Agricultural Credit Bill, 1965: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

The chief purpose of the Bill is to get the approval of the Oireachtas to increase the financial resources of the Agricultural Credit Corporation so that the Corporation will be able to continue to lend money for the benefit of the agricultural industry.

The last occasion on which the Oireachtas increased the Corporation's resources was in 1961. The Agricultural Credit Act passed in that year increased the share capital of the Corporation from £300,000 to £2 million and it also increased from £8.3 million to £10 million the Corporation's authority to borrow money. These additional resources are now practically exhausted. The Corporation's share capital has been fully subscribed and borrowings have almost reached the £10 million limit.

It is good to be able to record this increased borrowing which is in step with the increased activity in the agricultural industry. The Corporation's lendings have greatly increased since 1961. Between the start of business in 1928 and April, 1961, total lendings amounted to £10¼ million but in the four years from April, 1961, to April, 1965, practically the same amount, £10.3 million to be exact, was lent. One must allow for the fall in money values but even so the increase is remarkable. I should also say that of the £10 million lent since 1961, about half was lent in the year ended April, 1965.

The present Bill, therefore, in order to enable the Corporation to carry on its good work proposes to increase the Corporation's share capital from £2 million to £6 million and its borrowing powers from £10 million to £20 million.

There are a number of other provisions in the Bill and I hope that the explanatory memorandum which I have circulated will be helpful to Senators. There is one point I would like to draw attention to in connection with the explanatory memorandum. As a result of an amendment brought in by me in Dáil Éireann, the Bill as passed by the Dáil has a section—section 4—which does not appear in the Bill as introduced. The purpose of section 4 is to enable the Minister for Finance to guarantee in full borrowings by the Corporation. This is a necessary corollary to increasing the Corporation's borrowing powers.

Section 5 in the Bill as passed by An Dáil is referred to as section 4 in the explanatory memorandum, with consequential renumberings in other sections.

The purpose of the other provisions in the Bill—described in section 4 and onwards in the explanatory memorandum—is mainly to extend the provisions of the Agricultural Credit Act, 1961. That Act as well as giving the Corporation additional financial resources also widened the range of purposes for which the Corporation could make loans and extended the means by which loans could be made. The 1961 Act, for instance, brought in the "charging order" system which provides a fairly simple procedure when the Corporation takes a charge on registered land as security for a loan. The 1961 Act also enabled the Corporation to engage in hire-purchase business.

The present Bill proposes to enable a charging order to be used when the Corporation is making a loan to the personal representative of a registered owner of land. Also, the Bill proposes to allow a registered owner to have his land charged as security for a loan made to another party as, for example, where a farmer guarantees a loan made to a son who is establishing himself in another farm.

The Bill also proposes to increase from £1,000 to £2,000 the limit up to which charges by the Corporation on land will rank prior to equities. Priority to equities in the Corporation's favour was first fixed in 1928 and the limit was then set at £400. It remained at that figure until the Agricultural Credit Act, 1961, increased it to £1,000. The Corporation have assured me that they are not aware of any case where a priority charge in their favour was a cause of loss to an equitable claimant. £2,000 would be well in excess of the average loan made by the Corporation but in view of the Corporation's assurance and having regard to falling money values, I am satisfied that the increase in the limit is reasonable. It facilitates considerably both borrower and lender in that normally pre-registration title would not have to be investigated in such cases.

The limit on borrowings by personal representatives is also being increased from £1,000 to £2,000 and the Bill provides that the Corporation may guarantee loans by third parties to personal representatives. Under the 1961 Act, the Corporation was given power to guarantee loans by third parties but this power was not specifically extended to guaranteeing loans raised by personal representatives from third parties.

As regards the recovery of moneys due, the Bill provides that a certificate by the Corporation of moneys due under a hire-purchase agreement may be accepted in Court proceedings asprima facie evidence of the debt. There is a similar provision under existing legislation as regards moneys due in respect of loans or advances but the existing provision does not extend to hire-purchase dealings. I propose to remedy that deficiency. I am happy to be able to say that the number of cases in which the Corporation has to resort to court proceedings is comparatively small.

The 1961 Act gave the Corporation authority to accept deposits from cooperative societies. It is, however, precluded from accepting deposits from sources other than co-operatives. I, therefore, propose to give the Corporation the necessary authority.

Under the Agricultural Credit Act, 1961, the charging orders introduced by the Act were exempted from stamp duty and registration fees in the Land Registry. The Bill proposes to exempt from stamp duty and registration fees all mortgages and charges in favour of the Corporation, and also releases from such instruments. This will place borrowers using mortgages or deeds of charge in the same position as borrowers using charging orders in so far as these duties and fees are concerned.

The Bill also makes certain provisions as regards membership of the Houses of the Oireachtas by directors, officers and servants of the Corporation. These provisions are in line with established provisions as regards membership of the Houses of the Oireachtas by directors and staff of State companies.

