satisfactory and well understood by the
stakeholders.
______________
18
The Grade includes technical grades calculated at civil service equivalents 19
Median salary for five years combined (2005-2009) 20
Gross salary plus Employer‘s PRSI (10.75%) 21
Direct salary plus imputed pension contribution 22
Total Salary Plus allowances for overheads (47%)
49
Chapter 6: Scheme Effectiveness
6.1 Introduction
This Chapter analyses the effectiveness of the schemes under the following headings:
Quota Availability
Quota Uptake
Viability
Compliance
Fleet size
Environmental Benefits
The analysis used the following sources of data:
Consultations with Fisheries Organisations
Answers to Specific Questions from the Questionnaire
Analysis of Catch Data pre and post second Decommissioning Schemes
Survey Data for 2007, 2008 and 2009 on Costs and Profitability
Model of Costs and Profitability for 2009-11
The ―effectiveness of decommissioning on improvements to viability‖ is analysed here as
follows:
(a) Has extra quota been made available to the remaining vessels
(b) Have the remaining vessels used the additional quota available to them
(c) Have there been other positive impacts on viability and has the profitability of the
remaining fleet improved
6.2 Quota Availability
As outlined in Chapter 1, one of the principal objectives of a Decommissioning Scheme is to
make available surplus quota from decommissioned vessels to those vessels remaining in the
fleet. The scale of such decommissioning programmes is measured on the amount removed
from the fleet. This is generally some percentage of gross tonnage (the physical weight of the
fleet) or in terms of power (a percentage target of the aggregated engine power of the fleet).
Both of these metrics measure capacity in the fleet and how fishing opportunities are
50
expected to change as a result of removing a proportion of the fleet. It is also necessary to
consider how the capacity has been applied i.e. how active was the capacity removed and
how much fish did it land?
In this analysis23, we look at the relative contribution the decommissioned vessels made to
both fishing effort, expressed as kW days (engine power times the number of days at sea),
and then the landings composition, of the vessels in the year prior to decommissioning. The
capacity in GTs and the activity of this capacity is summarised in Table 7.1 below:
Table 6.1: Effect of Decommissioned Vessels
Year Active tonnage (GT)
Decommissioned
Active kw days
Decommissioned
2005/06 scheme 4% 10%
2008 scheme 7% 18%
This contribution for the 2005/06 element of the scheme (by measuring their landings in
2004) is outlined in Table 6.2 below and demonstrates that the aggregate contribution of
decommissioned vessels in landings was 17%.
23
The analysis presented here uses landings data from EU logbooks. All fishing vessels >10m are legally
required to declare the weight of landed fish by species for each fishing trip.
51
Table 6.2 Comparison of landings by all >18mvessels in 2004 by species
Landings weight
all vessels
Landings weight decommissioned
vessels
Contribution of decommissioned
vessels
Cod 1027 81 8%
Haddock 1831 204 11%
Whiting 4445 340 8%
Plaice 423 56 13%
Sole 234 20 8%
Megrim 2387 196 8%
Monkfish 1945 214 11%
Hake 988 97 10%
Nephrops 5793 785 14%
Ling 1164 92 8%
Pollack 774 70 9%
Saithte 514 58 11%
Scallop 2323 1919 83%
Total weight 23849 4129 17%
A similar exercise looking at landings in 2007 in Table 6.3 below show that the vessels
decommissioned in the 2008 element of the scheme had caught 20% of the available quota in
the last full year prior to their cessation of fishing.
Table 6.3 Comparison of landings by all >18m vessels in 2007 by species 24
Landings by all vessels
Non-Decomm. Vessels
Decomm. Vessels
Contribution of Decomm. Vessels
Cod 1475 1207 268 18%
Haddock 3465 2776 689 20%
Whiting 5101 4286 815 16%
Plaice 371 258 113 30%
Sole 267 181 86 32%
Megrim 1990 1550 439 22%
Monkfish 3404 2914 489 14%
Hake 1364 989 375 28%
Nephrops 9152 6928 2224 24%
Ling 689 561 129 19%
Pollack 742 600 142 19%
Saithe 577 525 52 9%
Scallop 70 46 24 34%
Total weight 28667 22822 5845 20%
24
Table 2. Weight in landings from 2007 by species. The table shows the landings figures from all vessels >18m; landings associated with
vessels decommissioned in 2008 (Decomm. Landings) and their relative contribution.
52
Conclusion on Quota Availability:
The analysis undertaken demonstrates that the contribution of decommissioned vessels in
2004 and 2007 represented 17% and 20% respectively of the quotas in the final year in which
those vessels were active. This latter figure rose to 23% in 2008 which is the last full year
prior to the final element of the decommissioning scheme.
This analysis demonstrates that the schemes achieved the first step in the expected chain of
events by decommissioning active vessels and thereby freeing up quota for the remaining
vessels in the fleet.
6.3 Quota Take-up by the remaining vessels
The take-up of decommissioned quota by the remaining vessels is the key indicator that a
Decommissioning Scheme is having its intended effects. The economic impact on the
remaining fishermen is a function of their response to decommissioning and to the impact of
external factors and is considered in 6.3. The take-up of quota post decommissioning is
analysed in a number of ways here:
- aggregate figures volume and value 2007-2009
- values per KW 2007-2009
- aggregate volume 2010
6.3.1 Aggregate Volumes Landed 2007-2009
The use of quotas is measured by the SFPA using log-book data submitted by vessels as the
principal source and this data is submitted in an annual return by Ireland to the European
Commission25. This data indicates the following quota uptake for the years 2007-2009
Table 6.4: Quota uptake by Irish Whitefish Fleet 2007-2009
Year Total Quota Landing by vessels
>18m
Quota uptake
2007 37,321t 28,783t 77%
2008 35,059t 22,045t 63%
2009 34,426t 20,477t 59%
25
The full table of uptake per species is at Appendix G
53
2010 33,713t 24,034t 71%
As the table outlines, there was a decline in aggregate quota uptake from 2007-2009 across
the eleven main species targeted by the >18m whitefish fleet. The 29% aggregate drop in
quota uptake from 2007-2009 varies across the main key species where cod dropped 46% and
nephrops by 34%. Other species such as haddock showed more modest declines. While
fluctuations in quota uptakes from year to year would be expected, there was a significant
decline from 2007 to 2009. In 2007, the year prior to the second Decommissioning Scheme,
the vessels that availed of decommissioning landed 5,845 tonnes (see table 6.3 above). This
left 22,938 tonnes in 2007 for the vessels that did not decommission. In 2009 the vessels that
remained in the fleet landed 20,477 or over 2,000 tonnes less than they did in 2007. This
suggests that at the aggregate level in 2009 the remaining vessels did not take up the extra
quota available. However this uptake rate increased significantly in 2010 to 71% of the
available quota compared to 59% in 2009.
6.3.2. Aggregate Value Landed:
The Value of the quota landed between 2007 and 2009 was analysed for this Review in order
to assist in calculating the income for vessel owners over the same period. Full details of the
landings per species can be found in Appendix G and are summarised in the table below:
Table 6.5 Aggregate Value of Landings for >18m whitefish fleet
Year Value of Quota Value of Landings % change in value
of landings from
previous year
2007 €155.2m €126.8m -
2008 €136.4m €95.7m -25%
2009 €114.8m €72m -24%
2010 €112.3m €88m 22%
54
The Table demonstrates a fall in the value of landing from 2007-2009 of 43% which
primarily arose because of quota changes, lower fish prices, and lower quota uptake by
fishermen. However the value of landings increased by 22% in 2010. This is discussed in
Section 6.3.4 below in more detail.
6.3.3 Value of Landings per kW
kW, a measure of the power of a vessel, as stated previously, is one of the standard units for
measuring capacity in the fleet. The comparison above of aggregate values between 2007 and
2009 is shown here in terms of kW which expresses any changes in terms of this standard
unit.
Gross income from fishing is the product of the price of fish and the quantity landed. Based
on known quotas and fish prices the average price of a tonne of fish is calculated as:
Fish Price 2007 2008 2009
Average value of a tonne of quota €4,412 €4,339 €3,527
Change since 2007 --- - 1% - 20%
Almost without exception, quay wall prices for all fish prices declined from 2007-2009 with
particularly high falls recorded for the main economic driver species of cod (-39%), haddock
(-22%) and nephrops (-19%)
Fishing Income and income per kW is calculated as26
:
Over 18 metre whitefish Fleet 2007 2008 2009
Total Income of fleet €133 million €102 million €78 million
Change since 2007 --- - 14% - 41%
Fleet income (€/kW) €1,658 €1,484 €1,289
Change since 2007 --- - 10% - 22%
26 The full model parameters that were used for calculating the income as well as the background data can be
found at Appendix E.
