I move: "That the Bill be now read a Second Time."
The primary purpose of the Bill is is to increase the statutory limit on borrowing by the Agricultural Credit Corporation. It is less than two years since this House passed the Agricultural Credit Act, 1972, which extended the borrowing powers of the corporation and fixed £70 million as the limit of their total borrowings. It is a tribute to the remarkable progress of the corporation that I am now proposing to increase this limit to £120 million.
Before dealing with the details of the Bill, I should like to review the work of the corporation and to describe the various credit facilities which they offer to the agricultural industry. The Agricultural Credit Corporation were one of the first public enterprises established in this country, being set up by the Agricultural Credit Act, 1927. Over the years, they have played a significan role in promoting Irish agriculture and their total investment in the in dustry now exceeds £65 million.
The corporation's business expanded dramatically during the past five years coinciding with the vast improvement in the prospects for agriculture in the European Economic Community. Total advances by the corporation increased from £6 million in 1968-69 to £29 million in 1972-73. The expansion continues in 1973-74 and total advances for the year could reach £50 million. The EEC now provides about 30 per cent of the credit used by farmers.
Deputies will be interested to know where the corporation get their funds. The main items in their balance sheet at 30th April, 1973, the end of their accounting year, were £6.7 million share capital owned by the Minister for Finance, £7.7 million in repayable advances from the Exchequer, and £41 million in deposits from the public.
Deposits have provided most of ACC's funds during the past few years. The deposits scheme which began in 1965 has been very successful. The inflow of deposits was so buoyant in the years 1968-69 to 1972-73 that receipts from deposits plus repayments on existing loans were sufficient to finance the corporation's entire lending programme. The inflow of deposits has not kept pace with the expansion in lending this year, with the result that the corporation have to look elsewhere for funds. To supplement their own resources, the Exchequer is giving them a short-term loan of £8 million and the corporation may have to borrow a further £8 million from abroad.
Turning now to loans available, the corporation provide a very wide range of loan facilities. They give loans to farmers for livestock, land purchase and improvement, erection of farm buildings and dwelling houses, and the purchase of farm machinery, seeds and fertilisers. Livestock loans are the major element representing 42 per cent of total ACC advances in 1972-73.
The period of repayment varies. For example, maximum repayment periods are five years for livestock loans, 15 years for loans for land purchase and improvement, 20 years for farm buildings and 35 years for farm dwellings. In addition, merchants can get short-term loans to enable them to give seeds and fertiliser to farmers on credit at spring time and to finance the purchase and storage of grain at harvest time.
In recent years, many firms in the food processing industries are turning to the ACC for capital. Hence the ACC are contributing to the expansion and modernisation of many creameries, meat factories and grain mills. During the past year the corporation—as well as the commercial banks—took part in a temporary scheme of loans for farmers at subsidised interest rates. The object of this scheme which began in June, 1972, was to help smaller farmers to increase their livestock numbers in order to benefit from EEC membership. The loans were advanced by the ACC and the commercial banks and the Exchequer pays an interest subsidy of 4 per cent. The scheme will end shortly but I mention it because it enabled farmers to obtain £4.0 million at low interest rates to buy stock and it also served as a useful introduction to the concept of interest subsidies which will form part of the EEC farm modernisation scheme.
During the past year the ACC also became associated with the World Bank Loan for livestock development. This loan of £10 million is channelled through the ACC for relending to farmers by both the ACC and the commercial banks. The loans, which are given to farmers who follow an approved development plan, are available for long-term investment in livestock programmes. A preferential rate of interest applies 11¾ per cent at present, and the loans are repayable over a period of 12 years.
I have given a brief outline of the work of the corporation. Deputies will see that the volume and nature of ACC business have expanded considerably. To cope with this expansion the corporation recently adapted their management structure and installed a modern accounting and data processing system. They also extended their area organisation in order to bring their facilities within easy reach of farmers and to ensure that their officials are in close contact with local problems.
Looking to the future, it is likely that the demand for credit for agriculture will remain high over the next few years. Farmers will need credit as they continue to adapt their enterprises, improve their land, buildings and equipment and increase their livestock numbers to exploit the market opportunities available in the European Economic Community. It is true that because of their higher incomes farmers will themselves have more funds for re-investment in their holdings, but, nevertheless, a substantial gap will remain which must be filled by borrowing from sources such as the Agricultural Credit Corporation.
This is the context in which I am presenting the present Bill to the House. While the corporation can count on annual receipts of £15 million from loan repayments, they would have to borrow about £30 million to finance an annual lending programme of £45-£50 million. Their total borrowings at present are close to the permitted maximum of £70 million. I propose, therefore, to increase the statutory maximum to £120 million. Section 2 of the Bill provides accordingly.
Borrowings by the corporation may be guaranteed by the Minister for Finance. The maximum of such borrowings which the Minister can guarantee under existing legislation is £70 million. To bring this into line with the new borrowing limit, section 3 of the Bill empowers the Minister for Finance to guarantee ACC borrowings up to a maximum of £120 million.
Sections 4 and 5 of the Bill relate to charging provisions which apply to lands offered as security for small loans. These provisions were put into the 1947 Act to speed up the issue of loans. Existing provisions apply to loans up to a maximum of £2,000 which was fixed in 1965. To take account of the decline in money values, I now propose to increase this maximum to £10,000. Sections 4 and 5 make this change.
Finally, section 6 of the Bill enables the corporation to make whatever changes are necessary in their memorandum and articles of association as a result of other clauses in the Bill.
This Bill will help the ACC to cope with the expanding demand for credit for agriculture and in this way enhance the prospects and progress of our agricultural industry. I recommend the Bill for the approval of the House.