This Bill provides for the establishment of an institution to be known as the Agricultural Credit Corporation. The share capital will be £500,000, with a maximum rate of interest of five per cent., the capital and interest to be guaranteed by the Minister for Finance. The Corporation shall have the right to issue certificates, to be subscribed for by the public, in denominations to be settled afterwards, with a rate of interest to be not more than three per cent. over and above the bank rate, up to a maximum of £7,000,000, or £1,000,000 in any one year. The principal and interest of these certificates will also be guaranteed by the Minister for Finance. The Corporation may take deposits from co-operative societies, and powers are given to it to issue debentures for, I suppose, temporary purposes. That is to say, the Corporation will be financed from two or three sources; (1) share capital up to £500,000, (2) money obtained on certificates up to a maximum of £7,000,000, and (3) deposits from co-operative societies, but not from individuals. That money is to be available for agricultural credit, for farmers and for farming purposes on the one hand, and for farmers' organisations, such as co-operative societies, on the other.
The purposes for which the money is to be available are set out in some detail in Section 12. They speak for themselves and I need not go into them fully. They will be for ordinary productive purposes such as stocking, farm buildings, and drainage, and so far as co-operative societies are concerned, for the establishment of co-operative societies and for the carrying on of their business. The Corporation will also act as a sort of clearing house for credit societies. Credit societies are particularly useful in certain poor districts where the average loan required is anything from £20 to £50, where the ordinary farmer has not very much security to offer as an individual, and consequently it is necessary to get some sort of extra security, the only sort of security he can get, by means of the establishment of a credit society. In my opinion these credit societies will be extremely useful in the really poorer districts, in West Donegal, West Mayo, Connemara and such places. The Corporation will act as a clearing house for these credit societies, that is to say, it will take surplus deposits, if they have any surplus deposits, and on the other hand will make money available to societies that need it.
There is also somewhat of a new departure in this Bill. There is an attempt to establish what is known as a chattel mortgage. A chattel mortgage is really an agricultural bill of sale. It has been the view of every Commission that considered the matter for a long time past that some sort of extra security should be made available for the small farmer in order that he might get the capital he requires. Practically all the Commissions that have dealt with this question have recommended the same thing, something in the nature of a chattel mortgage. There is a chattel mortgage for agriculture in America at the moment, and I think in some of the Dominions also but the conditions there are, of course, entirely different from the conditions here, and we cannot make any general deduction from American, New Zealand or Australian conditions, and apply them here.
At the same time, it is obvious that the Irish farmer, of all farmers, needs some additional form of security. Land is not a good security at the moment, mainly through the farmers' own fault, mainly because it is quite impossible to sell land in the event of the mortgagee being unable to collect his debts. Whatever the reasons may be, land is not an extra good security, and the condition of things at the moment is that the small farmer, or the big farmer, who wants to get anything from £50 to £200 gets it on a three months' bill, signed by three or four of his neighbours, brings them into town for that purpose, spends the day in town, and has to repeat that process at the end of every three months. That is most unsatisfactory and extremely expensive. The ordinary bank rate of interest is high enough, but when you have to add to the bank rate of interest the cost of entertainment, and so on, and the time that is lost, not only in the case of the man himself, but in the case of two or three others, the whole transaction becomes most unsatisfactory and most expensive. Yet, that is the only alternative at the moment as far as farmers are concerned. A mortgage on land is not a form of security that banks are particularly anxious for, for the reasons given. If there was good reason for attempting to establish some system of chattel mortgage in other countries, it seems to me that there is a particularly good reason in this country. The trouble is that there are a number of difficulties of detail to be settled, and it is extremely hard to settle them.
Everyone would agree that a chattel mortgage, on the face of it, is a reasonable sort of security for the farmer who wants to stock land, especially the particular type of farmer who got a holding under the Land Purchase Acts. That sort of security looks reasonable, and the sort of security he ought to have. But when you try to give legislative effect to a chattel mortgage, you find difficulties at once. The trouble is that all the Commissions that examined this question have left the whole matter very much in the air. None of them made a serious attempt to solve these problems. I suppose that is because of their magnitude. It seems to me that we can never carry the question any further until somebody tries to foresee the difficulties and solve them, embody the results in an Act of Parliament, and put it into operation. I do not pretend for a moment that the particular section dealing with a chattel mortgage is water-tight. I believe it is not. But I believe that we will never discover where it needs repair, except by establishing a chattel mortgage and putting it into operation. If afterwards it needs adaptation, correction, enlargement, or variation, our office is there to do it. The alternatives I was faced with when considering the question were either to drop the whole idea where the Commissioners have dropped it, and leave it as a pious wish, or, on the other hand, to insert some provision for a chattel mortgage, and try to put it into operation.