55
The value of landings per KW fell by 22% between 2007 and 2009. This was primarily made
up of a fall in fish price of 20% but also a fall in quantity landed per KW. These figures
would mean that while the value per KW fell by 22%, the quantity per KW only fell by 2.5%
between 2007 and 2009. This confirms the finding above at the aggregate level i.e. that the
remaining vessels did not increase their landings in 2009.
6.3.4 Aggregate volume landed 2010
Initial figures for 2010 show that landings have increased significantly to 24,034 tonnes
representing an uptake of 71%. This is close to the tonnage landed in 2007 but in 2010 it was
landed by the smaller post decommissioning fleet. This volume of landings would equate to a
nearly 30% increase in weight landed per KW and shows a much higher quota take-up by the
remaining fleet than was evident in 2009. The value of landings in 2010 was €88m which
was a 22% increase on the previous year.
6.3.5 Reasons for non-take-up of decommissioned quota in 2009
External factors are believed to have played a major part in the non-take up of
decommissioned quota in 2009. The price of oil was a major factor in 2008 but it returned to
2007 levels in 2009. Of more importance than the first two factors mentioned was most likely
the price of fish in 2009. It took a significant dip in 2009 compared to 2007 including:
- cod down 39%
- haddock down 21%
- hake down 14%
- megrim down 34%
- sole down 23%
- nephrops down 20%
The economics of fishing for whitefish stocks would have been marginal with the low prices
in 2009 and would have resulted in vessel owners tying up rather than undertake unprofitable
fishing trips.
Conclusions on Quota uptake by the remaining fleet
Comparisons between 2007 and 2009 show that the remaining fleet did not use the extra
56
quota that was made available to them in 2009 by the decommissioning schemes. There
are reasons, particularly low fish prices, why the opportunity to land extra fish was not
availed of.
Figures for 2010 show that landings by the remaining fleet have risen significantly
showing that, in 2010, they are utilising the extra quota available to them.
Quota uptake is an important factor in the effectiveness of decommissioning. One year in
which it did not happen, 2009, does not mean that it cannot be effective and a year in
which it did happen, 2010, equally does not mean that it is automatically going to be
effective. Quota take-up needs to be monitored on an ongoing basis.
If decommissioning is to be effective, a fisherman‘s incentive to take-up the extra quota
available cannot be constantly overshadowed by negative movements in other variables
like fish price and oil price.
Increased quota uptake in 2010 shows that when conditions are favourable, the benefits of
extra quota are realised.
6.4 Fleet Efficiency
While increased take-up of quota from decommissioned vessels is expected to be the main
outcome that will lead to improved viability, another is whether the vessel owners can fish in
a more efficient manner i.e. using less fishing effort and therefore lowering their costs in
areas such as fuel and labour.
In order to analyse this it is necessary to compare the size of the fleet in 2007 and 2009, its
fishing effort, as well as the total landings which allow for a calculation of the standard
measure of landings (kg) per kw per day. This is outlined in the Table below:
Table 6.6: Landing per kg per kw per day
Year 2007 2009 % change
Fleet Capacity 80,812kW 60,914kW -25%
Average days fished by Fleet 176 146 -17%
Total Landings 28,783t 20,477t -29%
57
Landings (kg) per kw per
day
1.98kg 2.52kg 14%
Conclusion on Efficiency:
Table 6.6 above demonstrates that the efficiency of fishing operations has improved
considerably over the period 2007-2009 as fishermen are now landing 14% more in landings
weight per kw per day. This should mean reductions in costs such as oil as fishing vessels are
fuel-intensive. More efficient fishing operations will also allow for better compliance with
EU days-at-sea Regulations which limit fishing effort to fixed levels.
6.5 Viability of the remaining fleet
The question for this Review is not just whether viability has improved but what influence
have the Decommissioning Schemes had on profitability. External factors have a significant
impact on profitability.
As outlined above, fishermen are subject to a number of external factors which can have a
determining impact on fishing income over the period 2007-2009. A full analysis of the
external factors can be found in Appendix I of this Review but is summarised below:
1. Fuel Prices27
: In 2008 fuel prices rose throughout the first half of the year and
reached historic high values by July of that year. This had an impact on the fleet and
in increased the cost of fuel oil (per day) by 14% on average. This increase looks like
being replicated in 2011 and is likely to have a similar effect.
2. Fish Prices28
: Almost without exception, quay wall prices for all fish prices declined
from 2007-2009 with particularly high falls recorded for the main economic driver
species of cod (-39%), haddock (-22%) and nephrops (-19%).
3. Quota Availability: The quotas are fixed annually at EU level via the TAC & Quota
Regulation agreed at the Agriculture and Fisheries Council. Overall, the aggregate
quotas for the whitefish stocks remained stable with a reduction of just 3% between
2007 and 2009. However on a per species basis some of the key driver stocks, such as
cod, saw reductions of 20%.
27
A more detailed note on Fuel prices 2002-2009 can be found at Appendix J 28
A more detailed note on Fish prices 2006-2009 can be found at Appendix K
58
In simple terms profitability is determined by the level of Gross Income and Costs. Gross
Income is the product of Price and Quantity. Costs are dictated by many external factors,
chief among them being the price of oil but also to the efficiency fishing trips. Of the key
drivers decommissioning can have a positive effect on the quantity landed and the efficiency
of fishing expeditions.
Analysis of Gross Income with and without Decommissioning
Using estimated Income figures it is possible to come up with a simple estimate of what the
gross income per kW would have been in the absence of decommissioning. Assuming all
other factors remain constant over the years 2007 – 2010, then the total income observed
would have been apportioned out over the pre-decommissioning fleet, which for this analysis
is assumed to be the fleet size (kW) in 2007. The results of this are shown below:
Figure 6.1: Income from Fishing 2007-2010
This analysis must be qualified by acknowledging that there may have been different results
for the fleet if the numbers therein had remained the same as pre-decommissioning.
€0
€200
€400
€600
€800
€1,000
€1,200
€1,400
€1,600
€1,800
€2,000
2007 2008 2009 2010
Income
From
Fishing
(€/kw)
Income from fishing (€/kW) - With Decommissioning Income from fishing (€/kW) - Without Decommissioning
59
Net Profit
As demonstrated above, gross income fell by 43% between 2007 and 2009 but rose again to
2007 levels in 2010. The profitability of > 18m fishing vessels, as calculated from survey
data collected for the EU (see Appendix F) declined from 19% in 2007 to 10% in 2008 and
13% in 2009 but is estimated, based on quota uptake figures, to have increased again to 17%
in 2010. The under-lying cause of the decline in profitability was primarily due to a
significant fall in fish prices, a reduction in time spent at sea and increased oil prices.
Conclusions on Decommissioning and Viability
The viability of the fleet is hugely influenced by external factors such as fuel prices and
fish prices. Analysis for this VFM showed that fleet profitability fell in 2009, the first full
year post-decommissioning, but has increased in 2010 as has quota uptake. This suggests
that the effectiveness of the schemes in terms of fleet viability can only be properly
assessed after a number of years post-decommissioning. The Steering Group recommends
that the effectiveness measures should be monitored on an on-going basis to provide a
long-term assessment of the scheme.
As demonstrated above, while the value of landings fell by 43% between 2007 and 2009,
the fall in fishing incomes fell by 22%. Analysis for this VFM also shows that incomes in
2010 were back at 2007 levels. This suggests that the Decommissioning Scheme has the
potential to offer better long-term viability to the fleet by reducing the vulnerability to
the impacts of external factors on fishing incomes.
The Programme Logic Model in Chapter 2 made the direct link between uptake of
opportunities to land more fish and increased viability. The conclusions on viability are
very similar to the conclusions on Quota uptake in 6.2 above i.e. there was no evidence
that the remaining fleet took the opportunity to land extra fish in 2009 but that they did in
2010.
Profitability fell in 2009, the first full year post decommissioning. A reduced price of fish
was the main factor in this reduction. The remaining fleet did not increase the tonnage
landed to compensate for the lower price.
Increased efficiency of fishing expeditions in terms of kg landed per kW/day would have
had a positive effect on profitability and increased efficiency can be linked to
decommissioning as less vessels chasing limited stocks will do so more efficiently.
60
Similar to the conclusions on Quota take-up, increased landings in 2010 are expected to
contribute to higher percentage net profits.
External factors have a huge influence on profitability and on the decision making of
fishermen. Unless external factors are so negative as to dampen the incentive to fish then
decommissioning should have a positive long-term impact on viability and profitability of
the remaining fleet.
