In relation to the Principal Act referred to here I raised a question on Second Stage as to whether the terms of section 6 (7) of the Principal Act were being complied with in relation to lodgment of particulars of the guarantees in the Oireachtas Library. The Minister gave an undertaking that the provisions of this Act, which had hitherto not been complied with by the Department, henceforth would be. Since that document, dated November, 1976 was lodged in the Library and given to me—it sets out a list of the banks which have given loans to An Bord Bainne in respect of which the guarantee of the Minister is in force—I do not wish to cavil unduly in relation to this matter. I am sure everybody is acting in good faith. However, it seems that the document given to me does not comply with the section in full. It is clear that particulars of each guarantee should be given if one reads section 6 (7) (a). All that is given here is a general statement about guarantees and the names of the Banks. But the amount of money being loaned by each bank—which clearly should be given in accordance with section 6 (7) (c)—is not given in the statement circulated and handed to me. It may have been given in other statements lodged since, namely, in the last 24 hours. These, if any, are not available to me and I should be grateful for an assurance from the Parliamentary Secretary that this information will be lodged and that the provisions of section 6 of the Principal Act will be complied with in their entirety.
Dairy Produce (Miscellaneous Provisions) (Amendment) Bill, 1977: Committee and Final Stages.
Is the Deputy on section 1?
Yes.
Then this is irrelevant.
It refers to the Principal Act. Could I have that assurance from the Parliamentary Secretary?
I agree that what the Deputy has said is correct. He asked that the names of the banks be circulated and this has been done.
If I may interrupt here. This is more relevant on section 2. I should like to get section 1 agreed since it is the definition section. Is section 1 agreed?
Before giving my agreement I should like to make the point that the section to which I am referring is a section of the Principal Act. It was in view of the fact that reference is made in section 1 to the Principal Act that I felt I should raise it at this point. However, if the Ceann Comhairle satisfies me that this matter can be raised adequately on section 2 I am certainly prepared to agree to section 1 on that understanding.
Certainly it should not be raised on section 1. I will allow the Deputy to continue on section 2 which, if the Deputy reads the section, he will find does refer to that about which he has been speaking and will afford him that opportunity.
The amendments put down by Deputy Bruton on this section have been ruled out of order.
I shall not go back over the ground I have covered on section 1. I would merely ask the Parliamentary Secretary if he would reply to the points I made which are more relevant to this section.
We have already circulated a copy to the Oireachtas Library giving the names of the banks. I can assure Deputy Bruton that we will get the amounts being loaned from An Bord Bainne and these amounts will be given as soon as possible.
On the section I wish to raise a point in relation to the duration of the authority given to the Minister to guarantee loans by An Bord Bainne. Section 2 (1) states clearly that the guarantees must expire on 31st December, 1979. An Bord Bainne have a continuing borrowing requirement of approximately £30 million which they must be borrowing at any time of any year. This is a solid core of borrowing which is always there. In respect of such continuing, permanent borrowing obviously it is more appropriate to obtain long-term rather than short-term finance. But, as the Minister's guarantee expires on 31st December, 1979, it is not possible for An Bord Bainne to obtain loans the duration of which exceeds the time between now and 31st December, 1979. Thus they are unable, first, to get the better terms which can be obtained by use of long-term finance and, secondly, to have the degree of confidence from their bankers in respect of this matter because I understand that banks prefer —if a concern has a continuing long-term indebtedness—that that be financed by a long-term rather than a short-term loan. Therefore, there are two separate points here, the terms of the loan and the preference of the banks for long-term as against short-term finance where there is continuing indebtedness.
In relation to An Bord Bainne's operations, quite clearly these will be continuing in an important way beyond 31st December, 1979. I do not understand why the Department of Agriculture, the Minister and his Parliamentary Secretary are not prepared to guarantee the loans of An Bord Bainne beyond that date. We all agree that the work An Bord Bainne are doing in promoting purchases of our milk produce abroad is vital, not merely to our farmers but to many thousands of other people involved in milk processing in creameries and other plants throughout the country and that their work will be of great importance to us after 31st December, 1979 just as it is at present. Therefore, why is the Minister not prepared to extend the duration of the guarantees beyond the end of 1979?
