I move amendment No. 1:
To delete all words from and including the word "request" to and including the words "matters of" and substitute therefor the words "convene a conference of representatives of the Government, the banks, and farmers to consider."
I would like to make it quite clear, in the first instance, that I approve of the main purpose of Senator Counihan's motion. The only thing that I do in this amendment is to propose a somewhat different procedure for giving effect to the policy contained in that motion. The procedure contemplated in the motion is that the Agricultural Commission should be requested to consider and report as early as possible on this scheme. I happen to know that the Agricultural Commission is at the moment profoundly interested in the pig problem, that it has a lot of work heaped on it and that there is not the least likelihood that it could undertake a special investigation of this kind and bring it to a satisfactory result in the near future. I also have reason to believe, and I do not think I am giving away any State secrets in saying so that, as a matter of procedure, from the point of view of the Commission, they would prefer to give their considered views on the problem of agricultural credit when they have already in many previous sessions considered the various directions in which they would recommend an expansion of agricultural production.
From the logical and purely academic angle, the Commission's point of view has much to be said for it, but, from my point of view, the matter of the provision of a satisfactory basis for agricultural credit, with a view to a rapid expansion of the agricultural industry, is one which admits of no delay. The matter is urgent, and I should also like to remind the House that, even if the Agricultural Commission is in session, we have not abdicated our functions and that we have a perfect right to discuss a matter of this kind, involving an important aspect of the agricultural problem, and one which, in some ways, is special and rather technical. But we are not asking the House to make any definite recommendations on the strength even of the expert knowledge of the persons most competent in this House to express opinions. We are asking the House to recommend that a conference of persons specially expert in these matters should be convened, a conference representing the Government, the banks and the farmers, and that they should consider Senator Counihan's proposal on its merits. What better body could be asked to express an opinion on that proposal than the kind of conference I have in view?
I should like, further, to say that when the idea contained in Senator Counihan's motion was first suggested to me it seemed to me, at first sight, to be too good to be true, and I had the feeling that it was such a stroke of genius and so obviously brilliant that there must be a snag somewhere. I have been looking for that snag for the last three months, and I have been talking over the principle contained in his suggestion with other persons who are competent to have an opinion on these matters, and neither they nor I have yet been able to find the snag. I have come to the conclusion that his idea for a solution of our urgent problem of agricultural credit is so overwhelmingly the right idea that I dropped all my old former opinions and suggestions in reference to the matter, and I can assure the House that I do not lightly abandon or expose to destruction the children of my own brain and I do not lightly adopt the opinions of someone else, and, when I adopt the views recommended by Senator Counihan, I ask the House to regard that as the very highest tribute I could pay to the value of the suggestions he has made.
Coming to the substance of this motion, the first point I should like to make is that, in making this suggestion on behalf of our agriculture, our agriculture is not asking for any fresh concession at the expense of the State, or at the expense of any other section of the community. It is not a case of attempting to beggar my neighbour, or attempting to advance a sectional interest at the expense of other interests in the country, and with reactions on the general interest which may be more harmful than beneficial. It is a possible policy for a minor economic interest to improve its own position at the expense of other interests, and I should not like to deny that that has happened in this country and in other countries; but it is not possible for a major economic interest, as our agriculture is, substantially to improve its economic position by methods which damage the economic position of the rest of the community. If it attempted any such policy, it would, suffer more, being such an important part of the general interest, than it could possibly gain by any attempt to transfer its burdens to other sections of the community.
In that connection, I have been rather alarmed lately to notice suggestions that agriculture having carried the industrial revival on its back for the last eight or ten years, should in the near future have the compliment returned and that the rest of the community should in various ways subsidise the agricultural industry and proceed to carry its burdens. The methods suggested have varied from subsidies for this, that and the other agricultural product to derating of agricultural land, a policy of which, I must say, I strongly disapprove. I am reminded in that connection of an Eastern fable about a man and his donkey. The man was riding along on his donkey somewhere in the neighbourhood of Bagdad and passers-by jeered at the big man sitting on the small donkey, and said what a shame it was that he should be riding that poor unfortunate donkey. It was suggested that he should get off the donkey's back which he did—and I am all in favour of industry getting off the agricultural donkey's back. It was further suggested that instead of the donkey carrying the man, the man should carry the donkey, and the man, being only too anxious to please everybody, proceeded to hoist the donkey on his back, and, if Senators remember, they fell into a river, so that in trying to please everybody, he pleased nobody and lost his ass into the bargain. If we attempt to further any policy of making industry, or non-agricultural interests, carry the burdens of agriculture, we are pretty certain to lose our agricultural ass into the bargain.