6.6 Fleet Impact
The policy of fleet restructuring pursued through the Fleet Development Measure and the
2005 and 2008 Decommissioning Schemes was intended to ensure that the national whitefish
fleet provided a safe, modern, fleet for the fishing industry. One measure of this is the age of
the fleet.
Under normal circumstances, if the fleet is denied any investment – it remains static – then
year-on-year the average age of this fleet will increase by 1 year (broken line in Figure 6.3
below).
Chart 6.2: Age of Polyvalent Fleet in 2007
Age of Polyvalent General Flet in 2007 prior to Decommissioning
0
5
10
15
20
25
30
0 < Age ≤ 5 5 < Age ≤ 10 10 < Age ≤ 15 15 < Age ≤ 20 20 < Age ≤ 25 25 < Age ≤ 30 30 < Age ≤ 35 35 < Age
Not Decommissioned Decommissioned
61
While the 2008 scheme did allow vessels of 10 years or more decommission in certain
circumstances, no entrants to the scheme availed of this option so essentially the schemes
were limited to vessels over 15 years of age. In practice the majority of vessels were
considerably older than this and the figure above shows the average age of decommissioned
vessels in the 2008 scheme compared to the overall age profile of the fleets being
decommissioned. It is evident that the result of decommissioning was a lowering of the
average in the remaining fleet.
Figure 6.3: Age of Polyvalent Fleet 2003-2009
Conclusion on Impacts on Fleet Age
The average age29
of the polyvalent general (excluding potting boats and polyvalent
tank-boats, both of which were excluded from fleet renewal and fleet
decommissioning) stood at 21.44 years in 2003.
In the absence of any fleet restructuring (either with or without public aid), by 2009
that fleet might have reached an average age of 27.44 years.
Currently the average age of the Polyvalent (general) fleet stands at 19.62 years.
Currently the average age of the Beam trawl fleet stands at 21.42 years, down from
25.74 years in 2003.
29
Average age of a GT in the fleet or the size (in GTs) weighted age of the fleet.
15
20
25
30
2003 2004 2005 2006 2007 2008 2009
Polyvalent General Beam Trawl Polyvalent Potting Expected
62
6.7 Impacts on Compliance
In 2006 the Cawley Report identified one of the challenges facing the Irish Fishing fleet as:
“Imbalance between catching capacity and resource availability – requiring significant but
managed industry restructuring and rightsizing. Due to declining fish stocks, reduced quotas
and the requirement for strict regulatory compliance, a significant imbalance currently exists
between the available fish resources, which can be sustainably harvested and the catching
capacity of the national fleet. Essentially this means that the current quota allocations are
below viability levels for large sections of the whitefish and pelagic fleet”
Background:
In 2007 the European Court of Auditors carried out an examination of the control,
inspection and sanction systems relating to the rules on conservation of Community
fisheries resources. Their report was published as the Court of Auditors Special Report No
7/2007. The Report defined Overcapacity as “a fleet‟s excess catch capacity relative to the
level of catch that would allow the resource to be sustainably exploited‖ and noted that
“Overcapacity encourages over-fishing‖. They went onto state that “It influences the
behaviour of the industry and the legislator, by reducing the profitability of enterprises in the
sector, which have to bear the costs associated with the overcapacity of their means of
production.”
In addition the report stated ―The fishing industry is exposed to the temptation of exploiting
its over-sized vessels to the full and to fish beyond the authorised limits. There is a risk of
their under declaring their catches or throwing the less profitable part overboard‖.
In its report the Auditors recommended a Reduction of overcapacity and stated that:
―The efforts made by the Member States and the Commission in order to reduce the pressure
of excessive fishing must be reinforced by setting ambitious targets for capacity reduction
and adopting socio-economic measures to benefit populations which make their living by
fishing.‖
Compliance and Decommissioning in the Irish Context:
In the time period of the decommissioning scheme from 2007 to 2009 other important factors
at play in Ireland which increased compliance were:
- Establishment of the Sea Fisheries Protection Authority in 2007.
63
- High fuel prices and static fish prices.
- Introduction of a more stringent effort management regime in the Irish Sea and
West of Scotland and the introduction of technical measures in West of Scotland.
- Development of a Culture of Compliance in the fishing Industry.
- Introduction of more responsible fishing practices advocated by groups such as
the Marine Stewardship Council.
- Increases in quotas in some stocks.
A cursory analysis of available fishing opportunities prior to decommissioning in 2007 and
post decommissioning in 2009 shows that for the main whitefish stocks there were generally
increased quotas available in 2009 and fisheries that traditionally would not have remained
open for the full year because of uptake remained open in 2009.
Examples of this include Cod in Area VII excluding VIIa, Monk in Areas VI and VII, Hake
in Areas VI & VII and Nephrops in Area VII.
Conclusion: As outlined above Fleet overcapacity has been identified as a contributory factor
to non compliance. There are also many other factors which affect compliance and therefore
it is not possible to show a direct correlation between decommissioning and improved
compliance. However the increased availability of fishing opportunities (quotas) to those that
remained in the fleet post Decommissioning is a contributory factor to increased compliance.
6.8 Environmental Benefits
While the objectives of decommissioning schemes are primarily focused on improving
profitability of remaining vessels via increased quota availability, there are subsidiary
ecosystem benefits as a result of removal of fishing capacity and effort. In the case of the
2005/06 and 2008 Irish decommissioning schemes, two fisheries, the beam trawl fishery
targeting flatfish species such as sole and plaice and the otter trawl fishery targeting
Nephrops saw the highest levels of capacity removal. Both of these fisheries are well
documented as being associated with high levels of discards, due to the capture of non-
commercial fish species and due to the relatively small mesh size used, the capture of
commercial fish species below minimum landing size. The Marine Institute data observer
64
programme estimates that discard rates of the overall catch in both fisheries is in excess of
60% and contribute a significant source of unwanted fishing mortality for both commercial
and non-commercial species.
As a consequence, the reductions in fishing effort as a result of the decommissioning
programmes will have resulted in commensurate reductions in the absolute levels of discards
in the areas where both of these fleets operate. This makes a significant contribution to the
reductions in discards which is a primary objective of the EU Common Fisheries Policy and
an area that has received considerable media focus in recent months. Additionally, the
reduction in beam trawl capacity will have led to a decrease in both the carbon and benthic
(seabed) impact associated with this fleet. Beam trawl nets are heavily constructed and
require considerable engine power, and therefore fuel consumption, for their operation and
fuel requirements are well in excess of any other fishing method. The weight and
construction of beam trawls is also acknowledged to have the largest impact on sea bed
ecosystem communities due the use of heavy chains used to 'dig out' the target species. The
resultant reduction in fishing effort of this fleet, will by default, have significantly reduced
the ecosystem impact associated with this type of fishing method.
_____________________
65
Chapter 7: Performance Indicators
7.1 What are Performance Indicators?
This Chapter considers the performance indicators in place for the Decommissioning scheme
and makes recommendations in regard to the possible use of additional indicators which
could be used to ensure improved monitoring of the performance of the Scheme. Performance
Indicators (PIs) are developed to aid programme management and review by setting targets
and standards against which performance can be benchmarked. Performance Indicators are a
means to an end. They are a key component of the reporting structures to meet governance
accountability and management requirements (Department of Finance, 2002).
The Department of Finance30
set out nine key characteristics of good performance indicators:
1. Appropriateness - the user must be able to associate the information to the activity,
output or outcome being reported.
2. Accuracy: data should be as free of errors as possible
3. Comprehensiveness – all facets of performance must be captured by the data
4. Consistency – There should be internal consistency so that where indicators are
grouped, they should not deliver mixed messages on performance
5. Manageability – The collection of data should be cost effective and integrated within
reporting structures. Results should be delivered in an understandable format and
management should play an active role in ensuring data quality.
