I move: "That the Bill be now read a Second Time."
This is a short Bill whose main purpose is to increase the borrowing powers of the Agricultural Credit Corporation. The corporation was one of the first State-sponsored bodies established in this country, dating from 1927. In the meantime it has become closely identified with agricultural progress here, it has expanded dramatically in the past ten years and is now investing £55 to £60 million a year in Irish agriculture.
The corporation are a registered company with £10 million share capital. The issued share capital of £6.75 million is held by the Minister for Finance who appoints the Board of Directors. The corporation also hold £16 million in Exchequer loans. In recent years their lending was financed mainly from deposits, repayments on existing loans and borrowing abroad including the World Bank and European Investment Bank. To take 1975 as an example the corporation expect to lend £55 million which will be financed by means of £25 million deposits, £21 million repayments on existing loans and £9 million foreign borrowing.
In passing I should say that the deposits scheme introduced by the corporation in 1965 and guaranteed by the Minister for Finance has been highly successful. They now hold £75 million in deposits and pay an interest rate of 10 per cent. I can readily recommend the scheme to the public who can get a very good return on their investment while at the same time contributing to the development of Irish agriculture.
The corporation give credit for a variety of purposes but loans for livestock, land purchase and improvement, buildings and equipment are the more popular. In the year to April, 1975, such loans amounted to £25 million or 45 per cent of total advances. They also give loans for the purchase of seeds and fertilisers, repayment of debt and family settlements and capital for the purchase of grain at harvest time. They finance hire purchase, mostly farm machinery, their total hire purchase transactions in 1974-75 amounting to £5 million.
Farmers are the principal borrowers but a considerable amount of credit goes to merchants and co-operative societies, mainly processing firms such as creameries and meat factories. In 1974-75 the corporation advanced £40 million to farmers and £16 million to others.
Repayment periods vary. Loans to grain millers for the purchase of grain may be repaid within six months. Other short-term loans such as budgeted loans for seasonal farm operations are repayable within 12 to 15 months. Then there are medium and long-term loans. Loans for livestock run for five years, land drainage for 15 years, land purchase and buildings for 20 years and dwelling houses for 25 years.
Interest rates charged by the corporation are based on the current cost of borrowing. With the high cost of funds in the money market in recent years the margin available to ACC to cover administrative expenses is minimal. Samples of current lending rates are 12 per cent for budgeted loans, 13¾ per cent for a repayment period of one to five years, 15 per cent for periods of ten years and over.
From time to time the corporation operate schemes to meet special needs. For example, they had a loan scheme for breeding stock from June, 1972, to December, 1973, to help farmers to increase their livestock numbers. The State paid an interest subsidy of 4 per cent on such loans.
A similar scheme of loans at low interest rates operated last winter to help small farmers buy feedingstuffs. The State paid an interest subsidy of 8 per cent enabling the farmers to borrow at 5 per cent. The Associated Banks took part in these schemes on similar terms.
Turning to the future it seems likely that a high demand for agricultural credit will continue. Farm prices are recovering after the temporary set-back in 1974 and, with the growing confidence in the future of their business, farmers will no doubt increase their investment in land improvement, livestock, farm buildings, equipment and other facilities. The farm modernisation scheme will give added impetus to such investment with its emphasis on farm planning, efficiency and profits.
The corporation are most anxious to contribute to farming progress, and with this in mind I am providing for a big expansion in their borrowing limits. They regularly review their schemes and credit terms to take account of farming requirements. They are also reviewing their administrative system and expanding their regional organisation in order to be in close touch with the needs of individual farmers and speed up the issue of loans. They will soon have offices at 24 centres throughout the country. I should like to congratulate the corporation on their performance and to wish them well in their plans to provide a first-class service to agriculture.
I will now summarise the main provisions in the Bill. Section 1 contains the usual definitions. Section 2 increases the maximum amount which may be borrowed by the corporation. The ceiling of £120 million set in the 1973 Act is increased to £220 million. It is expected that the revised limit will meet their requirements for the next two-and-a-half years.
Section 3 deals with ministerial guarantees. The Minister for Finance may guarantee the repayment of ACC borrowings. In keeping with the new ceiling on borrowings, section 3 increases the maximum amount of such borrowing which may be guaranteed by the Minister.
Section 4 gives the Minister for the Public Service authority to regulate the pay of the corporation's chief executive. It provides that the remuneration and allowances payable to this officer shall be subject to ministerial consent.
Section 5 corrects an omission in the Act of 1972 which, in dealing with foreign borrowing, empowered the Minister for Finance to indemnify the corporation against losses or to receive any benefits arising from changes in exchange rates. Section 5 formalises the accounting provisions for such losses or gains.
This Bill will enable the corporation to cope with their expanding business and to help the progress of Irish agriculture. I recommend the Bill for the approval of the House.