Seanad Éireann debate -
Wednesday, 28 Nov 1979

Vol. 93 No. 4

Private Business. - Agricultural Credit Bill, 1979: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Finance (Mr. Wyse)

The purpose of this Bill, which is quite short, is to increase the maximum amount which the Agricultural Credit Corporation may borrow from the present figure of £350 million to £600 million, and to increase, similarly, the maximum amount of borrowing which may be guaranteed by the Minister for Finance.

Borrowings by the corporation are approaching the statutory limit and, as Senators are aware, I recently authorised the corporation to borrow £25 million abroad for lending to the agricultural community for productive purposes. It is desirable, therefore, to have the Bill passed as quickly as possible.

As I gave a considerable amount of information to the House about the history and activities of the ACC when introducing consolidating legislation on agricultural credit—the Agricultural Credit Act, 1978—some two years ago, I do not think it necessary for me to go over the same ground in the same degree of detail as before, particularly as the present Bill is so specific and so short. However, I might say that the ACC were one of the first State-sponsored bodies established in this country. The ACC were set up in 1927 to provide a specialised credit service for agriculture, particularly long-term credit. Their level of business was small for many years, reflecting the general economic climate of the times and the reluctance of farmers to borrow. Today, however, the picture is completely different. The corporation are a highly-developed lending agency investing well over £100 million a year in Irish agriculture.

In the late 1960's improving market conditions, a growing confidence in the agricultural industry and the increasing willingness of farmers to invest heavily in their enterprises brought a rapid increase in the level of ACC business which, totalling £10 million in 1965, rose to £25 million in 1970.

During the Seventies, business expanded with increasing momentum. The corporation themselves did much to encourage greater investment and their own organisation evolved to accommodate the new production and trading environment. Investment in agriculture increased dramatically as farmers availed themselves of the opportunities presented by membership of the EEC and the many benefits flowing from the common agricultural policy. The recognition of the importance of a high level of investment and planned development was, and continues to be, one of the most encouraging features of agricultural development in recent years.

Last year the amount of advances issued by ACC increased to £143 million representing over 23,000 individual loan transactions. The total amount owing to the corporation, which stood at £130 million at the end of 1975, had reached £320 million at the end of September this year.

Close contact with the varied problems of the individual customers is maintained through the medium of a wide network of offices throughout the country, which brings ACC facilities within easy reach of the farmer. The corporation are continuing to extend this network.

In recent years the corporation financed a large proportion of their advances from buoyant deposit income. The balance is, in the main, financed from repayments of existing loans. Net deposit inflows averaged £55 million over the past few years, and the total amount on deposit at the end of September with the corporation was £265 million. These deposits carry a State guarantee and enjoy the status of trustee security.

With regard to the activities of the ACC, the corporation may give loans and hire-purchase facilities for any purpose which, in their opinion, is of benefit to agriculture or horticulture. The main demands relate to the purchase of livestock, buildings and machinery, seeds, grain and fertiliser, working capital, land purchase and improvement, and family settlements. In this context I should point out that only a relatively small percentage of ACC lending is in respect of land purchase, an average 12 per cent, and this percentage is agreed with the Department of Finance. In addition, the maximum loan in any one case is £40,000, for depositors £50,000. Where several of their customers are involved in bidding for the same parcel of land, the corporation endeavour to ensure that they do not bid against each other leaving the ACC to finance what would then be an unnecessarily and artificially high price. Loans are given both to farmers and to firms in the agricultural processing industries such as creameries, meat factories and grain mills. Repayment periods vary from one to two years for short-term loans to fifteen years for land purchase. Current rates of interest range from 17½ per cent for seasonal loans payable within one year to 18¾ per cent for term loans of ten years and over. It may be contended that these rates are on the high side, but these are the going rates for money at present, and this, like any other commodity, has its price. I would point out here that special loans at lower rates are available for small holders.

In speaking of the corporation's lending activities I might mention in particular the scheme of development loans, designed to encourage planned development of farm enterprises. These loans, which have proved very successful, are given on the basis of plans submitted by prospective borrowers, and repayment terms are geared to suit the type of project involved. In the current year over £25 million was advanced for such loans, bringing the total of development loans issued to £54 million.

Senators will be interested to know that the activities of the corporation are about to be reviewed by the Oireachtas Joint Committee on State-sponsored bodies. The Committee's findings will be awaited with considerable interest both by myself and, I am sure, by Senators in general.

As this stage I would like to comment on a matter which was the source of some confusion on the Committee Stage debate on this Bill in the Dáil last week, and that is the question of the control exercised by the Minister on the corporation's borrowing activities.

The confusion arose, I feel, on reflection, because of the difference which exists between the formal, legal position and what actually happens in practice. Do the corporation need the approval of the Minister for all their borrowing? The answer is yes. This is the position as set out in the terms of the present Bill and in previous legislation.

However let us consider what happens in practice. Every deposit made with the ACC by a member of the public represents a borrowing transaction. It would of course be ludicrous to suggest that the specific sanction of the Minister for Finance should be required for each and every such transaction. What happens in practice is that the corporation have general approval from the Department of Finance for the acceptance of deposits.

Similarly, in the case of other borrowing, the corporation have general approval for regular routine borrowing such as borrowing on the interbank market. However, as I pointed out in the Dáil, the Department of Finance and the ACC are in close and regular contact. If the corporation wish to undertake a single large borrowing transaction abroad or even at home—though this would be rare—then in practice they will discuss the matter in detail with the Department and get official approval before undertaking such borrowing. If, of course, there is a question of the State providing a specific guarantee for borrowing or guaranteeing the exchange loss, then in all such cases, whether the transaction is big or small, the formal approval of the Minister would have to be obtained beforehand.

I hope that what I have just said will dispel any confusion which may have existed after last week's debate—confusion which arose primarily because of the difference between the formal legal position and the day-to-day working relationship between the corporation and the Department of Finance. The system which exists is of sufficient flexibility to allow the corporation to pursue their legitimate business activities with no undue interference, while at the same time retaining for the Minister an acceptable measure of control in relation to those major items of policy with which the Minister would wish to be concerned.