6. Relevance – The information provided by the indicators should be what the user
actually wants
7. Timely – The most recent available data should be used
8. Verifiable – indicators should be accurate and objective and should meet the standards
of an independent examination
9. Validity – they should cover actual performance.
7.2 Current Performance Indicators
The indicators used to monitor the performance of the decommissioning scheme to date can
best be divided into three categories:
30
Management Information Framework – Performance Indicators: a Users‘ Guide
66
Table 7.1: Performance Indicators
Input Output Outcome
DAFM Funds
EU Funds
DAFM/BIM staff
involved in the scheme
Number of vessels scrapped
Reduced Irish whitefish
fleet
7.3 Future Performance Indicators:
1. BIM had also undertaken some work on the issue of the profitability of the remaining
fleet which has been continued and expanded in this review, but it might be worth
considering additional effectiveness indicators for any future scheme. This can be
modelled on Chapter 6 of this Review through measuring the contribution of
decommissioned vessels i.e. Catches of decommissioned vessels as a % of available quota
= available quota for remaining fleet
2. As the objective of this scheme is to improve long-term the viability of the whitefish fleet,
on-going assessment of the effectiveness measures outlined in this Review should
continue, for example:
Table 7.2: Performance Indicators
Category Effectiveness Measure Update Required
Quota uptake Quota Uptake for the >18 fleet Annually
Landings Value of whitefish Landings Annually
Viability Fishing Income (€/kw) Annually
Viability Net Profit Annually
Fleet Efficiency Volume of Landings (kg/kw/day) Annually
Environmental Benefits Level of Discards As appropriate
Biological Benefits Stock Benefits As appropriate
__________________
67
Chapter 8: Summary and Lessons Learned
8.1 Summary
In summary, the Steering Group concluded that:
The decommissioning schemes achieved 71% of their target for capacity reduction by
removing 10,230 GT at a cost of €48.4m.
The rates of payment for the 2005/06 scheme were increased for the 2008 scheme which
resulted in a higher take-up for the 2008 element of the scheme. The rates of payment in
both schemes are analysed in this Review using seven different criteria and the Steering
Group concluded that these rates were reasonable.
The level of deadweight was very low primarily because the management rules for the
fleet mean that there is no reason for a vessel owner to voluntarily decommission a vessel
as its tonnage remains a tradable commodity.
Re-entry to the fleet by beneficiaries of the scheme was not a significant factor based on
an analysis of the net fleet reductions from 2007-2009.
Quota availability to the remaining fleet was improved by the decommissioning schemes
and access to freed-up quotas should improve the long-term viability of the fleet although
this will need to be assessed over a longer period.
Quota uptake by the remaining vessels is the key to the effectiveness of
decommissioning. The extra quota available to the fleet in 2009 as a result of the
decommissioning schemes was not used although this may be explained by the impact of
external factors particularly low fish prices. Quota uptake figures for 2010 indicate that
landings by the remaining fleet have increased significantly demonstrating that when
conditions are favourable the benefits of extra quota can be realised.
68
The viability of the fleet is hugely influenced by external factors such as fuel prices and
fish prices. Analysis for this VFM showed that fleet profitability fell in 2009, the first full
year post-decommissioning, but has increased in 2010 as has quota uptake. This suggests
that the effectiveness of the schemes in terms of fleet viability can only be properly
assessed after a number of years post-decommissioning and the Steering Group
recommends that the effectiveness measures should be monitored on an on-going basis to
provide a long-term assessment of the scheme.
In addition to the above, the Steering Group concluded that the scheme:
o Improved the efficiency of fishing operations from 2007-2009 as fishermen
landed 27% more in landings weight per kw per day;
o Positively impacted on the fleet by reducing the average age of vessels;
o Incentivised better compliance with fishing Regulations by making available
additional quota;
o Brought about subsidiary ecosystem and biological benefits, for example an
anticipated reduction in the area of discards.
Finally, should a fleet re-structuring initiative be considered in future, the Steering Group
believes that certain lessons have been learned from this Review which could inform
future policy in the area. In this context, the Steering Group has made a number of
observations which can be found below in Section 8.2.
8.2 Lessons Learned
Re-Entry/Efficiency
I: Where it is determined that there is overcapacity in the fishing fleet, all options should be
examined that would address such overcapacity before any funding for structural fleet change
is made available. Other options could involve all or part of the overcapacity to be addressed
through industry buy out e.g. in the form of greater than 100% replacement requirement for
new and replacement vessels.
II: Any future schemes should be preceded, where possible, by more thorough ring-fencing
of individual fisheries in term of fleet size and geographic constraints.
69
Future Scheme
III: The selection criteria for any future scheme should give greater weighting to the catch
record of vessels in order to prioritise the removal of more active vessels.
IV: Further consideration should be given to widening the scope of any future scheme to
vessels between 12m and 18m in length, subject to an ex-ante assessment of their impact on
key quota species and the effectiveness and costs of such a measure.
Funding
V: In the event that future funding for fleet re-structuring becomes available, some
consideration should be given to any future decommissioning funding prioritising the
removal of inactive tonnage, especially given that the purchase of inactive tonnage could be
done with a lower rate of payment, through a closed tendering system by the vessel owners.
This type of measure is currently not permitted under EU State Aid rules for fisheries and
would require an individual case to be made to the European Commission.
VI: The premium rates for any future scheme should be at a level benchmarked against the
market value of vessels introduced to the fleet in the preceding six months.
Complementary Measures
VII: The fishing industry needs to prioritise consideration of measures regarding the quota
management system with a view to coming forward with appropriate proposals.
Performance Indicators
VIII: Performance Indicators are provided for future assessment of the performance of these
schemes.
_________________________
70
71
Appendix A: Programme Logic Model
Objectives
Input Activity Output
Result Impact
To bring about a
structural change in
the fishing industry
that will provide for
the long-term
economic viability of
fishermen that remain
in the fleet.
Exchequer
funding/support
Co-funding under the
FIFG and the EFF
DAFM, BIM and
SFPA staff resources
Designing Schemes
Consultation with
Sector
Securing EU State
Aid clearance
Processing
applications
Verifying Eligibility
Making Payments
Fishing Capacity
decommissioned
Remaining fishermen
availing of increased
opportunities brought
about by
decommissioning.
Improvement in the
long term economic
viability of the
remaining fleet.
72
Appendix B: Methodology
Fisheries VFM methodology
This table outlines the main issues to be addressed in the VFM in terms of whether it delivered value for money and delivered on its original intentions.
Question How will it be
measured?
External Factors Data Required Who will provide
data?
How many vessels were
decommissioned?
Measured in Gross Tonnage Decommissioned vessels BIM
Was all the allocated
expenditure spent?
Measured in level of
expenditure
Expenditure BIM/DAFF
How did the scheme
compare with other EU MS
decommissioning schemes
GT decommissioned /euro Different criteria for other
schemes
Details of decommissioning
schemes in other MS
Other EU MS administrations
73
Did the scheme deliver on
profitability for the
remaining fleet?
Has the % reduction in fleet
size resulted in same % rise
in available landings.
Calculated on 1:1 basis
Has the % reduction in fleet
size result in same %
reduction in fishing effort.
Calculated on 1:1 basis
State of the stock
Effort limitations
Displacement of effort
Oil prices
Market price for fish
Catch data and effort 1998-
2009 for decommissioned
vessels
MI to analyse catches and
effort for decommissioned
vessels
Questionnaire of scheme
beneficiaries
Have the non-
implementation of all Cawley
recommendations re. Quota
and fleet management
lessened the impact of
decommissioning?
Brief analysis of potential
impact of fleet and quota
management
recommendations (paras
5.1/5.2/5.4)
MI/BIM
74
Has there been re-entry into
the fleet by owners who
have decommissioned?
Fleet size Latent tonnage Fishing register from 2005-
2010
Licensing section DAFF
EU Fishing fleet register
Questionnaire of scheme
beneficiaries
Staff costs for design and
administration of the
scheme
Hours worked at 2005-2008
pay rates by staff
No. of staff and time spent
on the scheme.
BIM and Seafood policy to
calculate
75
Appendix C: Questionnaires
Two questionnaires were sent to vessels owners in June 2010 and are re-produced below
along with the responses.
DECOMMISSIONING SCHEME QUESTIONNAIRE
Dear Sir/Madam,
The Department of Agriculture, Fisheries & Food is currently undertaking a Value for Money Study of
the whitefish fleet decommissioning schemes from 2005/06 and 2008.
This Study will examine all aspects of the scheme and is overseen by a Steering Committee. This
Committee is interested in hearing the views of those involved in the industry – including both those
who have availed of the scheme and as well as those who have not.
The Committee would like to encourage you to respond as this is an important evaluation which will
be used to inform policy on fleet management and capacity in the future.
Please note that questionnaire is completely anonymous and you are not requested to identify
yourself anywhere and your identity will not be sought in relation to any of your answers.
The completed questionnaire should be returned to Colm Hayes within 10 days (and no later than 15
July) in the prepaid addressed envelope provided.
We would like to thank you in advance for your assistance.
76
Decommissioning Survey I31
Section A: Respondent Profile
1. Which County are you located in?
2. What age are you? 18-30 0% 31-45 27%
45-64 55% >65 18%
3. Do you come from a fishing family? Yes 64% No 36%
4. What age did you start fishing? <18 82% 18-30 14%
>30 5%
5. What age were you when you bought your 18-30 68% 31-45 27%
first boat?