It is quite clear that during 1979 Bord Bainne will wish to raise money in the form of loans and the duration of such loans will extend beyond 31st December, 1979. For example, with regard to the marketing of cheese, it may be purchased by Bord Bainne during the 1979 season but it will not be mature enough for sale until well into 1980. As a result of the cut-off point of 31st December, 1979, Bord Bainne will not be able to finance their operations even in 1979 by means of State guaranteed loans because the material purchased during that year will not be realised until well into 1980. In effective terms the guarantee does not last the two years it appears to last when one reads the Bill; certainly in respect of cheese it will last for only 18 months.
There was a time, not too long ago, when the marketing operations of Bord Bainne were financed very substantially by the State. Partly as a result of EEC regulations the State has been successful in devolving itself of this financial responsibility. The only assistance it gives is a very small grant-in-aid of about £25,000 per year and unless Bord Bainne defaults on the loan this guarantee does not cost the State anything. Therefore, why is the Minister deciding in this instance not to extend the guarantee beyond 31st December, 1979? It is quite mysterious in view of the following factors: first, the importance of Bord Bainne's operations; secondly, in view of the fact that the guarantees are very important to Bord Bainne in getting loans—a State guarantee is of considerable value in the financial market—and, thirdly, the guarantee will not cost the Exchequer or the Minister for Finance a single penny unless Bord Bainne defaults and there is no great likelihood that they will. Perhaps the Parliamentary Secretary would reply to those points.
I should like to support the suggestion of extending the terms of this Bill for up to five years. At the moment the cut-off point is 31st December, 1979.
As I see it, Bord Bainne will be expected within a certain time to build up assets to enable them to finance themselves in order that they may get loans on the strength of their assets. At the moment there is borrowing of approximately £30 million and, in view of the likely expansion of the dairy industry and the processing of dairy foods it is likely that the borrowing also will increase. In my opinion guarantees will be necessary for a much longer period and that is why I suggest five years.
I should like to point out to Deputy Bruton and Deputy Bermingham that this Bill had been cleared by their Government when in office. In fact, the former Minister, Deputy Clinton, frequently impressed on the board the need for building up their own assets sufficiently to enable them to conduct their financial affairs without having recourse to the State.
Both Deputies have raised the issue of extending the period of guarantee but Bord Bainne themselves raised this point with the Minister in the course of their discussions with him. He said he would let the Bill go ahead as it was prepared but that he would look at the matter further and keep it under review. When the matter comes up for review in 1979, if there is need for a further extension I am sure the Government will be agreeable to consider it at that time.
I do not want to get very deeply into this because it is not so long ago since I was involved in it. I can understand very well the Minister's difficulties. It would be the desire of any Minister for Agriculture to assist to the maximum in this area because dairying is such an important activity and our future depends on it to a considerable extent.
The important thing is to have the guarantee because when there is a State guarantee it is an assurance that the cheapest possible money can be got at all times. It would be very convenient for Bord Bainne if there was a five-year guarantee and, perhaps, that matter might be considered to see if it would make a significant difference to them. I know I had my difficulties in getting the agreement of the Department of Finance to extend it beyond the time stated. We doubled the amount. I can see the difficulty of Bord Bainne; the better we do in milk production here, the more difficulty they will find themselves in. The State is taking no chance whatever because there is an enormous product to back the loan at all times.
Perhaps I might give the House some idea of the money we are talking about. At one stage I visited two co-operatives in the south; one of them had £8 million worth of products in stock and the other had £7 million worth. That gives some idea of the amount of capital required to finance the dairy industry at the moment. The fact that the products are there and can be sold and also that there is property involves the State in very little risk. If we are to show our confidence in the industry, the confidence it deserves, we should be prepared to give it whatever reasonable guarantee is required.
At the same time, I see the need for building up a fund and for the farmers contributing to this fund in order to become independent. Unless the Minister is fairly tough about this the farmers simply will not contribute anything they can avoid contributing at any time. There is a need for them to take this matter seriously. The Minister should inquire if there is a significant difference in the cost of money on a five-year guarantee and on a two-year guarantee. The promise is there of a review if that should prove necessary.
I am glad that the previous Minister for Agriculture has come into this debate because he was associated with Bord Bainne. First, I should like to congratulate the Parliamentary Secretary on his appointment and I wish him many years of success.