Because of the continuing expansion in the corporation's business it is now necessary to raise the maximum amount which they are authorised to borrow. The new ceiling is £600 million for the total amount borrowed and outstanding at any one time. The Minister for Finance is authorised to guarantee borrowings by the Corporation. It is accordingly proposed also to increase the ceiling on such guarantees to £600 million. Given the likely future pattern of growth by the corporation, I think that the new ceilings should take care of their borrowing requirements up to mid-1982. I would be glad to have the co-operation of the House in having the Bill passed quickly because of the decision to borrow £25 million abroad which I mentioned at the beginning. Negotiations are at present under way to effect this borrowing, and it is hoped that the money will be borrowed and disbursed by the end of the year. I commend the Bill for the approval of the House.

Mr. McCartin

We in Fine Gael welcome the Bill because it will enable the ACC to expand and develop in the way in which we expected them to. Since I started in the business of agriculture I have seen the ACC grow from infancy to the stage at which it is today. When I was living in the west I wanted to negotiate a loan. I travelled to Kildare Street and in the reception area I was met by the chief executive of the ACC. This gives some indication of how small the organisation was at that time. They employed one Bachelor of Agricultural Science, a man who has made a tremendous contribution to the development of agriculture.

The subject is not as narrow as giving a simple guarantee or permission to the ACC to borrow the amount of money involved. The subject of credit was never more topical. We recognise that there is a depression in agriculture at the moment and hope it is temporary. People are more worried about it than the circumstances justify. Nevertheless, it is obvious that all the money provided for in the Bill is necessary to develop agriculture to its full potential. Money is needed to increase stock numbers, to improve farm buildings, to provide the expertise, to do all the things that will have to be done if agriculture is to make the contribution that it could make to the economy.

At the same time we are entering a phase in our development when most farmers know what they are earning in the year. The figures are available. Those of us who care to look at the records can easily ascertain what farm incomes actually are and will find that the level of earnings in the agricultural sector is not comparable to incomes in other sectors. This means that it is unrealistic to expect the small farmer to improve his stock or to buy extra land out of the present income of the farm family. Their income is not sufficiently high to enable them to live in standards of comfort comparable to other sections of the community. A very high level of borrowing will be required for future development.

We know from the most recent figures published by the Agricultural Institute that more than 50 per cent of farmers are earning less than £2,000. In 1978 30 per cent of farmers earned between £2,000 and £5,000—between £40 and £100 a week—and 50 per cent earned less than £40 a week. We have heard recent reports of manual workers earnings in excess of £200 a week. We know that the income outside agriculture is rising rapidly. Since last year, prices have increased and growth is not expected to be more than 1 or 1½ per cent. Taking those things together, we know that farm incomes in the present year are even lower than in 1978. The ACC have a very heavy responsibility as the principal organisation from which farmers can borrow for the development of their business.

There are many reasons for the current credit squeeze. The Government have imposed severe limitations on availability of credit because of the rapid rate of inflation and our balance of payments problems. As a result of this serious situation the Central Bank have imposed restrictions on credit. One would not need to be an economist to realise that it is unreasonable to apply credit restrictions across the board, to the industrialist looking for funds to make his business more viable, to the farmer looking for funds for extra stock and to the householder who is merely looking for money to change his car. In practice, the credit restrictions do apply equally to all these things. The ability of the borrower to make repayments is the sole criterion on which credit is approved at present throughout the community. The agricultural industry has to compete for credit with other sections of the community. We cannot look at the ACC in isolation. Credit control should be applied selectively, because a credit squeeze is not a cure when it is applied across the board. It may appear to be solving the problem but it is aggravating the problem it was meant to solve.

The ACC have suffered as much as the banks and other institutions. People who are being refused credit by the different banking organisations are asking the ACC to solve their problems. The result is that there is a great demand for funds from the ACC. This problem will not be solved by a simple proposal to increase the borrowing of the ACC.

In the course of my duties as a public representative I have been approached on many occasions by people who were seeking advice on borrowing to build a house or to develop their holdings. In the past I usually advised people to go to the ACC. At present, for the first time in my life, I am advising people not to borrow in the hope that inflation will help solve their problems. Most people who had borrowings to repay during the agricultural crisis of 1974 had borrowed at fixed interest rates of 6 per cent from the ACC. That year inflation was as high as 12 to 14 per cent and prices for agricultural produce were rapidly increasing. At the moment, repayments on borrowings are difficult to make because the prices for agricultural produce are stagnant.

The Minister has stated that he has given permission to the ACC to borrow abroad. Those of us who are members of the European Parliament find ourselves discussing agriculture with people from all over the EEC. We find ourselves discussing agriculture on a common basis with those whose agriculture is better developed, with the Dutch who produce 1,000 gallons of milk per acre. Contrary to popular belief they do not produce it mainly on imported feed. The average farmer feeds 30 cwts. of meal. Farmers in Ireland who are producing 1,000 gallons of milk per acre are feeding the same quantity of meal. I know we have certain advantages, but the truth is we are talking to farmers who developed their farms on cheap capital. Today, for further development they can borrow money at the low rate of 7 per cent throughout Europe. Irish farmers, whose levels of efficiency and production are lower than Continental farmers, are being asked to pay interest rates of 17 and 18 per cent. The main areas of agriculture for which borrowings are made are pigs, poultry, beef, and dairying. Tillage farmers borrow money occasionally to buy machinery. One section of agriculture that can borrow money at the moment is dairying. A farmer who does not need to increase his holding could not justify the purchase of extra livestock and sheds.

Only a few farmers could be advised to borrow money at the current interest rates being charged by the ACC and the banks. There are very few farmers to whom we could honestly say that we would recommend them to borrow money. As I said last Sunday to a farmer who has 30 acres of land and was thinking of buying the 20 beside him, "You may think you need the 20 acres but you are much better off on the 30 you have than borrowing to buy the 20 and having to face bills for sheds, livestock, manure and the land reclamation involved in every acre in our part of the country".