The Bill provides that a chattel mortgage shall be taken by the Corporation itself, or by any of the recognised banks, and by nobody else, and that it shall be registered. Of course, rents, rates, taxes, and some other charges of that sort have priority, but ordinary debts have not. The chattel mortgage shall be registered in a secret register to be kept in the office of the County Registrar, to be available for the banks and for the Corporation. It was the opinion of the Banking Commission, and it was the opinion, I think, of the 1914 Commission on Credits— which was generally agreed to be a very competent body—that secrecy was essential for the successful working of a chattel mortgage. I agree, but I do not think it is right. I think we have to get to the time in this country when an overdraft is looked upon as an ordinary commercial necessity, as it is in every go-ahead commercial country—to the time when people will have all their money invested in productive enterprises, and will try to borrow money cheaply to get into more. At the moment we are a long way from that, and I am satisfied that unless there is a secret register—a register at least fairly secret—you will not have this chattel mortgage availed of.
The difficulties, of course, are with the secret register. If you had an open register, then shopkeepers and everybody else would know where they are, but no one would avail of it. If you have a secret register, I think it will be availed of. I do not think, when it comes to an examination of the matter, that you are going to injure the ordinary trader very much at all. That is a matter I discussed with traders. They agreed in the main that so far as eighty per cent. of their customers are concerned trade is done on the security of the character of the customer, and that this secret chattel register will only affect their dealings with about twenty per cent. of the customers. It will simply mean that the shopkeeper will be very careful about giving credit to twenty per cent. of his customers, and you provide men, including that twenty per cent., with readier means of getting money and, consequently, doing a cash business, which is so much the better for the shopkeeper, and certainly so much the better for the farmer. There is too much illegitimate credit in this country—if I may put it in that way. It is no harm that there should be a tendency to get back to definite institutions for credit, and outside that doing, so far as possible, a cash business.
This Bill provides for the chattel mortgage. I do not think I need go into it in detail. As I say, everyone knows what a chattel mortgage is. It may be taken on any chattels—it may be a floating chattel mortgage for all the chattels of the farm, or a specific chattel mortgage or both. A floating chattel mortgage may be made specific and brought down to definite chattels.
The Corporation itself will do purely and entirely a long-term and intermediate-term business. The proper function of joint stock banks is, of course, a short-term business, but they are able to do intermediate-term and even long-term business with a limited number of customers. They have, however, never been designed to do an entirely long-term business. On the other hand, only long-term loans in the main, including some intermediate-term loans, are suitable for agriculture. At the best of times, there are only small profits from farming, and a loan cannot be repaid except over a pretty long period. The banks cannot give loans for a long period. This Corporation is a recognition of the fact that agriculture needs not only additional credits but, in particular and principally, different kinds of credits for certain purposes. For productive purposes especially it needs long-term credits, and there is no institution at present specially suitable for giving those long-term credits. As the Corporation will be confined to long-term credits, it will not cut across the operations of the joint stock banks in any way. On the other hand, it will undoubtedly strengthen them. I need not elaborate that at any length. Any banker will see that it will undoubtedly strengthen them. It is contemplated— of course these are all matters for arrangement afterwards—that this Corporation will be merely a central institution with no branches through the country. There is no reason that there should be. It would be an expensive process. Apart from that there are the ordinary joint stock banks, and it is more than likely that it will be possible to make an arrangement with them that their branches shall act as agents for this Corporation.
I realise that when we are making arrangements to give additional credits to agriculture we are doing something that is badly needed. It would have been a mistake, however, to my mind, to provide additional credits for agriculture for the last three or four years. It is a mistake, especially in an agricultural country, to provide anything like extensive credits on a falling market. But when prices have fallen and have become stabilised, then credits are wanted and can safely be given. I think, therefore, that the establishment of this Corporation just at this time is particularly opportune and useful. We realise, also, that when we are attempting to provide additional credits for agriculture there is a duty on the other side—that it is absolutely essential to provide more complete arrangements for collecting bad debts, and this Bill provides for that. It provides that any person obtaining a loan by a misstatement, or misusing a loan when obtained for a purpose other than the purpose for which it was given, shall be punished by criminal penalties. So that what I really anticipate under the Bill is that it will make it more easy for the honest man to get credit and more easy to collect debts from the defaulter.