The former Minister, Deputy Clinton, has been quite reasonable in his explanation. I was one of those people who felt very sore about this Bill when we first heard of it. As the Parliamentary Secretary has pointed out, it was ready to come before the House before the previous Government left office. I understood there was difficulty in getting the Department of Finance to agree to guarantee the loan over five years because they said the farmers would be shy to contribute to the board in order to finance themselves without the aid of a State guarantee. I did not agree with it because I have been associated with farmers for a long time and I know what they are capable of doing. They are a bit conservative but when they get something that is doing such a good job as An Bord Bainne have been doing over the years I believe they will do as the Minister asks. I know the Minister has to be careful but I believe there should be a longer guarantee. A person can get money at a cheaper rate if the guarantee is over a longer period. I would say the same thing if the Deputy opposite was Minister. I appreciate the honesty of the former Minister in putting forward the difficulties which were conveyed to me at that time. The Minister might be suspicious that farmers would not look after their own business if they thought the State would do it for them. I do not agree with that because farmers in various walks of life have to do their own business. I believe when the farmers see that Bord Bainne are doing a good job for them they will inject capital into Bord Bainne and will be able to do their own borrowing. I ask the Minister, like the other Deputies, to have a look at this and see if a longer guarantee can be given to Bord Bainne.
I would like to make it clear that I am not looking for an assurance from the Parliamentary Secretary that an unlimited guarantee as to time or amount will be given to Bord Bainne. I proposed an amendment to extend the time of the guarantee to the 31st December, 1982 but that amendment was, probably rightly, ruled out of order by the Ceann Comhairle on the grounds that an ordinary Deputy cannot introduce an amendment which would impose a potential charge on the Exchequer. No such restraint applies to the Parliamentary Secretary and it is quite in order for him either now or on Report Stage to introduce an amendment to extend the guarantee to the 31st December, 1982. I ask him, in view of all he has heard from both sides of the House about the importance of this matter, to either introduce an oral amendment now on Committee Stage or, alternatively, to give an assurance that he will introduce such an amendment on Report Stage to extend the period of the guarantee to the 31st December, 1982.
I agree with the Deputies who said that it is very important that farmers contribute to an increasing extent to the provision of a capital fund for Bord Bainne which will act as a security for their loans independently of any ministerial guarantee. The farmers are already contributing very substantially by way of a deduction from the milk price paid to them to such a capital levy. I understand that very recently the amount of capital levy and the amount paid by farmers towards the creation of a capital fund, which will ultimately take the place of a ministerial guarantee, have been doubled. There is no doubt in my mind that at the present rates of contribution a capital levy fund will not have been created by the 31st December, 1979 of sufficient size to replace the guarantee of the Minister. Does the Parliamentary Secretary envisage that capital levy being increased to such an extent that such a fund will exist to replace the Ministerial guarantee by the 31st December, 1979? If so, how much reduction in the milk price for farmers will be necessary to enable the guarantee to be replaced entirely by a fund raised by farmers by the 31st December, 1979? If he is not prepared to give such an estimate and if he is not asking the farmers to increase the levy to that extent, why then is he not prepared to extend the period to 31st December, 1982?
I believe that with the present rates of contribution to the capital levy a sufficient fund will have been raised about the 31st December, 1982 but certainly not by the 31st December, 1979. If that is the case, why will the Parliamentary Secretary not agree to such an extension?
As I said at the outset, I consider the period of the guarantee is adequate. I already gave an under-taking to Deputy Bruton that the matter will be reviewed at the end of 1979 and if it is found necessary then to have an extension, I am sure the Minister will bring the necessary legislation before the House. I thank the former Minister for his contribution because he has had considerable experience in dealing with those matters and he knows, perhaps, better than Deputy Bruton or I, the difficulties involved in trying to negotiate an extension at this time with the Department of Finance and other Departments involved in this also.
I thought there were no problems with the Department of Finance since the 5th July and that the money is flowing all over the place.
There are always problems and the demands are increasing.
I thought the Government had surmounted them.
We have tried during the last three months to surmount many of them.
The Government have not surmounted this one.
Many of them were created by Deputy Bruton's Government when they were in Office.
That is a lame one.
It was a lame Government.
I do not think the Minister has anything to talk about.
I helped to shift them.
The Government would probably do the same thing themselves.
The Parliamentary Secretary.
As far as I am concerned the time limit given is adequate.
I regret that the under-taking has not been given. The assurance of a review in 1979 is no use to An Bord Bainne in raising money on long-term loans now. They cannot get five-year loans now using State guarantee because there is no statutory authority for the guarantee beyond that date. The assurance given by the Parliamentary Secretary in financial terms is worthless.