We should be more courageous in our approach to borrowing abroad. I think the ACC have been very slow to seize the opportunities which have been available for the past seven or eight months. I am not being pessimistic when I say that farmers who have borrowed money at high interest rates, in some cases up to 20 per cent, are moving downhill. The ACC have stubbornly refused to borrow money abroad because they claim that they were caught before. We know they were. They did borrow in European currency but, as far as I can remember, it was not a currency of the EEC. The situation has changed. We are now a member of the EEC and our Minister for Finance is negotiating our terms in the EMS. If that is to mean anything, surely it means that the Government are committed to maintaining the value of our currency. If our Government are committed to maintaining this parity, why are the ACC afraid to borrow abroad? We are talking about agriculture and we have a common agricultural policy. If a farmer borrows German currency or Dutch currency at 5 per cent or 6 per cent—I have even heard of a lower rate—to invest it in an agricultural enterprise which has a guarantee of a common market and a common price structure, it should not be such a great risk, even if the Minister is wrong and the Government are wrong. I sincerely hope they are not wrong.

Even if the IR£ was devalued, beef, pig meat, poultry and so on should be worth more. It can be argued that, in practice, this is not always so. MCAs will probably be phased out. Hopefully, our agricultural industry will organise itself to avail of the ready markets. If farmers are unable to sell their produce at a good price on the Continent I do not see any point in any farmer borrowing money. Farmers should not have to pay almost more than twice the interest rates that are available to people with whom we must compete when the Government have given us a guarantee that by joining the EMS our money will not be devalued and when we have a common agricultural policy. There is less risk involved in borrowing abroad to invest in agriculture than there is for the farmer who went into intensive beef, pig or poultry production four or five years ago and borrowed money at 10 per cent from the ACC. Today, these farmers are making repayments at interest rates of almost 20 per cent. Any farmer who borrowed money at high interest rates for intensive operations cannot make ends meet. Repayments cannot be made at 20 per cent.

I would take the chance that our currency will remain stable and that our agricultural prices will not fall too far below those on the European mainland and in the rest of the Community and allow farmers the advantage of borrowing abroad. The ACC are the proper body to do it on their behalf, with a guarantee from the Government, if that is necessary. I do not think I am asking too much on behalf of Irish agriculture. If the Minister has confidence to join the EMS, he should have confidence to guarantee the borrowings of the ACC. I think that is an important consideration which I ask the Minister to dwell upon and which I have raised before, privately and publicly, and to which I have never got a satisfactory answer. There is always the answer that somehow or other there is a big area, it could not be understood by a farmer and that the sum of the wisdom of those engaged in the world of finance is greater than any calculations that can be done by those engaged in the agricultural industry. I would ask the Minister to consider the position of farmers who are faced with interest rates of up to 20 per cent.

Two years ago, when a similar Bill was introduced, it was expected that the increased borrowing power given to the ACC at that time was expected to take them up to 1981. We have reached the limit before 1981. I do not find fault with the Minister nor with the ACC. It is further evidence that we are not working within a plan.

In relation to borrowing, we should ask ourselves if farmers actually know what they are doing. We are the only country in Europe with a crisis in the beef industry. We know that we are down to 60 per cent of the guide price for beef while on the Continent farmers are close to 80 or 85 per cent of the guide price. Farmers who borrowed money in confidence in the knowledge that they belong to a common market, in the knowledge that it was Government policy that the money be provided, have been disappointed. Those engaged in intensive beef this year cannot meet their repayments. The problem is that we are not working within an overall plan. It is not sufficient to give money for the development of individual farms without considering the whole area of processing. We know what has happened recently. The high interest rates may lead to a more serious crisis than in 1974. Does the Minister propose that the ACC should increase their borrowing to the £600 million limit? Do we know whether extra agricultural advisers will be appointed to advise farmers who will be borrowing this money? Will some of it be lent to farmers who are earning less than £40 per week? Will they be encouraged to increase their livestock by some sort of propaganda advertisements in newspapers? Will they be encouraged to borrow money? The truth is that unless they can save that £40 per week which they are earning, they cannot repay that money.

Many of these people have other commitments and they are the section of the community who live in houses which have no running water, houses which were built before 1925, and they have other problems. We have not proposed any solution to their problems such as making credit available to them with an advisory service and with the structures within which they can develop. Without this framework many of them will have to leave agriculture in the next few years. The ACC should be advised accordingly. It is time to face up to the hard fact that land is coming on the market every day. Farmers are not in a position to borrow money to buy land. They do not know whether that investment can be justified. The Land Commission have been pulled out of that area of activity.

There is much more thinking to be done than just to say, "We can provide this amount of money for agriculture and everything will automatically develop from there on." This money should be provided within the framework of a watertight plan. We should have a good idea in regard to how many farmers will get this money, what size of farmers we can give it to and how many extra livestock units we expect to see. Since the Minister was here before, we have seen no livestock units on the land of Ireland. We had one little Bill to take the Agricultural Institute out of one body, another little Bill to increase credit, and another little Bill to put a penny on dairy produce. I am sick of those piecemeal measures. I want to see somebody introducing a framework within which we can see the direction in which the agricultural industry proposes to go.

If a farmer wants to borrow money from the ACC, he may borrow a small amount of money. He may have two or three holdings. The ACC are not willing to take just sufficient security from him to ensure that their investment is not at risk—they insist on taking all his security from him. He is bound hand and foot to the ACC for the future. I do not mind if the ACC have an advisory service in the field to cater for all that farmer's requirements, but I do not want to see a situation in which the ACC will bind that farmer hand and foot and prevent him from borrowing against his other assets and prevent him from carrying out any development of which they do not approve. While they have expanded their activities, I do not believe they have sufficient agricultural officers or experts to analyse development requirements and make a farm plan. That is the work of the advisory service.

It is being suggested that the co-operative movement should set up their own bank. I would not have thought this necessary a few years ago. I would have thought that working with the ACC was best. On the other hand, the whole area of finance in this country has been in the hands of far too few people, such as the associated banks and one or two others. There is no selection for people seeking credit apart from the ACC and the banks. One could say that their policies, generally speaking, have been the same. The bigger farmers pull out of the ACC and get accommodated in the banks because the ACC restrict their development. At the moment, I would welcome another credit body. In the expanding role which agriculture will play, it is necessary for us to have another institution to provide finance. I believe that an organisation directed by the co-operative movement could give that sort of leadership to agri-business which is not being given at the moment by the banks or the ACC. I would welcome it. I would not see it as an organisation that would have to compete.

