I move that the Bill be now read a Second Time. This Bill is an earnest of the Government's intention, as stated in the Programme for Economic Expansion, to ensure that the development of agriculture will not be hampered by lack of capital. It follows similar action already taken in the case of capital for industry.
The subject of credit for agriculture has been under close examination for some time past. This examination has been greatly assisted by the survey of agricultural credit in Ireland made by Mr. F. W. Gilmore, Deputy Governor of the U.S.A. Farm Credit Administration, which has been presented to the Dáil. At this point I wish to express the Government's appreciation and thanks to Mr. Gilmore for his very valuable contribution. His task was not an easy one but he approached it with great energy and determination and completed his report on a complex subject in a matter of a few months.
The modifications of the law which the Government consider desirable as a result of the examination of Mr. Gilmore's survey are contained in the Bill now before the House. The various changes proposed are summarised in the explanatory memorandum which has been circulated with the Bill for the convenience of Deputies.
The Government's aim is to enable the Agricultural Credit Corporation to play a leading part in financing the development of agriculture and to create conditions in which arrangements can be worked out for participation by farmers in the ownership, and ultimately in the control, of the Corporation. The Government accept that the Corporation must have adequate financial resources and be free to lend money for all agricultural purposes. While it must continue to operate as a sound commercial organisation, it should be placed in a position to undertake such lending and other investments as are clearly in the national interest, even though at times, the degree of risk may be higher than is normal in ordinary banking operations. On the other hand, all unnecessary hindrance to prudent borrowing by farmers from the Corporation must be removed.
The present authorised capital of the Corporation is £300,000 which is all issued and is held by the Minister for Finance except for a few shares held by his nominees. The Corporation has for some years past been paying a dividend at the rate of 4½ per cent. per annum. The Bill provides for an increase of the authorised capital to a maximum of £2,000,000. As the magnitude of the increase indicates, the Government have in mind a greatly increased future scale of activity for the Corporation. Such increased activity will entail heavy investment of capital. There is no doubt that increased investment by farmers in their land and buildings, in equipment and stock, is a pre-requisite for expanded production at lower unit cost. The farmer's capacity to invest depends on the grant and credit facilities available to him in addition to his savings.
The availability of funds in the form of share capital will provide greater flexibility for the Corporation in dealing with the increasing demands on it for credit. While it is expected that a very big part of these demands will come from the individual enterprising farmers who are the backbone of the agricultural industry, there will also undoubtedly be an increasing demand by co-operative and corporate enterprises undertaking investments in specialised forms of agricultural production and processing. These enterprises will not be operating against the individual farmer but can be used constructively to strengthen the individual farmer's position in production and marketing.
In countries with advanced economies, the pattern of agricultural production and distribution is undergoing profound changes involving new techniques and processes and integrated forms of development requiring the investment of large sums designed to give vast increases in production and productivity. If we are to expand, or indeed even maintain, our sales to export markets we must be in a position to meet the challenge presented by these developments. It is the Government's intention that we will not fail to do so for lack of reasonable credit facilities.
Some agricultural co-operative societies are, of course, already engaged in, or are proposing to engage in, specialised or integrated forms of agricultural production involving close co-operation with farmers in their areas. These co-operatives are setting a progressive example and I hope that it will not be long before many other co-operatives follow this example in ways best suited to local farming needs and prospects. There is a vital need for development of the co-operative movement in this way throughout the country, particularly in the interest of smaller farmers who, such is the need for heavy investment in farming under modern conditions, may find it very difficult, if not altogether impossible, to prosper without the help and guidance of the co-operatives.
For their part, the Government are now taking steps to ensure that the Agricultural Credit Corporation will have sufficient funds to enable it to consider applications from co-operatives for credit for all soundly based projects which cannot be financed from other sources. I may add that the Corporation is itself considering what special scheme or schemes it can introduce to facilitate and stimulate development by the co-operatives in the desired direction.
The Corporation will not be expected to pay a greater dividend on share capital provided from the Exchequer than it is in a position to pay when it has met its various obligations, including provisions for reserves and for the remuneration of any special credit officers who may be appointed to the staff. This will meet the recommendation made by Mr. Gilmore that the Corporation should be enabled to employ credit officers so as to improve its services to farmers. The extra resources now being provided should enable the Corporation to invest in, or lend to agricultural enterprises which, while profit earning eventually, may not prove remunerative for some time.
Under the existing legislation shares of the Corporation may be held by the Minister for Finance only, except that the directors may hold qualification shares and other nominees of the Minister may hold one share each for the purpose of complying with the requirements of the Companies Acts. The Bill empowers the Corporation to issue shares or stock to persons other than the Minister for Finance but the Minister's consent is necessary so long as he holds not less than half the issued capital. The Minister is also being given a general power to purchase and sell shares of the Corporation. These powers in addition to the increase in the authorised capital which is being provided for will enable arrangements to be made for the purchase of shares by farmers when it becomes opportune to provide for this.
However, as is proper for an institution which is primarily of a banking nature, most of the Corporation's capital will continue to be raised by borrowing. At present the borrowing powers are restricted in form as well as in amount. It is proposed to confer power to borrow money in any way the Board thinks fit and to raise the effective borrowing limit of £8.3 million to £10 million. Certain guarantee powers are available to the Minister for Finance under the existing Acts to guarantee borrowing by the Corporation but they are too limited in form. Provision is, therefore, being made to enable the Minister to guarantee the Corporation's borrowing and to make direct advances from the Central Fund to the Corporation. The total of such guarantees, advances and any other borrowings is not to exceed the figure of £10 million already mentioned. Provision is also being made for the guarantee of the Corporation in approved cases against losses on agricultural credit schemes subject to a maximum of £5 million at any one time. The new powers should facilitate greatly the financing and operation of the Corporation.