>45 5%
6. What age were you when you bought the vessel that you applied for the decommissioning scheme?
18-30 5% 31-45 63%
>45 32%
7. Before decommissioning, was fishing your main occupation?
Yes
95%
No
5%
8. What was your main reason for applying for the decommissioning scheme? (Please tick one only)
(i) Age and condition of the vessel?
53%
(ii) Your own age and retirement?
5%
(iii) Significant borrowings/bank debt?
11%
(iv) Upgrade to a more modern vessel?
11%
(v) You did not see an economic future in fishing?
21%
31
This questionnaire was sent to vessel owners who applied for the scheme and the response rate was 22%.
77
(vi) Other (please specify)
9. Do think the eligibility criteria for the scheme were fair?
Yes 57% No 33% Don't know 10%
(I) Should it have been restricted to the polyvalent or beam trawl segment of the fleet?
Yes 33% No 52% Don't know 14%
(ii) Restricted to vessels 10 years or more in age?
Yes 76% No 19% Don't know 5%
(iii) Restricted to vessels 18 metres or more in length?
Yes 10% No 81% Don't know 9%
(iv) Have carried out a fishing activity for at least 75 days at sea in both of the two periods of 12 months preceding the scheme, or, have carried out a fishing activity for at least 150 days at sea in the 12-month period preceding the scheme?
Yes 89% No 5% Don't know 6%
10. Please note in the box below, any changes you would have made to the eligibility criteria?
78
11. Do think the selection process for eligible
vessels (i.e. points based system) was fair?
Yes 78% No 22%
12. Please note in the box below, any changes you would have made to the selection criteria?
13. Do you think there should be a further round of decommissioning schemes
Yes 80% No 5% Don't know 15%
14. Are you satisfied with the way the Decommissioning Scheme was administered by BIM and the Department of Agriculture, Fisheries and Food? (Please tick one option only with 1 being very
satisfied and 7 being very dissatisfied).
79
1 2 3 4 5 6 7
26% 16% 16% 21% 5% 5% 11%
15. If you feel aspects of the Decommissioning Scheme could be managed or operated in a different way or if you would like to make any additional comments about the scheme, please note
them in the box below.
If you received an offer under the Decommissioning Scheme please proceed directly to Section 2.
If you did not receive an offer, you may stop now and we thank you for completing
the questionnaire.
Section 2: Take-up of Scheme offer
Note: 20% of respondents stopped after Section 1 as they applied for the scheme but did not receive an offer
1. Did you accept the offer made to you under the Decommissioning Scheme?
Yes 88% No 12%
2. If you did not accept the offer, what was the reason for this?
(i) Decided against leaving the industry:
50%
(ii) The amount offered was too low
50%
(iii) The bank would not allow you to decommission
(iv) Other reason (please specify below)
80
If you did not accept an offer, you may stop here. We thank you for taking time to complete this questionnaire
If you did receive an offer, please proceed to Section 3 below.
Section 3: The Decommissioning Grant and its use
1. How did you fund the original purchase of your vessel? (You can tick more than one option if appropriate)
Bank Loans 70%
Public grants 5%
Working Capital 25%
Private Loan
Other (please specify)
2. If you took out a loan from a financial institution when you originally bought the vessel decommissioned, how much was this for?
(i) less than 25% of the purchase price
(ii) 24-49% of the purchase price
14%
(iii) 50-75% of the pruchase price
43%
(iv) More than 75% of the purchase price
43%
3. When you decommissioned your boat, how much of the final payment you received went to pay off an outstanding loan from a financial institution?
(i) Zero % - I had no loan or did not pay off any loan
32%
(ii) Less than 25% of the decommission premium received 12%
(iii) 25-49% of the decommission premium received
32%
(iv) 50-75% of the decommission premium received
12%
(v) More than 75% of the decommissioning premium received 12%
81
4. What did you use the balance of the decommissioning premium for?
Retirement Fund
27%
investment in non-fishing 7%
related business
Investment in fishing boat 53%
Other
13% or fisheries related business
If you re-invested in the fishing industry, can you provide more general details as to
the nature of the investment e.g. processing,
fishing, aquaculture etc.
5. Do you agree or disagree with the following statements?
(a) I would have ceased fishing without the decommissioning scheme being put in place
(i) Agree Strongly
(ii) Agree
(iii) Neither agree nor disagree 21%
(iv) Disagree
37%
(v) Disagree Strongly
43%
(b) The decommissioning scheme allowed me to cease fishing a number of years earlier than
would otherwise have been the case
(ii) Agree Strongly
7%
(ii) Agree
29%
(iii) Neither agree nor disagree 14%
82
(iv) Disagree
14%
(v) Disagree Strongly
36%
6. If you had not received a grant through the Decommissioning Scheme, do you think you would have:
(i) continued fishing as before
47%
(ii) Moth-balled the vessel
(iii) Sold the vessel
20%
(iv) Leased the vessel
(v) Don't know
33%
(vi) Other (please specify)
7. In your opinion, is fishing now a more viable business than when you started in the industry?
Yes 6% No 67% Don't know 27%
8. In your opinion, is fishing now a more viable business as a result of the decommissioning scheme
Yes 27% No 40% Don't know 33%
Thank you for completing this questionnaire
You can also make direct contact with the Committee undertaking the Review if you wish.
The contact details are: Colm Hayes
Economics & Planning Division
Agriculture House
Kildare Street
Dublin 2
Tel: 01-6072240
83
Decommissioning Scheme Survey II32
1. Which County are you located in?
2. What age are you? 18-30 4% 31-45 41%
45-64 56% >65
3. Do you come from a fishing family? Yes 86% No 14%
4. What age did you start fishing? <18 81% 18-30 15%
>30 4%
5. What age were you when you bought your first boat? 18-30 78% 31-45 22%
>45 0%
6. Is fishing your main occupation?
Yes
100%
No
0%
7. Did you consider applying for the whitefish decommissioning scheme in 2005/06-08?
Yes
52%
No
48%
8. Which of these was your main reason for not applying for the decommissioning scheme (Please
tick one only)
(i) Age and condition of the vessel?
40%
(ii) The level of funding for the scheme?
25%
(iii) Your business is
25%
32 This survey was circulated to vessel owners in the eligible fleet who remain in the industry. The
response rate was 49%.
84
profitable
(v) Saw an economic future in fishing
10%
(vi) other (please specify)
9. If a decommissioning scheme was being run again now would you apply ?
Yes
74%
No
26%
10. In your opinion, is fishing now a more viable business as a direct result of the decommissioning
scheme
Yes 25% No 57% Don't know 18%
Thank You for completing this questionnaire
You can also make direct contact with the Committee undertaking the Review if you wish.
The contact details are: Colm Hayes
Economics & Planning Division
Agriculture House
Kildare Street
Dublin 2
Tel; 01-6072240
email: [email protected]
85
Appendix D: Taxation Treatment of Decommissioning payments
Decommissioning of Fishing Vessels
Introduction
The 2008 Decommissioning Scheme (―the Scheme‖) was implemented by the Minister for
Agriculture, Fisheries and Food in accordance with Council Regulation (EC) No.1198/2006
of 27 July 2006. It provides for payments to fishing vessel owners in exchange for the
permanent withdrawal of the vessels from the whitefish sector of the Irish fishing fleet and
their removal from the EU register of sea fishing vessels.
Treatment of Decommissioning Payments
Payments received under the Scheme are capital receipts and chargeable to tax under the
Capital Gains Tax (CGT) regime. For CGT purposes the relevant chargeable assets are the
decommissioned vessel and the attaching tonnage. Payments should be apportioned between
both assets by reference to their market value at the time of disposal and separate
computations should be prepared on that basis.
Time of Disposal
For CGT purposes the time of disposal is the date the licence for the decommissioned vessel
is surrendered in accordance with the terms of the scheme.
Costs/Receipts associated with the Permanent Disposal or Scrapping of Vessels These costs are not strictly deductible under section 552 TCA 1997. However, as it is a
requirement of the Scheme that decommissioned vessels are permanently disposed of or
scrapped, costs incurred for that purpose may be deducted from the part of the
decommissioning payment attributable to the vessel when computing the gain or loss on the
vessel. Any amount received by the owner on disposal or scrapping should be added to the
part of the payment attributable to the vessel.
Retirement Relief
Section 598 Taxes Consolidation Act 1997 provides for retirement relief on the disposal of
―qualifying assets‖ by an individual who is aged 55 years or over. ―Qualifying assets‖ include
assets used for the purposes of an individual‘s trade which, apart from tangible movable
property, he/she has owned and used for that purpose throughout the 10 year period ending
with their disposal.