The Agricultural Credit Corporation can expand their activities three-fold provided we get the development that is possible and necessary. I welcome the Bill apart from the fact that it is solely an exercise in figures. This is the only Bill dealing with agriculture that we are likely to have for some time. It is being introduced in isolation and not in the framework of the planning that is necessary if the credit is to be used correctly, and if agriculture is not to find itself in greater difficulty in the future than it has in the past.

Mr. Mulcahy

I welcome this Bill and the opportunity that it gives us to make a few points about foreign borrowings and aspects of the impact that the policy on agricultural funding might have on the running of the economy. Not for the first time I am very much in agreement with Senator McCartin. This is not really a matter for party politics. What we are doing here today is trying to draw on the available experience of Members of the House in relation to the matters before us. Nobody has a corner on that knowledge, or how one can best go about funding the expansion of economic activity. Agriculture represents a very large proportion of that. Therefore, it should not surprise anybody to find myself and Senator McCartin in substantial agreement on a number of points.

I welcome the whole expansion of what the Agricultural Credit Corporation have been doing. I remember many years ago that when they were just a small speck on the horizon and Mr. Considine was running the corporation, he predicted that one day they would represent a very big ship in the Irish economy. I like to look back on moments when people had a vision about what would happen and to give credit—no pun intended—to the individuals who had the courage of their convictions and were able to persuade the small group of decision makers referred to by Senator McCartin to move and to provide the initial funds that got the ACC under way. We have Mr. Culligan today. I believe the Joint Committee on State-sponsored bodies are this very day having discussions with the ACC. I wish them well and hope that whatever comes out of the meeting will go towards further improving and expanding the activities of that group.

I want to say to the Minister and the Government that we must not lose our nerve now. We have taken many very good steps. We have encouraged the expansion of agriculture and the increasing of the productivity of agricultural units of all kinds. We have encouraged people to borrow. We have also brought about a reorganisation—a revolution one might say—in the way we handle currencies, particularly through the European Monetary System. We have recognised, through the EMS policy, that the economy has got to be managed in a new way—in a way which recognises the fact that on the ticker tapes across the world the value of our currency is displayed every day. Somebody takes a view on Ireland every day now in every money market, in every bank, that matters in the world. It is not a matter of waiting for the ESRI report or the OECD report to come out to wonder how is Ireland getting on. Every day it can be seen.

The steps we have to take in managing our economy are different kinds of steps. We have to be alert to that new situation, and all of that ensures that the value of our currency is looked after. We have to see what effect increases in incomes, prices, aspects of our exports policy, our import policy, our borrowing policy, our construction industry policy, have on our currency. Our balance of payments has got to be watched very carefully. The condition of our external reserves has got to be watched very carefully. All of that is natural. It is sui generis.

This brings us back to the point Senator McCartin made. If we have done all these things, why are we borrowing at this high interest rate? Why do we not believe it is possible to borrow at a lower interest rate? At the moment the world is awash with cash as a result of the increase in oil prices. The Arabs have more money and that money is available. On many occasions I have been approached by people offering money which is probably coming from that source but coming through EEC currencies. It is being made available through respectable EEC banks on long conditions, and by that I mean 15 years and at low interest rates.

It seems a bit strange that the ACC is not taking the opportunity to borrow that kind of money and that they should not have their arguments with the Department of Finance who probably take a fairly conservative view as is their wont. We are not surprised at that and we would wish them to take a prudent view. If you can get funds at 7 per cent or less, why ask our system to compete at 17 per cent? That is the basic question. I have not found a simple answer to it.

The EMS is designed to hold the currencies of the EMS within a more or less 2 per cent band, and all the currencies are not equally strong. It would be possible to borrow in Belgian money which has a smaller chance of being revalued than Deutschemarks. I cannot see why we cannot do that. If we are not doing it because we are afraid there will more and more revaluations in the EMS, that is another matter. We are moving towards a convergence of our moneys in the EEC—and we have big meetings in Dublin this week. Either we believe we are in the EMS with a view to producing a more rational economic and monetary system in the EEC or we do not believe it. If we do, we should take advantage of the availability of large sums of money—the world is awash with cash—and put that money into productive ventures. I was very glad the Minister said that only 12 per cent of the available funds were going for land purcase, and that some notice was taken of the possibility of the bank vying effectively with itself in bidding for land parcels.

In regard to the £25 million borrowed recently, at what interest rate was it borrowed and in what currency was it borrowed? I remember noticing it at the time but I have forgotten and I meant to look it up again. Senator McCartin said he would encourage his farmer friend to take up the 20 acres beside the 30 acres he already has and he would be safe in doing so because inflation would look after his interest payments. That is the very thing that we are trying to stop. We must get our inflation rate down. We must not take business decisions which assume there will be a high inflation rate. If we do that, we will have a high inflation rate. We will never get the economy right and we will never get our productivity right and we will never be able to compete effectively in Europe and grow at a real rate.

We need development plans, and I would hope the Department of Economic Planning and Development will be working hand in hand with the Department of Agriculture and the Department of Finance to ensure that there are development plans for agriculture which will take into account, not only technology, husbandry and the output side of agriculture but also the input side, which is the funding and the policies behind it. If they do not exist then I hope they will in future.

We cannot get away from the whole question of the MCAs and the attitude of the UK to this whole matter. I can only hope, as an aside, that this week we will get that sorted out and that Mrs. Thatcher will go home and leave us alone, and pay up the £1,000 million which she is committed to paying, and let us get on with developing the EEC in the way that everybody is committed to, and let the smaller countries like Ireland and the low output countries get on with the job of catching up. If that means we have got to keep up our borrowing, let us not lose our nerve. If we look back into the past we learn a lesson on that. In the mid-sixties we went through a period of wondering whether we should continue the growth that had been achieved at that time. Today who would look back and say, "We should not have done so. Look at the risks we were taking"?