The proposal contained in Senator Counihan's motion is not open to the objections I have to any such policies. The points about it which appeal to me are as follows: when the State remitted, in 1933, half the burden of the annuity payments, it accepted a capital liability for the State equivalent to the present capital value of the remitted annuities. The amount remitted was some £1,700,000 a year, payable over a certain number of years, which is either 30 or 40, on the average, although it varies in different cases according to the date at which individual farmers came into the system. From the State point of view, that concession involved the assumption of a burden on the general taxpayer equivalent to the capitalised value of the concession made to the farmers, but it did not confer on the agricultural interest the power of borrowing, an increase of credit, in any way corresponding to the terrific addition that was made to the burden of the general taxpayer. In other words, the capital liability assumed by the State was not balanced by any real capital asset conferred on agriculture which might have become a basis for agricultural borrowing for productive purposes.
The reason for that was that the concession was made simply and solely in the form of a diminution in the annual outgoings of the farmer. It did not, however, give the farmer anything he could bring to a bank and say: "There is a tangible security. On the strength of that, I wish to borrow such and such a sum of money. What about it?" In fact, as the thing now stands, the only form in which the farmer could realise the superior capital value conferred on him by this annuities remission is by selling his land and going out of production altogether, under which, in theory, and over a long term of years, the capital value of that land should be enhanced by the capital value of the remitted annuities, but, in practice, that is not an asset on which individual farmers here and now can get credit and go to the banks to borrow.
The question arises: what is the capital value of that remitted burden of annuities, and the answer to that is somewhat technical. The present value of an annuity of £1 a year for a number of years varies with the rate of interest at which you discount future payments, and the number of years which the future payments have to run.
If you want to know what the answer is in any given case you will look at a table of compound interest or at a book containing compound interest and annuity tables. If you do, you will find that the value of an annuity of £1 over a period of 30 years discounted at 4 per cent. is about £17 5s., and the value of an annuity for 40 years is just short of £20. In other words, if you take these payments as spread over the next 40 years and take the rate of interest that is likely to exist at 4 per cent. the present value of the annuity concession is 20 times the full annuity remitted, in other words, £34,000,000. If you take it that the annuities have only 30 years to run, then the capital value is something less. It amounts only to £30,000,000.
Now the proposal is that the farmer should just take out his privilege in a different form, and, if he wishes, resume payment of his full former annuity as it was before 1933 and, in consideration of his doing so, he should get from the State land bonds having the same present capital value as the capital value of the resumed addition to his annuities. Take a concrete example—if a farmer were paying £24 a year in annuities before 1933, he is now paying £12 a year. He would have the right under this scheme to revert to his former rate of £24, thus paying £12 more than he is paying now. He would get land bonds bringing him in, perhaps, £10 a year, because naturally some provision must be made for the element of the sinking fund, and the farmer would, naturally, expect to pay something more than he is going to get by way of interest. He expects to pay over a number of years what would cancel the land bonds given to him. He is making a payment which would, eventually, revert to himself if he happens to keep the bond in his possession for 30 or 40 years.
Apart from that technical consideration the farmer who elects to take his concession in the form of land bonds would not be costing the taxpayer one penny because the fresh bonds issued would be covered by fresh resumption of the liability to pay the other half of the annuities. The farmer, having got his concession in the form of land bonds, would then have the option of using those bonds in any way that was most convenient for him.