Section 54 Finance Act 2008, which is operative from 1 May 2008, amends section 598. It
reduces the age limit to from 55 years to 45 years and the periods of ownership and use
requirements from 10 years to 6 years for payments received under the Scheme.
While retirement relief can apply to gains accruing on both fishing vessels and tonnage, it
should be noted that the ownership and use requirements referred to above do not apply to
vessels as they are tangible movable property. They do, however, apply to tonnage. Where a
vessel is replaced, additional tonnage may be required to meet the capacity of the
86
replacement vessel. For the purpose of section 598 (3A) TCA 1997 tonnage acquired for this
purpose in the six years prior to decommissioning may be treated as having been acquired at
the same time, and having been used in the same manner, as the tonnage attaching to the
replaced vessel.
Loss or destruction of an asset
Section 536 TCA 1997 allows for deferment of a CGT charge in certain circumstances where
compensation is received for assets lost or destroyed and where the amount received is used
in acquiring a replacement asset.
While it is not absolutely clear in the case of a voluntary disposal that an asset is lost or
destroyed, Revenue will, without prejudice, consider claims under section 536 (2) where the
part of the compensation attributable to tonnage is applied, within 12 months of receipt, in
acquiring replacement tonnage.
This treatment does not apply to fishing vessels as they are wasting assets for CGT purposes.
Capital Allowances
Because the vessel ceases to belong to the person carrying on the fishing trade a balancing
event occurs in accordance with section 288 TCA, 1997. The amount to be taken into
account for the purposes of calculating any balancing allowance or charge is the part of the
decommissioning payment attributable to the vessel plus any payment received on the
disposal or scrapping of the vessel. The part of the payment attributable to tonnage is not to
be taken into account. This is because capital allowances are not available for expenditure
incurred on the acquisition of tonnage. Where allowances have mistakenly been claimed on
such expenditure, any adjustments required to reflect the correct position should be made.
Section 30 Finance Act 2008, which is operative from 17 April 2008 provides that a
balancing charge arising as a result of payments received under the Scheme will be spread
over 5 years, commencing in the year in which the payment is paid.
Section 27 amends section 288 of the Taxes Consolidation Act 1997 which is concerned with
balancing charges on disposal of plant and machinery. Under the latest European
Communities initiative concerning compensation for decommissioning of fishing vessels, if a
balancing charge arises as a result of this compensation the charge will be spread over 5
years, commencing in the year in which the compensation is paid.
Decommissioning of fishing vessels: amendment of section 288 (balancing allowances
and balancing charges) of Principal Act.
27.—(1) Section 288 of the Principal Act is amended by inserting the following after
subsection (6):
(6A) (a) Where—
the sale, insurance, salvage or compensation moneys consist of a payment or payments
to a person under the scheme for compensation in respect of the decommissioning of
fishing vessels implemented by the Minister for Agriculture, Fisheries and Food in
accordance with Council Regulation (EC) No. 1198/2006 of 27 July 20061, and
87
on account of the receipt by the person of such payment or payments, a balancing
charge is to be made on the person for any chargeable period other than by virtue of
paragraph (b),
then, the amount on which the balancing charge is to be made for that chargeable period
shall be an amount equal to one-fifth of the amount (in this subsection referred to as
‗the original amount‘) on which the balancing charge would but for this subsection have
been made.
Capital Gains Tax
Section 48 makes three amendments to Chapter 6 of Part 19 of the Taxes Consolidation Act
1997, which relates to transfers of business assets.
The first amendment gives effect to the proposal in the Budget statement to the effect that the
taxation code would be amended to assist the take-up of the scheme for the decommissioning
of fishing vessels. This is being done by granting relief under section 598 of the Taxes
Consolidation Act 1997 (i.e. "retirement relief") in respect of compensation payments made
under the scheme for the decommissioning of fishing vessels implemented by the Minister
for Agriculture, Fisheries and Food in accordance with Council Regulation (EC) No.
1198/2006 of 27 July 2006. In order for the relief to apply, the person who received the
compensation payment must have owned and used the fishing vessel for the period of 6 years
prior to the receipt of that payment and must have been at least 45 years of age at that time.
The first amendment is subject to a Ministerial commencement order.
The second amendment ensures that relief under section 598 will not apply where the sale or
main purpose of the disposal of qualifying assets is the avoidance of tax and not for genuine
commercial reasons.
The third amendment gives effect to the proposal in the Budget statement to grant relief to
farming partnerships on the dissolution of such partnerships.
Amendment of Chapter 6 (transfers of business assets) of Part 19 of Principal Act.
48.—The Principal Act is amended—
(a) in section 598—
(i) by inserting the following after subsection (3):
‗‗(3A) Where compensation has been received by a person under the scheme
for compensation in respect of the decommissioning of fishing vessels
implemented by the Minister for Agriculture, Fisheries and Food in accordance
with Council Regulation (EC) No. 1198/2006 of 27 July 20061, relief under
subsection (2) shall apply as if the period referred to in paragraph (i) of the
definition of ‗qualifying assets‘ in subsection (1)(a) were 6 years 30 and the age
referred to in subsection (2) were 45 years.‘‘, and
88
Appendix E: Calculation of the Scheme Premium
2005/06 Scheme
The decommissioning scheme introduced in 2005, unlike the 2008 scheme dealt with below,
provided for decommissioning payments constrained at the maximum levels permitted by EU
Regulations (COUNCIL REGULATION (EC) No 2792/1999) for vessels in the polyvalent
and beam trawl segments of the fleet and for decommissioning payments at the maximum
levels permitted by EU Regulations minus 15% for scallop boats in the specific segment.
2008 Scheme
Unlike the situation in 2005, maximum payments available under the 2008 decommissioning
scheme were not constrained by way of Regulation, rather member states were free, within
certain guidelines, to frame payments best suited to achieving the overall aims of the
programme taking into account local circumstances. To that end, the Seafood Industry
Strategy Review Group, in their report of 2006, provided quite concise recommendations,
which were subsequently agreed by Government and incorporated into the detailed
conditions of the scheme as published.
Report of the Seafood Industry Strategy Review Group
Extend and develop the current Decommissioning Programme to bring about a
better alignment between fleet capacity and resource availability through the
permanent removal of 45% of the capacity of the demersal fleet 18 metres in length
and over, which has been partly (10%) achieved through the present
decommissioning scheme. The pace of decommissioning can be quickened by
providing an incentive premium for a defined time period, a selective reduction in
the qualifying age of vessels and by treating decommissioning monies as capital
gains rather than income for tax purposes. A proportion of the overall fund for
restructuring should be set aside to support crewmembers impacted by the
Decommissioning Programme.
Rates of Decommissioning - Incentive Premium
Having considered all of the issues surrounding the rates of grant aid made
available for decommissioning, the Group recommends that decommissioning
premiums for vessels with a demonstrable track-record of targeting pressure
stocks, should (within the context of an agreed programme) be increased by up to
50%.
Bord Iascaigh Mhara, the agency tasked with implementing the decommissioning
programme in 2008, formulated that scheme on the principles set out in the
recommendations of the Seafood Industry Strategy Review Group. Prior to its launch
however the financial parameters of the scheme (as drafted) were subject to two
separate evaluations:
89
The first of these was a ―cost effectiveness evaluation‖ undertaken by BIM for the
European Commission. In particular this analysis addressed the question, ―in order to
ensure that there will be no over-compensation, you are kindly requested to provide
the Commission with: i) Information on the (a) average market and (b) insurance
value for fishing vessels and licenses as subject to the scheme and the
cost/effectiveness ratio, and ii) Background information on the basis on which you
established the maximum level of grant aid.
The second was a cost benefit analysis, carried out for the Department of Agriculture,
Fisheries and Food, by independent consultants (KPMG) in line with Guidelines for
the Appraisal and Management of Capital Expenditure Proposals in the Public Sector
issued by the Department of Finance. This concluded that ―the proposed
Decommissioning Scheme offers the best value for money for the Government. The
Scheme reduces the risks of EU imposed fines, and delivers against the stated
objectives of the Scheme and the requirements of the CFP‖. It further states that ―this
Cost Benefit Analysis concludes that the proposed Decommissioning Scheme is the
preferred option‖. (Reference: Cost Benefit Analysis: Building a Sustainable Future
for Ireland‘s Fishing Fleet. KPMG, October 2007).
1 ) It is important to note that both the 2005 and the 2008 schemes took place in an
environment where whitefish vessels continued to trade in a second-hand market, and
where there remained a demand for such vessels.