Recent EEC reports show that, in fact, some of the EEC countries will recover their growth in the coming year. This is no time for us to be losing heart. We have got to go along with them instead of cutting back. That is just a general economic policy comment. I would point out to Senator McCartin in relation to the housing side which he mentioned, that private housing development recently has gone from, say, something like 5,000 houses being privately funded to something like 8,000. I gather that most of those are on agricultural holdings and the money being spent on that has gone from £30 million to £130 million. Maybe the farmers are not too bad when it comes to development of that size.

Mr. McCartin

I was making the point that those farmers have other commitments. They have the responsibility of trying to provide themselves with homes and trying to equip those homes with water and so on. If we check out the figures, the area I represent has the highest number of houses built before 1925, and 80 per cent of the people are farming people. Throughout the country you will find that farming people generally live in older houses. They do not have to make payments at the moment, but that will face them some day soon.

Mr. Mulcahy

I am making a political point, if you like. The Government's policy has stimulated development of homes, has encouraged people to build homes in those areas, and it reflects itself in the figures in that the privately funded houses have gone from 5,000 to 8,000.

Finally, therefore, I welcome the expansion of the borrowing ceiling of the Agricultural Credit Corporation. My main message to the Minister and the Minister for Finance is that we should not be worried about foreign borrowing if we believe in our own policy. We should encourage the Agricultural Credit Corporation rather than hold them back.

Mr. Butler

I am in agreement with the proposal in this Bill. The Agricultural Credit Corporation should have the right to borrow extra finance to develop agriculture in Ireland. Since 1927, the Agricultural Credit Corporation have done an immense job for Irish agriculture and in doing so have benefited all our citizens because it is from the flow of agriculture that we get the benefits that come from our exports. Everybody benefits from our exports. I am not as worried as the other two Senators about borrowing abroad or at home. Personally I would prefer to borrow at home. If the interest rate is 8 per cent or 7 per cent abroad—if it is as low as that—I suppose financiers would go for that type of credit and invest it at home and try and get 15 per cent or 16 per cent on it. Whatever moneys we get should be got from our own borrowing power at home. No matter how we spread out that money it is the Irish people who will benefit from it and not the countries of the EEC or outside the EEC. We should do all we possibly can to foster the growth of finance at home in agriculture or industry. I am not very well up on the financial aspects of borrowing and lending and interest rates.

The main purpose of this Bill is to allow the development of agriculture to continue. That is necessary. I believe sincerely that the development of agriculture in Ireland has not reached 25 per cent of its potential. If you examine any aspect of agriculture, whether it is milk, or cereal growing, or grass growing, or cattle, unless we put in the maximum effort—whether it is financial effort, or manpower, or tractors—we cannot get the maximum out of it. We cannot put the maximum effort into agriculture unless we have the finance to do so.

We must give credit to the Agricultural Credit Corporation for the help they are giving in that direction. We must accept that extra moneys are needed for the further development and the continuing development of Irish agriculture. If we look at our total exports in agriculture we see they have over £1.6 billion. Anything we sell abroad naturally brings finance back here and we can invest it, and the farmers of Ireland can invest it. Therefore, we must encourage the further development of agriculture. If it is necessary to put extra finance into it, let us put it into it. Working in the industry I know it is necessary to give extra finance for the development of agriculture. I suppose money is needed in other sections of industry but it is my personal opinion that agriculture must come first.

One thing that worries me is the extension of ACC borrowing from £350 million to £600 million. It is an increase of about 60 per cent and that is a big amount to a person like myself who does not understand what £1 million is. It is a lot of money to people who have never seen £1 million; £60 million is a lot of money; £350 million is a substantial amount; but this Bill increases it to £600 million. I am a little bit worried about that. Why is a 60 per cent expansion in ACC borrowing power necessary? That is not made clear in this Bill. The ACC have not given any indication of where the extra money will go. I hope it will not go to farmers for the purchase of land, although it may be necessary to give some of it to small farmers to extend their farms. I hope only a small amount of the money will go in that direction. I hope it will be loaned to farmers for development and that the farmers will have development plans. Part and parcel of the ACC loan system is that there be a development plan. The development of agriculture, even with the assistance of the ACC, has not taken place over the number of years about which we are talking. Something must be wrong. The help is there, the encouragement is there now because of the money which is now available, but something is wrong. We are at a stage where farmers are beginning to cry halt.

This must be discouraged. Farmers are now worried that they have reached the maximum of finance which can be got from agricultural produce. We have heard that the price of milk paid to farmers by creameries will be reduced next year. We have also heard that the prices for beef, cattle, sheep and lamb are going down. In that type of situation it is very hard for farmers to grasp the value of credit. There must be some way to get across the point that even though prices may be reduced there is a future in agriculture and the way to get over that is to increase production from the land.

I have here the annual report of the ACC for 1978. On page 25 they say that "other productive purposes" were £43.251 million and 30 per cent of the total was lent. There is no indication to the people concerned, and to Senators, how that was distributed. I do not know the people who attend those meetings. There was an address by the chairman of the company which possibly clarified to those people how the distribution of that £43.251 million was made. It is necessary for Senators to know where that money went.

The farmers' bank has been discussed at the ICOS conference. I was at that conference and farmers were definite that they should examine carefully a farmers' bank. If there is to be one then it will be in competition with the ACC. I have no doubt at all about it being in competition for the investment of moneys by farmers in the ACC. It will also be in competition for the withdrawal by farmers of money from the ACC. That should be examined very carefully by the officials of the ACC. There should be more communication with the ICOS and the ACC in this regard. It is very necessary at this point in time. I listened to Commissioner Lardinois and he was in favour of the farmers' bank. He made a very strong case and he made reference to those types of banks on the Continent and the benefit those banks are to farmers on the Continent and the benefit such a bank would be to the farmers in Ireland. I believe that it would be of great benefit to them. There must be closer co-operation between the ACC and the ICOS before this gets off the ground. There might have to be an amalgamation or something like that. I am not an expert on this, I do not know what is the right thing to do but there must be more communication between them.