I would like to refer to the terms of the guarantee. I proposed an amendment that the terms of the guarantee be changed in section 6 (4) of the Principal Act which reads:
Where the Minister guarantees a loan under this section, there shall be paid to the Minister by the Society in respect of the guarantee such fee (if any) as the Minister, with the concurrence of the Minister for Finance determines.
That phraseology is repeated in other sections. I believe that the wording should be: "provides a guarantee", in the first line rather than "guarantees a loan". The reason I suggest this is that I understand that there are other forms of financial facility which Bord Bainne obtain which cannot be strictly classified as loans and in respect of which a guarantee from the Minister will be of considerable value.
In my contribution on Second Stage I outlined the types of facilities involved and I briefly refer to them now. One was a facility to enable them to prefix the export refunds which would be obtained from the EEC in respect of exports to third countries. These would be long-term contracts, some of the deliveries under which would not take place until six or nine months after entry into the initial contract. It would be important for stability in terms of that contract to know what the export refunds would be but that is not possible because these refunds are fixed from day to day. In order to provide a system of insurance against fluctuation in the export refunds, Bord Bainne do obtain facilities from financial institutions in order that they will be able make up the difference and ensure that a fixed export refund, as at the time of the original contract, will be maintained throughout the contract, regardless of the actual fluctuations which may take place in the refunds as a result of EEC decisions.
There is a similar facility in relation to the provision of bonds. The board may wish to obtain guarantees is respect of a bond that they may enter into, either not to withdraw a bid which they have made for a contract prior to the closure and decision as to which of the tenderers will get the contract, or, having obtained the contract, that they will perform it. Facilities in respect of bonds require to be obtained by the board. These are financial facilities from banks to which I understand the term "loan" as expressed in the original section does not extend. I believe it should be so extended. There are other foreign exchange facilities which the board use to insure them against fluctuations in foreign exchange rates. This is a major problem at present.
I believe that if the wording of the original Act was changed from "guarantees" alone to "provide a guarantee" it would extend to the type of financial facility which in modern international marketing is of considerable importance to Bord Bainne but to which the Act and the Minister's guarantee do not now extend. I should like the Parliamentary Secretary to give an undertaking that such an amendment would be introduced in early legislation, if not in this Bill.
There is another point in respect of the wording of the 1973 Act which I feel merits amendment. This is section 6 (5) which states:
Moneys obtained by the Society on foot of a loan guaranteed under this section shall be used solely by the Society for the acquisition in the course of its ordinary business of dairy produce.
I understand that loans may be required by Bord Bainne, to be guaranteed by the Minister, in respect of matters which are not, strictly speaking, the acquisition of dairy produce. They may require loans in respect of the marketing of dairy produce and more importantly nowadays, the storage of dairy produce.
As the former Minister outlined the amount of money involved in keeping stock adequately refrigerated can be very large indeed and is a form of outlay quite independent of the cost involved in the simple acquisition of the produce. I understand that legislation, strictly interpreted, does not extend to loans obtained for the marketing and storage of produce but merely for the acquisition of it. would ask the Parliamentary Secretary to consider amending the legislation to this extent. I agree there must be some limit on the sort of purpose for which Bord Bainne can borrow money with the strength of a ministerial guarantee. In my original amendment I proposed such a limit, accept that the drafting was not necessarily perfect but I would ask the Parliamentary Secretary to look at it and consider the possibility of alternative drafting in amending legislation which, hopefully, will be introduce in the near future.
As Deputy Bruton will appreciate, I could not guarantee that any of the things he has asked for will be included in future legislation. The matter will be reviewed at the end of 1979 and if it is found necessary then that the points raised by Deputy Bruton should be included they will be given serious consideration at that time.
Does the Parliamentary Secretary accept the validity of the points?
I accept that they are valid points but I am sure the Deputy will accept that I cannot give him the guarantees for which he asks.
Does the Parliamentary Secretary accept that these points were made on Second Stage and that it should have been possible for the Minister and himself to form a view about them? Why has the Minister been unable to give a decision and why is he not here?
The Deputy will accept that the Minister is away on other duties. I am sure Deputy Bruton understands that it is not possible for the Minister to be present at all times in the House. I am sure he accepts the guarantees I have given in relation to this Bill.
This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.