2 ) In addressing the questions posed by the European Commission, BIM collected
information on 12 fishing vessels that had been introduced into the Irish whitefish fleet
in the 18 months prior to the scheme. All were whitefish vessels, from the second-hand
market, and represented typical examples of the type of boat traded by the whitefish
sector.
3 ) BIM also considered a further 6 vessels then available on the second-hand market.
While these vessels had not been introduced to the fleet they none-the-less represented
typical examples of the second-hand market for fishing vessels available to the Irish
catching sector.
4 ) It was evident that the scheme had to ‗compete‘ on price with a normal ‗market‘ for
second-hand whitefish vessels, and the decommissioning grants offered would be
compared by prospective applicants against the perceived value their own vessel might
have in such a market.
Results:
Following the analysis undertaken by BIM (and later by KPMG) it was established that:
The 2008 scheme was designed to provide decommissioning grants having an average
value of €5,200 per Gross Tonne with the actual payment dependent on the age, catch
history etc of the individual applicants. The final cost of the scheme resulted in an
average payment of €5,262 per GT. This was equivalent to 83% of the value achieved
on the open market by the 12 vessels introduced in the 18 months prior to the scheme
(point 2 above) and 65% of the value asked for the 6 vessels then available on the
second-hand market (point 3 above).
90
Judged against the ‗basic decommissioning‘ payment of €3,500 per GT set out in the
2008 scheme: the basic payment was 56% of the cost of those vessels recently
introduced and 43% of the cost of those vessels currently on the market.
Judged against the maximum decommissioning payment of €7,500 per GT – adjusted
for the age of each vessel, the maximum allowable payment is 97% of the cost of
those vessels recently introduced and 78% of the cost of those vessels currently on the
market.
If, as had been the case in 2005, rates for the 2008 scheme had been calculated on the
basis of COUNCIL REGULATION (EC) No 2792/1999, payments would have been
64% of the cost of those vessels recently introduced and 49% of the cost of those
vessels currently on the market.
The 2005 scheme, with maximum grant aid constrained by COUNCIL
REGULATION (EC) No 2792/1999 resulted in the decommissioning of only 26
polyvalent vessels (over 18 metres) amounting to 3,178 gross tonnes. This was some
10% of the over 18 metre whitefish capacity whereas the objective of the scheme had
been to remove 25% (10,937 gross tonnes).
It was concluded that the decommissioning grants offered using the 2005 constraints
(that is, 64% of the cost of those vessels recently introduced in 2007/08 and 49% of
the cost of those vessels currently on the market in 2008) would not compete
effectively with the then second-hand market price and that such a scheme was
unlikely to achieve an uptake rate significantly greater than that experienced in
2005/6.
The average decommissioning grant calculated for the 2008 scheme was instead
equivalent to 83% (rather than 64%) of the value achieved on the open market by the
12 vessels introduced in the 18 months prior to the scheme (point 2 above) and 65%
(rather than 49%) of the value asked for the 6 vessels then available on the second-
hand market (point 3 above).
Only in the case of vessels meeting the highest parameters of the scheme (that is
newest boats, with highest track record of catching specified stocks etc.) would the
rate rise to the maximum; that is 97% of the cost of those vessels recently introduced
and 78% of the cost of those vessels currently on the market.
That this latter scenario was not the ‗norm‘ in the scheme is evidenced by the
outcome; on average grants paid amounted to €5,262 per GT and, consequently, on
average the scheme was equivalent to 83% and 65% of the second-hand market value
respectively.
Unlike the 2005/6 scheme uptake for the 2008 scheme amounted to 46 vessels with a
total capacity of 6,913 gross tonnes; more than twice that achieved in the 2005/6
scheme.
A total of 12 owners (21% of applicants by number or 23% by capacity) withdrew
from the scheme after a formal offer had been made. One might surmise that at least
some of these considered the grants on offer too low.
91
Appendix F: Model Parameters for Calculation of Fishing Income
Model Parameters
Vessel owners provided the following parameters for the 2007 – 2009 economic surveys. In
most cases data were provided by, or, verified by accountants.
1 ) Total Income
Fishing income +
Non fishing income
2 ) Operating Costs
Crew share out
Fuel oil
Repairs
3 ) Variable Costs
Filters
Provisions
Handling fees
Commission
Transport
Ice
Harbour Dues
Other Variable Costs
4 ) Non Variable Costs
Insurance
Loan interest
Bank charges
Accountancy Fees
Subscriptions
Motor & travel
Legal fees
Telephone
Other fixed Costs
5 ) Total costs
Operating costs + Variable Costs + Non Variable Costs
6 ) Gross Profit:
Total Income (1) – Total Costs (5)
92
Appendix G: Fishing Income and Costs 2007-2009
2007 2008 2009
Capacity of vessels sampled (kW) 10,202 12,746 9,907
Capacity of vessels sampled (GT) 3,810 4,760 3,700
Vessels Sampled 18 24 19
AVERAGE
Fishing income €948,341 €817,620 €677,893
Non fishing income €31,987 €20,809 €24,120
Total Income €980,328 €838,429 €702,014
Crew share out €245,370 €205,646 €188,892
Fuel oil €214,066 €227,881 €181,862
Repairs €122,010 €101,578 €94,728
Operating Costs €581,446 €535,105 €465,481
Filters €2,233 €1,680 €15,499
Provisions €20,822 €19,264 €18,393
Handling fees €1,287 €1,027 €1,474
Commission €32,103 €31,754 €4,130
Transport €8,474 €6,818 €9,015
Ice €762 €1,191 €2,040
Harbour Dues €5,335 €4,087 €2,710
Other Variable €58,632 €49,524 €21,593
Total Variable Costs €129,647 €115,346 €74,854
Insurance €1,123 €25,507 €18,227
Loan interest €35,411 €29,985 €32,204
Bank Charges €5,531 €6,090 €788
Accountancy Fees €5,134 €4,295 €3,604
Subscriptions €453 €402 €589
Motor & Travel €11,030 €8,858 €7,565
Legal Fees €1,416 €834 €1,368
Telephone €5,956 €5,493 €4,965
Other Fixed €23,247 €25,438 €4,774
Total Non Variable Costs €89,301 €106,901 €74,084
Total costs €800,393 €757,352 €614,420
Gross Profit (EBITD) €179,935 €81,077 €87,594
93
Appendix H: Volume and value of fish caught by Irish Fleet 2007-2010
2007 Quota33
Average Price (€ / tonne
34)
Value of Quota
Landing by vessels > 18
metres
Value of Landings
Cod 1,573 €4,464 €7,021,872 1,786 €7,974,757
Haddock 4,868 €2,162 €10,524,616 3,589 €7,759,958
Whiting 6,702 €1,416 €9,490,032 5,124 €7,255,386
Hake 1,765 €3,238 €5,715,070 1,439 €4,660,032
Monk 3,742 €4,540 €16,988,680 3,494 €15,862,079
Megrim 3,702 €4,252 €15,762,164 2,042 €8,682,882
Plaice 1,083 €2,144 €2,321,952 392 €840,877
Sole 512 €12,046 €6,167,552 278 €3,350,234
Nephrops 10,468 €7,294 €76,353,592 9,286 €67,735,075
Saithe 1,580 €913 €1,442,540 584 €533,612
Pollack 1,231 €2,762 €3,400,022 768 €2,119,945
37,231 €155,188,092 28,783 €126,774,837
2008 Quota Average Price (€ /
tonne)
Value of Quota
Landing by vessels > 18
metres
Value of Landings
Cod 1,450 €3,024 €4,384,800 1,328 €4,016,870
Haddock 4,867 €2,016 €9,811,872 3,413 €6,881,334
Whiting 5,858 €1,716 €10,052,328 2,408 €4,131,424
Hake 1,833 €3,338 €6,118,554 1,359 €4,535,007
Monk 3,470 €4,435 €15,389,450 2,560 €11,353,112
Megrim 3,305 €3,872 €12,796,960 1,468 €5,685,219
Plaice 1,224 €2,053 €2,512,872 191 €392,472
Sole 502 €12,475 €6,262,450 150 €1,867,508
Nephrops 9,719 €6,632 €64,456,408 8,358 €55,430,919
Saithe 1,600 €1,020 €1,632,000 420 €428,716
Pollack 1,231 €2,392 €2,944,552 389 €931,373
35,059 €136,362,246 22,045 €95,653,954
33 These figures include swaps from other Member States and also include flexibility in certain quota
areas under the provision of Article 4.2 of Council Regulation (EC) No.847/96 of 6 May 1996. 34
Value of quota and landings based on sample price data collected by BIM.