The Minister said that the rates of interest range from 17½ per cent, to 18¾ per cent, which is very high interest to pay on loans from the ACC. We would expect the ACC to charge a lower rate of interest but maybe they could not carry out their work if they had not that type of interest. It seems to be extraordinarily high to me. Money for development should be given at as low an interest rate as possible. We have heard from Senator McCartin and Senator Mulcahy the interest rates on the Continent. They are talking about 6 per cent and 7 per cent. I still hope that the moneys they will be looking for will be available here in Ireland and that an interest rate of 6 per cent will not draw them. I welcome the Bill and I hope that agriculture will benefit from it. I sincerely believe that only good can come from the further development of agriculture here.

Mr. Howard

I welcome the opportunity of speaking on this Bill and indeed joining with the other Senators who have spoken here in extending my support to what is proposed in the Bill, that is to extend the maximum borrowing guarantee by the Minister for Finance to the ACC and to extend the volume of funds available to the ACC from £350 million to £600 million. This is an increase of £250 million. The Minister indicated that he expects that this will be sufficient to take care of the capital requirements of farming from the ACC over the next two-and-a-half to three years. The Minister also indicated that the main categories to which loans were made by the ACC to agriculture were the purchase of livestock, buildings and machinery, seeds, grain, fertilisers, working capital, land purchase and land improvement in family settlements. The majority of these could be described as requiring long-term finance and others as short-term finance. I hope the Minister will be able to tell me that if there is a speedy passage of this Bill, this will automatically mean that the credit squeeze affecting many farmers and agriculture generally at the moment will be eased to some extent. To what extent does he anticipate that credit will be made more freely available once this Bill becomes law?

It is desirable that we make it quite clear that the purpose of this Bill is to enable the ACC to accept deposits and to borrow this money. There is no question of either the State or the taxpayers providing this extra finance. I agree with the sentiments that have been expressed by Senators here this evening that it is desirable that if the ACC need to borrow money, they should borrow this cash, wherever possible, from the countries that are also members of the EEC. I agree also with the views that have been expressed that if money is available at an interest rate of 7 or 8 per cent then it should be pursued and it is in the interest of the industry to pursue it.

I want to associate myself with the compliments that have been paid to the ACC for the services they have rendered to the agricultural industry since 1927. I welcome the expansion that has taken place. Any person looking back over the history of the ACC must admit that their contribution to the development of agriculture has been a positive one.

The board and the officials of the ACC have always shown a commitment towards the progress and development of agriculture. I hope, bearing in mind that the contributions that we have had this evening have been positive, that these contributions plus the passing of this Bill and the availability of this extra £250 million will play a part in restoring a measure of confidence to the agricultural industry. I believe that confidence has taken quite a battering in recent times. Independent sources have shown that farm incomes are likely to be down by 15 per cent this year, the return on milk is less than what it was the previous year and that cattle prices are down substantially. I know people who purchased cattle last spring who sold them in recent weeks who are counting a loss of approaching £100 per head. There is a decrease in the return from sheep and lambs. Therefore, with these reductions, with a contracting margin of profits and in some cases a loss it is inevitable that there would be a certain loss of confidence. I hope that this Bill will to some extent pave the way for a restoration of full confidence in the development of farming because I believe that it is not alone in the interest of the industry but in the interest of the nation that we should have a thriving, prosperous and confident agricultural industry.

Certain comments made yesterday, which conveyed the view that the attitude of some farmers at the present time was defeatist and that they were lazy, do not help to restore the confidence I want to see restored. I believe that a refusal to see facts as they are, a refusal to recognise the difficulties that at the present time exist and a refusal to take positive steps to rectify this situation, is a disastrous attitude.

I support a call for increased output because I believe that increased production on our farms is necessary and that there is no other group in our community who have demonstrated so clearly their capacity to respond positively to increased output if the conditions and the circumstances were there to encourage that. I believe there is no other sector with the same capacity to generate increased output than the farming sector. Responsibility rests on all of us to ensure that we give to that industry the confidence it requires.

I hope that in the talks that are taking place elsewhere in this city this week the protection of the Common Agricultural Policy is given a high priority. I believe that our representatives should stop being reasonable in accommodating the whims of the UK or some of our partners in the EEC. I am concerned with the attempts of the New Zealanders to get a greater share of their production into the British market.

The importance of a thriving agricultural industry to the nation is something that I feel we should emphasise. About 170,000 farm families derive their income from agriculture. Several thousand other housholds obtain their livelihoods also from the processing and manufacture of agricultural production and from the servicing of the industry. If we fail to retain people in agriculture we are, for every person who leaves the land, putting an additional person chasing an industrial job in a heavily overcrowded labour market. If we are to have progress and expansion in farming capital is vital.

I read some time ago a report by the National Economic and Social Council titled “Alternative Growth Rates in Agriculture” which predicted that given the proper resources and given the proper encouragement the agricultural industry was capable within a period of seven years of generating 70,000 to 80,000 extra jobs. Shortly afterwards another report by the Irish Farmers Association predicted that within a five-year period and given maximum encouragement to the industry there was a potential 102,000 jobs there. If we are committed to providing additional jobs and improve employment, why the potential of agriculture as an industry to provide these extra jobs has been ignored is something that I fail to understand.

Farm capital requirements are long term and short term. The long term requirements are those related to farm development, that is land purchase, but essentially development. I am concerned that if we do not have sufficient confidence within the industry the development plans will come to a standstill. We must ensure that that confidence is there. If we have not development, we will have only stagnation and unemployment. I hope that the Minister for Finance and the Minister for Agriculture will express their commitment to ensure that that confidence, which I feel is now being eroded, is restored.

A number of Senators have spoken about the interest that is payable on sums borrowed from the ACC and also from other sources for farming. The Minister spoke this evening of lending rates of between 17 per cent and 18¾ per cent. Farmers who have found it necessary to borrow from other sources have found themselves paying even a still higher rate of interest. There seems to be a marked reluctance by our people to appreciate that with borrowed money costing our agricultural industry interest rates in the region of 18 per cent to 20 per cent, their position in competing in European markets with the farmers of other countries, where money can be borrowed at one-third of the cost, presents a serious disadvantage to our industry. I might add that one other advantage that farmers in other European countries enjoy in addition to lower interest rates is that the aids that are available are in some cases three times the aids that are available to agriculture in Ireland.