The Corporation has hitherto been somewhat hampered in its lending activities by certain restrictions which are not appropriate to present day conditions. These are being rectified in the Bill. The principal objects and powers of the Corporation are being re-enacted in more general form and are being widened in certain respects. Under the powers now proposed the Corporation will be able to lend or advance money or to guarantee credit for any purpose which the Board consider likely to increase the productivity of or be otherwise of benefit to agriculture. The definition of the expression agriculture is being widened. In addition to covering all the usual farm operations, it will also cover such activities as horticulture, tree planting, fish farming and the marketing, processing or completion for sale of any farm produce. The existing limit of £10,000 on loans other than to co-operative societies is being abolished and the Corporation is being explicitly empowered to issue and accept bills of exchange and to engage in hire-purchase arrangements.
The Corporation will also be able to take up shares and, if necessary, to sponsor special projects and companies for the benefit of agriculture. It is hoped that such activities and the further development of co-operatives will be of particular assistance and benefit to farmers in meeting the challenge of modern conditions in agricultural production and marketing and will result in increased exports of agricultural produce and goods derived from such produce. The Corporation will be able, and has indicated its intention, to draw on the specialised knowledge and experience of the Irish Agricultural Organisation Society and of the Department of Agriculture in the development of production, processing and marketing enterprises, and such consultation will ensure that these projects are in the interests of the individual farmer.
To simplify loan procedure the Corporation is being given power to make orders charging loans on land, subject to the consent of the owner, or of the occupier, if the loan is for work of permanent improvement. Loans so charged will be a personal liability of the owner or occupier of the land for the time being. Charging orders made by the Corporation may be varied with the consent of the owner or occupier. The Corporation will make no charge for its services in ordinary cases and neither stamp duty nor Land Registry fees will be payable. I am confident that this arrangement will facilitate farmers greatly in borrowing from the Corporation. It follows the system used in the administration of Gaeltacht housing loans and for the fertilisers scheme operated as part of the Land Project in which charging orders are made by the Office of Public Works and the Land Commission respectively.
As a further measure to assist in the provision of credit for farmers the system of chattel mortgages, that is mortgages on livestock, crops and agricultural equipment, is being extended to cover contractual liabilities generally. Up to now a chattel mortgage could be used as security for a direct loan only but under the new provisions it can be used, for example, to secure a guarantee given by or to the Corporation covering the supply of agricultural goods on credit to a farmer.
In the existing legislation loans charged in favour of the Corporation on registered land the title to which is marked "subject to equities" are given priority over the "equities" up to a limit of £400. There is a similar priority over the corresponding burdens in the case of unregistered land. The limit of £400 was fixed as far back as 1928 and the Gilmore Survey recommended that it be increased to £800. In view, however, of the decline in the value of money since 1928 an increase to £1,000 is justified. This figure, which is adopted in the Bill, is larger than the great majority of loans for which the Corporation is asked. The change will, therefore, simplify procedure in connection with most loan applications.
In order to enable the Board of the Corporation to be strengthened as necessary to cope with the increase in its activities, provision is being made to raise the maximum number of directors from five to seven. It will be possible to avail of this provision to give greater representation to farmer interests according as may be justified by investment by farmers in the Corporation. At present there are no effective arrangements in operation by which farmers or other members of the public can invest in the Corporation. Under its new powers the Corporation intends to launch a scheme of investment specially designed to appeal to farmers and I hope that there will be an enthusiastic response.
While it is not a matter that it is necessary to cover by legislation, I may add that the Corporation proposes to amend its Articles of Association to enable it to consider applications for loans on the security of land up to 66? per cent. of the market value of the land instead of 50 per cent. as at present. This will enable the Corporation to give larger credit than hitherto in worthwhile cases.
As regards the scale of the Corporation's activities, I may mention that the aggregate of loans issued since it commenced business in 1928 up to 1960 was £9.4 million, an average of £300,000 a year. The present level is of the order of £800,000 a year which approaches three times the average. This, however, is far from being adequate and I hope that as a result of the enactment of the Bill the Corporation will enter upon a new and expansive phase of activity, performing to the fullest extent its due function in the provision of credit for agricultural purposes.
Before I close, I should refer to the commercial banks who have, within their own province, been implementing progressive policies. They have introduced various special farm credit schemes and are improving their relations and contacts with farmers. These developments are very welcome as there is still vast scope for investment in better farming. The banks as well as the Agricultural Credit Corporation have their own role to play in making that investment possible and fruitful.
In recent years increasing attention is being paid by the agricultural advisory services to farm management problems, including the use of credit. Educational work in this sphere is also being undertaken through the agricultural classes organised by the County Committees of Agriculture and the Winter farm schools organised jointly by these Committees and the Vocational Education Committees. Increasing numbers of farmers are approaching the agricultural advisers for advice on farm management plans and are being helped to place their programmes on a sound financial basis. The farmers' organisations have also been doing good work in educating their members and farmers generally in the use of credit. It is essential that farmers should realise the importance of the wise use of credit in farming so that they will benefit from the improved arrangements which are now being provided.
I have outlined the main provisions and principles of the Bill. I am satisfied that it will provide improved, simpler and more effective machinery for the Agricultural Credit Corporation in channelling credit to farmers. I am sure that its principles and intentions will commend themselves to the House.