94
2009 Quota Average Price (€ /
tonne)
Value of Quota
Landing by vessels > 18
metres
Value of Landings
Cod 1,394 €2,725 €3,798,650 957 €2,608,370
Haddock 4,805 €1,694 €8,139,670 3,303 €5,595,299
Whiting 4,910 €1,423 €6,986,930 2,750 €3,913,705
Hake 1,776 €2,786 €4,947,936 1,497 €4,170,893
Monk 3,555 €4,220 €15,002,100 2,902 €12,247,579
Megrim 3,721 €2,815 €10,474,615 1,719 €4,839,041
Plaice 1,253 €1,503 €1,883,259 157 €236,106
Sole 477 €9,299 €4,435,623 116 €1,079,986
Nephrops 9,256 €5,897 €54,582,632 6,088 €35,898,872
Saithe 2,048 €1,041 €2,131,968 607 €631,367
Pollack 1,231 €1,959 €2,411,529 381 €746,379
34,426 €114,794,912 20,477 €71,967,597
2010 Quota Average Price (€ /
tonne) Value of Quota
Landing by vessels > 18
metres
Value of Landings
Cod 1,340 €2,236 €2,996,240 1,032 €2,306,708
Haddock 4,021 €1,868 €7,511,228 2,841 €5,306,862
Whiting 4,785 €1,379 €6,598,515 4,123 €5,685,574
Hake 1,704 €2,505 €4,268,520 1,881 €4,712,069
Monk 3,004 €4,228 €12,700,912 3,742 €15,822,501
Megrim 3,428 €2,883 €9,882,924 2,272 €6,550,175
Plaice 1,764 €1,574 €2,776,536 175 €276,000
Sole 413 €9,508 €3,926,804 125 €1,185,879
Nephrops 8,490 €6,701 €56,891,490 6,595 €44,195,411
Saithe 1,916 €1,339 €2,565,524 755 €1,011,233
Pollack 1,108 €1,962 €2,173,896 492 €966,283
31,973 €112,292,589 24,034 €88,018,695
95
Appendix I: Economic analysis of profitability in the over 18 metre whitefish
fleet using catch data:
An assessment of the overall economic performance of the fleet can also be done by
considering the following method which relies only on official data.
i) Landings data from official (EU) log-books
If the landings (tonnes of fish) and the total effort of the fleet (kW days) are known, then
the landing per kW per day can be calculated:
Over 18 metre whitefish Fleet 2007 2008 2009
Landings (tonnes) 28,783 22,045 20,477
kW days 14,204,369 11,240,797 8,886,746
Landings (kg) per kW per day €1.976 €2.189 €2.519
Change since 2007 --- +11% + 27%
Based on known quotas and fish prices it is also possible to calculate the average price of a
tonne of fish:
Over 18 metre whitefish Fleet 2007 2008 2009
Average value of a tonne of quota* €4,412 €4,339 €3,527
Change since 2007 --- - 1% - 20%
Using the known fleet capacity (kW) and average number of days fished per annum:
Over 18 metre whitefish Fleet 2007 2008 2009
Fleet Capacity kW 80,812 68,83035 60,914
Change since 2007 --- - 26% - 25%
Average days fished by fleet 176 161 146
Change since 2007 --- - 8% - 17%
It is then possible to calculate the total income of the fleet, the fleet income per kW day and
the annual fleet income (per kW per year):
35
As decommissioning was ongoing during 2008, the official ‗fleet register‘ figure has been adjusted to give an average
mid-year figure
96
Over 18 metre whitefish Fleet 2007 2008 2009
Total Income of fleet €133 million €102 million €78 million
Change since 2007 --- - 14% - 41%
Fleet income (€/kW) €1,658 €1,484 €1,289
Change since 2007 --- - 10% - 22%
The last of these, Fleet Income (€/kW) is directly comparable to the earlier statistics
calculated by direct survey of a sample of the fleet. The two sets of results are
presented below for comparison.
Over 18 metre whitefish Fleet 2007 2008 2009
Fleet income (€/kW) €1,658 €1,484 €1,289
Sample income (€/kW) €1,673 €1,540 €1,300
ii) Uptake data from the Whitefish Quota Management Committee
Whereas a complete analysis of official log-books for 2010 are not available at the time of
writing, best estimates using data from the Whitefish Quota Management Committee are.
Using a similar analysis it is possible to estimate fleet income figures that include best
estimates for 2010. A comparison for all 3 methods is set out below:
97
Income (€/kW)
Over 18 metre whitefish Fleet 2007 2008 2009 2010
Direct survey (DCF Sampling Programme) €1,673 €1,540 €1,300
EU Log-book Data (>18 only) €1,658 €1,484 €1,289
Uptake (Quota Management Committee) €1,532 €1,551 €1,296 €1,589
The broad agreement between the direct analysis of a sample of accounts and the indirect
methods using official figures for the fleet as a whole is evident. From this one can conclude
that 1) there does not appear to be any significant or systematic mis-reporting of economic
data in the samples utilised, and 2) that whereas fleet income declined between 2007 and
2009, by 2010 fleet income had once again increased and was broadly similar to that
estimated in 2007. The reasons for the decline in the period 2007 – 2009 are set out in the
following section.
Chart 7Y: Income from Fishing 2007-2009
€0
€200
€400
€600
€800
€1,000
€1,200
€1,400
€1,600
€1,800
€2,000
2007 2008 2009 2010
Inco
me f
rom
fis
hin
g (
€/k
W)
DCF Sampling Programme (>18 only) EU Log-book Data (>18 only) Uptake (Quota Management Committee)
98
Appendix J: Fuel Prices 2002-2009
In 2008 fuel prices rose throughout the first half of the year and reached historic high values
by July of that year. This had an impact on the fleet and in increased the cost of fuel oil (per
day) by 14% on average. As the number of days-at-sea in 2008 was less than 2007, the
impact on the total annual fuel bill is less. The evolution in fuel prices is outlined in Chart 7x
and Table 7 Y below.
Average Fuel Costs 2007-2009
Results from economic survey 2007 2008 2009
Average fuel costs €214,066 €227,881 €181,862
Average days fished by fleet 176 161 146
Average fuel costs €1,216 €1,415 €1,246
Change since 2007 --- + 16% + 2%
Price of Low Sulphur Diesel 2000-2010
International Price of Low Sulfur Diesel
€ per litre
€0.00
€0.10
€0.20
€0.30
€0.40
€0.50
€0.60
€0.70
€0.80
Ja
n-0
0
Ja
n-0
1
Ja
n-0
2
Ja
n-0
3
Ja
n-0
4
Ja
n-0
5
Ja
n-0
6
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
99
Table 7Y: Reference Fuel Prices 2002-2009
Reference Fuel Prices
Note prices are provided for illustrative purposes and may not always reflect
Prices experienced.
Year Total
2002 €0.23
2003 €0.24
2004 €0.30
2005 €0.44
2006 €0.50
2007 €0.50
2008 €0.62
2009 €0.37
2010 €0.50
_______________
100
101
Appendix K: Fish Prices 2006-2009
Almost without exception quay-wall prices for all fish species declined across the period 2006 –
2009. The values used in this analysis are shown below.
Species 2007 2008 2009 2006 - 2009
Cod €4,464 €3,024 €2,725 -39%
Haddock €2,162 €2,016 €1,694 -22%
Whiting €1,416 €1,716 €1,423 0%
Hake €3,238 €3,338 €2,786 -14%
Monkfish €4,540 €4,435 €4,220 -7%
Megrims €4,252 €3,872 €2,815 -34%
Plaice €2,144 €2,053 €1,503 -30%
Common sole €12,046 €12,475 €9,299 -23%
Norway lobster €7,294 €6,632 €5,897 -19%
Saithe €913 €1,020 €1,041 14%
Pollack €2,762 €2,392 €1,959 -29%
102
Appendix L: Bibliography
BIM: 2008 Annual Report
Department of Finance (2002): Management Information Framework – Performance
Indicators: a Users‟ Guide
European Commission Regulations
Seafisheries Licensing Authority (2005-2009): Annual Report
National Development Plan 2007-2013
Report of the Seafood Industry Strategy review Group (2006) Strategy for a Restructured,
Sustainable and Profitable Irish Seafood Industry.
Curtis, Rita and Squires, Dale (2004) Fisheries Buybacks. Blackwell Publishing
White, Padraic (2005) Decommissioning Requirements for Ireland‟s Demersal and Shellfish
fleets: a report to Marine Minister Pat the Cope Gallagher T.D.