He could keep them until 30 or 40 years' time or he could sell them. There would not be a great danger of a serious slump in their value if he did sell them. Let us say he could use those bonds as a source of much needed addition to his working capital. That is the only means by which agricultural output can readily be expanded. Now the total borrowing capacity of agriculture, by certain calculations is, on this basis, about £30,000,000, if you like, or £34,000,000, if you like. The latter figure is the maximum, and a very improbable maximum, because in the first case we must cut off from that total the margin which the bank would naturally require between the market value of the bonds and the amount which the bank would be willing to lend on them. That would cut off 10 per cent. of the nominal total. In the second place, we have this probable fact that not more than half and probably less than one-fourth of the Irish farmers are likely to avail themselves of this scheme. Only in the event of 100 per cent. of the farmers eligible for it electing to take out the concession in this form would the total borrowing capacity of Irish agriculture be expanded by £25,000,000 or £30,000,000. I am more concerned that the amount available for borrowing for productive purposes should be not too little rather than with any fear of anything in the nature of inflation. In a word, I have no fear that inflation would result from the adoption of the scheme.
In many ways, the agricultural industry is unique. In no respect is it more unique than in the fact that the property is owned and has been in many cases created by the labour and savings of successive generations of Irish farmers up to and including the present. The capital invested in industry is borrowed in one form or another on the money market. Our agriculture has a higher proportion of owned capital invested in it than has any other industry. Senators Counihan and Parkinson drew attention to the total capital value of Irish agriculture, even under present conditions. One would be inclined to say that the capital value of the tenant purchaser's interest—the value of his land, plus his farm buildings, leaving out his dwelling house, plus his livestock, plus his machinery—would amount to something between £200,000,000 and £300,000,000. That being so, it is trifling with the matter to suggest that £15,000,000 would expand unduly the farmers' indebtedness as against this capital sum of £200,000,000 or £300,000,000. The Banking Commission reports that the amount actually borrowed from the banks is some £13,000,000. Even if it is found that there is an equivalent amount borrowed by way of shop credit from the merchants and shop keepers you still get a trifling amount owed to our financial institutions by agriculture as a whole. I suggest that this scheme would make a trifling addition to the already small amount borrowed for agriculture. That amount is comparatively trifling and will not make the financial structure of our agriculture in any way top-heavy or dangerous.
I think that the right use of borrowed capital would do much to expand agricultural production in various ways. If we compare our agriculture with that of our neighbours, one of the first facts that strike one is that the capitalisation of our agriculture per person occupied—that is, the total amount of capital involved in it per person occupied—is not more than £500, whereas the capitalisation of British agriculture is estimated at something like £1,400 per person occupied. That means that labour occupied in British agriculture is much better equipped and more productive than labour occupied in Irish agriculture and we are not surprised to find, in consequence, that the net output per person occupied in British agriculture is about twice as high as the net output per person occupied in Irish agriculture. In the case of Britain, the net output is value for about £135.
I had the curiosity to look up the figures for consumption of imported and home-produced agricultural machinery and implements over a period of years and I found that from 1926 to 1930 there was a gradual increase in the value of agricultural implements and machinery imported, plus the value of similar implements and machinery produced at home, until a maximum of £400,000 a year was reached, the home manufacture being about £100,000 and the import increasing to about £300,000 worth. As one would expect, one also found that that total of expenditure on agricultural implements and machinery collapsed to less than half in the difficult years of 1932 and 1933 but, lately, it has been rising slowly, though it has not yet reached the maximum it reached in 1929. On this point, I speak subject to further information: I am not sure that there has not been between 1938 and the present date a declining trend once more in the consumption both of imported and home-produced agricultural machinery because, if my figures are right, we imported in 1937 £187,000 worth and, in 1938, only £150,000 worth. I should like to know whether the home production of agricultural implements and machinery increased more than enough in that period to balance the decrease in the import. The point is that, as things stand, we are spending on an average only £1 per farm per year on agricultural implements and machinery and that is not a great deal of money to spend on renewal and replacement of existing machinery and additions to the existing quota of machinery.
Another direction in which our agriculture might quickly expand, if adequate credit and capital facilities were available, is in pigs and poultry. The rapid expansion of these two things, in particular, is primarily a question of new buildings and better equipment. As the Minister knows, you can keep a flock of 50 or 100 hens about a farmstead and it will not be so much in the way and will give a fairly profitable return. But once you get above a flock of about 100, you have got to go in for modern buildings and equipment. You must acquire incubators and brooders and proper poultry houses and, if possible, put them out in the fields. To pig feeding, the same remarks apply. If more than three or four pigs are kept, you must have proper buildings and layout for the carrying on of the industry. These are directions in which borrowed money might well be invested to give a gross return which would more likely be 100 per cent. of the amount borrowed than five per cent.