The line of production that is best for the smaller farmers is, of course, increased milk production. If they are to increase their output in milk it involves capital expenditure and we are back again to the question of borrowing to finance development on these smaller farms. It would be only fair to say that if these small and medium sized farmers are to survive, in addition to costly finance, there are other obstacles before them as well. There is the attitude of the European Community towards increased milk production, that we should stall at this point. I join with other Senators in encouraging the ACC to seek finance outside the country if necessary if they can obtain it at lower rates of interest.

The Minister mentioned that about 12 per cent of the resources of the ACC could be devoted to land purchase. I come from a county where if people who are now farming on limited acreage are to survive and if their children are to continue farming it is necessary for them to acquire additional land. The reality of the situation at this point in time is that there is not 12 per cent nor any percentage of the funds of the ACC available to smaller farmers to extend their holdings if the opportunity presents itself to them.

I support this Bill and I have confidence, as I said earlier, in the capacity of the agricultural industry to expand output and production. I support this Bill in so far as it is a measure that will help in that direction. I will support all measures that are aimed at ensuring expansion in the agricultural industry. At the same time I will condemn those who, by inactivity or perhaps blindness, strangle development in agriculture.

Mr. Kilbride

I do not intend to detain the House very long on this matter. As a man who was reared on 37 acres of land—I have a few more acres now at the present time—I feel that the facilities of credit to the small farmer is of vital importance. It must not be looked at only in the context of an investment or as something that will enable him to compete on level terms with his farmer colleagues in the EEC with whom he is in competition. Since the inception of the EEC the small farmer has seen an upward trend in prices. Generally it was a recoupment that enabled him not only to invest and pay the interest to the ACC if he borrowed from them or from the banks. He was able to see himself on equal terms with the fellow competing in any other business for a considerable number of years.

These years have come to an end. It is disastrous that he should have to think of borrowing money today to make ends meet or stave off the evil day when the very people from whom he borrowed are pressing him for repayments and the money he had to repay this money has diminished and practically disappeared. His livestock prices are much less than they were a year ago. The man who bought 20 or 30 cattle last January, February or March is selling them today at a price much less than he paid for them. That is a fact which will be accepted by every Member of this House.

The same is true today about sheep. While the Minister for Agriculture justly took credit for the advance in sheep prices a few months ago I do not think he has much to be pleased about in regard to present day sheep prices. The same is true about the pig industry. The cost of feedstuffs has increased so extensively over the past 18 months that the margin of profit for the small farmers has shown that pig production is not any longer a profitable exercise except for people who are producing pigs in great quantities. In Longford, Cavan, Leitrim, or Roscommon it is not usual to see a pig at a farmer's house any more. The sow and the litter have practically disappeared. For that reason the whole economy is built around whatever is made from livestock.

The position in regard to mixed farming has shown that the farmer is working at a disadvantage at present. No matter what the farmer invests in this year he will not make a profit. A farmer with 20, 30 or 40 acres of land is not liable for income tax but has to pay a tax on the livestock that he sells. The 2 per cent levy is a most unfair taxation on any farmers, big or small. On the big farmer who is liable for income tax it is a penalty for which there does not seem to be any justification. Figures have been produced by various sections of the community to show that farmers are not taxed enough. People on fixed incomes say that the farmers should pay more tax.

An Leas-Chathaoirleach

I am loath to interrupt the Senator, but the Chair would be grateful if he would bring his remarks a little closer to agricultural credit.

Mr. Kilbride

The farmer who tries to borrow money from the EEC is at a disadvantage, particularly the small farmer, I do not like to have to point out these aspects of farming and farming finance, but they cannot be denied. For that reason, the Government and the Minister for Agriculture should take account of these disadvantages when arriving at an interest rate for the allocation of loans to farmers, particularly small farmers. They should be given loans at a rate of interest which would make it possible for them to be repaid in five or six years.

The farmer should not have to compete with sections of the community who have fixed incomes. These sections should not regard him as still not pulling his weight. If his investment is made on the basis of his profits he is not liable for income tax, and liable only to pay a token sum in interest.

The ACC have played an important part in the life of the farming community. They have accommodated the farmer. They were established to provide loans at an interest rate of 4½ per cent when the banks were charging 5 and 6 per cent. We can look back on those days with nostalgia when times were relatively better for the farmer. He had what was known as simple plenty. The return on his investment gave him a decent livelihood. It would be difficult for a farmer to get a loan from the ACC on his present income.

I welcome the increase in the borrowing power of the ACC. Unless agriculture prospers the economy is doomed to failure. The farmers are the backbone of the country. They are the only people who are capable of increasing their production. If the farming community is treated fairly it will increase the prosperity of the country in a year or two. The Government should give the farmers an opportunity to exist. People who work with the ACC told me that they have been sending out notices for weeks without response. The success of the ACC is being judged on the basis of the responses.

I hope the difficult phase which the farming community is going through will pass and that we will get over the credit squeeze. I hope that the slump in prices will not continue and that the penal taxes that are being imposed will be decreased or discontinued.

I would like to see the Government being in a position to say to the farmers: "You have been doing what this nation requires you to do. We are prepared to give you the credit which you are entitled to get". I do not like the idea of telling farmers that they are not pulling their weight, as only a small percentage of the farming community are not pulling their weight. The farmer has to live by what he produces. He enables society to improve. The community will be impoverished if farmers are not given the finance to enable them to increase their production.

I hope that better prices will make farmers more creditworthy. I hope that the Minister will be able to come back here and say that the position has changed. It is important for the economy that farmers are happy and are able to do the sort of work they have a right to do.

Mr. Markey

There is no doubt that an enabling amount of £600 million is welcome. It reinforces the argument that this amount of enabling money for agricultural improvement represents only half the amount that is necessary to obtain the target for agricultural improvement. We should devote some time to considering the potential of the people who will receive this money. There is little point in critical remarks being directed at any category, in saying that they do not see the potential that lies within their own industry, or that they do not wish to see the potential that they have.