I, myself, think that the best and most important direction in which our agriculture could expand would be in the direction of increasing the number of highly productive and profitable cows which we have. We have now about 1,200,000 cows and we had the same number of cows about 50 years ago. I rather think that the number of cows 100 years ago was 1,000,000. Is there no getting away from that stereotyped figure of 1,000,000? The cow is responsible, directly and indirectly, for two-thirds of the total output of agriculture—directly for the output in respect of milk consumed whole, butter, cheese and calves, not forgetting bullocks as well as heifers; indirectly the cow is responsible for that important part of our agricultural output which relies on skimmed milk as its chief protein constituent in feed— namely pigs and poultry. If you look at the agricultural output report of 1926-27 you will find that the value of dairy produce, plus pigs, plus poultry, is well up to three-quarters of the value of our total output. There are little more than 1,000,000 cows in the country and there are, at least, 400,000 farmsteads. In other words, there are only, on the average, about two and a half cows to each farm, which means that there must be tens of thousands of one-cow farms and two-cow farms. As every person who stops to consider the matter must realise, you must have more than three cows about a place before you begin to have a reliable supply of milk for use other than in the family and before the farm can be made the basis of any serious agricultural industry for sale. It is, I think, of the highest importance that we should aim at increasing the total number of cows and, therefore, increasing the average number of cows per farm. That is a question of increasing the amount of working capital available in each farmstead, for the cow is the most important element in the working capital of Irish agriculture. The farmer who elects to take his concession in the form of these land bonds would be doing a wise thing, from my point of view, if he borrowed from the bank in order to avoid selling that springing heifer which he, otherwise, must sell in order to meet his current liabilities. In that way, the possibility of temporary accommodation, resulting from this new credit basis for agriculture, would make it possible for him to extend this as well as other forms of his working capital but an increase in the number of good cows is by far the most important and most desirable way in which agricultural working capital could be increased.
I myself have had some little experience of cow-keeping and I am glad to say that I found no great difficulty in getting an average of 600 to 800 gallons of milk per cow per year. I find that the average for the whole country is somewhat less than 400 gallons, which seems to be appallingly low. With adequate capitalisation of Irish agriculture, it would be a sound proposition for the farmer to borrow for the means of buying feed, if he must buy it in order to keep his cows from being starved, and, in that way, increase their total production of milk in the year. However, something depends on what the output per cow, in terms of milk, is if we want to arrive at the increased agricultural output that would result from keeping, say, 500,000 more cows, a figure that we might well achieve in the course of the next five or ten years. If you take 400 gallons of milk as the output per cow at 6d. per gallon, that gives you £10 as the value in terms of milk alone. Then you have the value of the other supplementary activities, by way of poultry and pigs, that the additional milk supply will make possible. I, personally, think, especially if you could raise the output per cow to something like the 600 or 800 gallons level, it would be quite moderate to suggest that every additional cow should be worth an addition to the agricultural output of some £20 per year, in which case if we could, over the next five years, have 500,000 fresh cows we could add £10,000,000 per year to our gross agricultural output. If that would not be a satisfactory and adequate return justifying, and more than justifying, the borrowing of, perhaps, £5,000,000 in order to make it possible to increase the number of cows by 500,000 I do not know what an adequate return means. I think, if this scheme is adopted, it is probable that, perhaps, £4,000,000 or £5,000,000 will be borrowed and used productively by farmers in this way. I should like to hope that as much as £10,000,000 or £15,000,000 would be so borrowed and so used.
Before that question is approached, there is another matter that should be got out of the way and that is the question of frozen loans. I think the time has fully come when there should be a full and frank settlement as between the banks and the farmers in respect of these frozen loans. I think that, in doing so, the procedure followed in other countries should be carefully studied. One does not like the idea of repudiation or even of writing down of debts in any form. One does not like the idea that one can get away without paying one's debts. At the same time, circumstances have altered since 1920 and 1921 in ways that neither the farmers nor the banks at the time could possibly have foreseen. Equity has required in similar cases that there should be a revision of nominal commitments in the interests of all concerned. I would urge a voluntary coming together of the banks and the farmers in reference to their frozen loans so that this problem could be got out of the way before this new possibility of extending agricultural borrowing has been launched.