It is important to consider the amount of money that we are talking about. I recognise that £600 million is a substantial increase on £350 million. Lending, which totalled £25 million in 1970, is now in excess of £100 million. Our rate of inflation has been high for most of the last decade. In his speech the Minister should have given us the numbers of the loan applications from the beginning of the decade to the present time. For instance, have those numbers increased? Are the applicants the same type of farming applicant as in the beginning of the decade? Do the same people continue to apply for loans? The improvement of agriculture lies in the hands of the small farmers. The Minister should have given us a breakdown of the 23,000 loan applications. When all is said and done, the State must provide subvention on the scale envisaged in this Bill. As an indication of agricultural improvement, we want to know whether loans are being sought by the type of person on whom we must depend not only for the agricultural improvement that we all wish to see but for the retention of an agricultural society in this country. The Minister cannot supply me with the figures now but I would certainly like to have them in my possession. Without these figures we have no way of knowing if the money invested by the State into agricultural improvement is being utilised properly.

Minister of State at the Department of Finance (Mr. Wyse)

Many Senators referred to matters which are mainly the concern of the Minister for Agriculture. I am not in a position to answer for another Minister.

Senator McCartin spoke at length about agriculture. He referred to agricultural policy, development and so on. These are all matters for the Minister for Agriculture. He also referred to land policy which is a matter for the Minister for Agriculture.

I will deal with a number of points that are appropriate to the Bill. Interest rates are being kept under review by the Minister for Finance and the Central Bank. Senator McCartin referred to the Co-op Bank. No concrete proposals have come before the Minister for Finance on this matter. I hope the Senator will appreciate that I cannot deal with this matter.

Senator McCartin also referred to borrowing abroad. He said that the ACC should be encouraged to borrow abroad. This is a matter for the ACC themselves. The Department of Finance would not discourage any such proposals and would be willing to discuss them with the ACC.

Senator McCartin also talked about the credit squeeze. He has exaggerated this matter. The total advances owing to the banks from agriculture increased from £500 million in February 1979 to £640 million in August 1979. He said that we should invest more money in agriculture. The Minister's recent agreement to the ACC borrowing £25 million abroad shows the Government's appreciation of the importance of investment in agriculture. The policy of the present Government is to ensure that investment in agriculture continues.

Senator Butler referred to a brochure issued by the ACC and to other productive purposes that were mentioned in the annual report. The productive purposes are land reclamation, drainage, loans to processing industries, food processing, glasshouses, crops, factories, farms and so on.

Mr. Butler

I was interested in the breakdown of the money given to each of those sectors. They are very important sectors.

Mr. Wyse

That information is not available to me. It may be possible to get that information from the EEC. Senator Howard was talking about the speedy passage of this Bill easing the credit squeeze. The £25 million that will be invested in agriculture in a few weeks may ease the position. Senator Markey asked if there has been any increase in loan transactions. The answer is yes. In 1974-75 the figure was 13,244. In 1978 it was 23,147, an increase of 75 per cent. I think I have dealt with the questions concerning the Bill. A number of other matters were raised which I intend to bring to the attention of the ACC.

Mr. Markey

We would appreciate if the ACC would communicate with us directly and give us the information we sought. For instance, I want a breakdown of the loan transaction figures.

Mr. Wyse

Any time a good suggestion is made I am always anxious to convey it to the people concerned or to the Department concerned. I want to thank the Senators for their contributions and especially for paying tribute to the ACC. Everybody agrees that they have done wonderful work down through the years. The present staff and the former staff have dedicated themselves to their particular responsibility. I can also assure the Senators that the ACC are well equipped to cater for the needs of agriculture in the eighties.

An Leas-Chathaoirleach

The Senator may ask a short question at this stage.

Mr. Butler

I am not asking a short question. I am protesting. The Bill deals with agricultural credit, but agricultural credit is only for the development of agriculture. We are disappointed that the Minister did not refer to the development of agriculture. We protest because the Minister for Agriculture was not here. Neither the Minister for Finance nor any of the Ministers concerned with agriculture was here.

An Leas-Chathaoirleach

I gave the Senator liberty to ask a question. We cannot have a discussion now because the debate has concluded.

Mr. Markey

We can always say that the Minister's refusal to answer is an indication of his embarrassment.

Question put and agreed to.

Agreed to take remaining Stages today:

Bill put through Committee, reported without amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Mr. Butler

I protest on behalf of the Senators on this side of the House at the lack of information given to us by the Minister. I have great respect for the Minister and I know that he would give us any information that he had at his disposal. We were dealing with agricultural credit. Agricultural credit is for the development of agriculture. We asked pertinent questions on the development of agriculture. The Minister fobbed us off and said that the Minister for Agriculture was not here to answer questions. We also referred to finance. He again fobbed us off and said that the Minister for Finance was not here to answer our questions and that he would communicate with us. The Seanad meets to debate Bills and to get information from Ministers who are present. The questions we asked on the development of agriculture and on the financial side of agriculture have not been answered. We had a debate on low interest loans and on high interest loans, but we got no information on whether the 8 per cent European loan is better than the 18½ per cent Irish loan.

Mr. Wyse

I did not say that the Minister for Finance was not here. I will be delighted to give him information in connection with finance. The Senator knows as well as I do that I gave him information on land reclamation, drainage, loans for processing industries, food and so on. Senator McCartin dealt with points that related directly to agriculture. The Minister for Finance or any other Minister who comes into the House is not obliged to answer questions in connection with his own Department. I dealt with all the points relating to the ACC. I dealt with the rates of interest and I dealt with lending and a number of other things. Most of the other points raised related to the Department of Agriculture and the Department of Lands. Drainage is a matter for my own Department. I have dealt with matters that were raised in connection with the Bill before the House.

Mr. Butler

Agricultural credit is credit for the development of agriculture and we should have some reference to the development of agriculture.

Mr. Wyse

The development of agriculture is the responsibility of the Minister for Agriculture.

Question put and agreed to.

The Seanad adjourned at 6.30 p.m. until 2.30 p.m. on Wednesday, 5 December 1979.