This Bill is a very important measure to enable the agricultural industry to maintain its progress and I confidently recommend it to the Seanad.

I should like to justify the Minister's confidence by welcoming the Bill. We all know that in earlier years the Agricultural Credit Corporation made disappointing progress in the development of agricultural credit. In 1961, only nine per cent of the total amount outstanding to farmers came from the Agricultural Credit Corporation, and 91 per cent came from the banks. Since that time great progress has been made. The amount outstanding doubled in the three years between 1961 and 1964, raising the proportion of total credit provided by the Corporation to 13½ per cent. In the past year as the Minister has told us, the total amount lent was of the order of £5 million, which implies that the increase in the amount outstanding last year must be a figure of about £4 million. So we have now reached the stage where almost half the increase in credit extended to the agricultural community is coming from the Corporation, and they are now making a really substantial contribution.

However, there is still some evidence that the Corporation are over-cautious in their approach to the provision of agricultural credit in many cases. I have heard a figure of 25 per cent of applications rejected. I am not sure of the authority for it, and I would be interested if the Minister would confirm it. If it is true, it seems rather a high figure. It is understandable that a body of this kind should be rather cautious. For some time past that has been the difficulty in several of these bodies. The Government have found it difficult to get them to take risks, which is what they were established for. If there were no risks their work could be done directly by the Civil Service. We all know that in the case of the Industrial Credit Company, another body have had to be established to deal with the risky projects. Taiscí Stáit Teoranta were established in order to undertake loans in certain cases where the Industrial Credit Corporation were not too happy. We must hope that progress will be made by the Agricultural Credit Corporation towards taking a more liberal attitude.

One of their advantages, of course, is their low overheads. They have a single office in Dublin with a half-dozen full-time representatives and part-time agents. They manage to operate on a margin which should be the envy of the commercial banks. They borrow money at five per cent, or fractionally more—there is a slight bonus for people who leave money with the Corporation for a period of years—and they lend money at six per cent, which is a margin of one per cent or less, as compared with the four per cent margin of the commercial banks, with their much higher costs through their network of offices throughout the country. The Corporation are thus an excellent example of a State activity to supplement the private sector. It is interesting to note that it was established originally in 1923 by the Cumann na nGaedheal Government, which were not generally considered socialistic in their tendencies.

There is a proposal to enable the Corporation to accept deposits from any source and not only from the cooperative societies. Is the Minister confident that this new proposal will open up the possibility of deposits from other sources and that there will be a strengthening of the Corporation's resources? What rate of interest would be paid on these kind of deposits, and to what extent would this involve the Corporation in competition with the commercial banks for deposits? If they compete for deposits, and divert some deposits from the commercial banks, experience has shown that the money returns again to the banks.

Not long ago, the German banks opposed a bond issue which would have diverted money from them, but they found that the money came back to them eventually. In this case the farmers will get the money and will use it for useful purposes, to buy the things they require for their farms, and the money will thus go back to the banks. I do not think we should be over-cautious on this question. At present the commercial banks' deposits are rising all too slowly for our economic health, but I would not worry about the possibility of diverting some deposits to the Corporation because ultimately that would not affect the position of the banks.

Section 9 deals with the question of the directors of the Corporation and members of the staff and there is the provision in regard to the possibility of a member of the Houses of the Oireachtas being a director or staff member of the Corporation. The justification given is the usual justification, which is as inadequate in this instance as in any other: "It is in line with established provisions. In a Bill of this kind one cannot fight a general principle of that kind, but it seems to me to be a general provision that needs to be looked at again. In this country there is a tendency to narrow down the area of useful activity for members of the Houses of the Oireachtas outside the Oireachtas itself. They are headed off the boards of State companies. Perhaps there are some good reasons for that, and one can see the difficulties, but they are also headed off from other activities. They are rarely asked to serve on commissions and even private vocational bodies are reluctant to bring members of the Oireachtas into their affairs in case Party politics might be introduced.

The fact is that members of the Oireachtas are being deprived of the contacts they should have to do their job properly. As someone who has not until now been a member of a House of the Oireachtas, I know something of this phenomenon. In many individual cases it has been my experience that a Member of the Oireachtas has, in fact, been less well informed than other people of less ability, but who were more involved in the particular affairs under discussion. This is a tendency we should resist. The talent resources of this country are one-twentieth of that of our neighbour. Even if we allow that we are ten per cent cleverer than the people in the neighbouring country, that still leaves us with only one-eighteenth of the resources of the people next door. In those circumstances we cannot afford to exclude any source of talent and the fact is that these State bodies have managed to acquire a high proportion of the talented people in the community and anything which discourages them from entering public life is something we should all resist. This is not a matter which can be debated at great length on this particular Bill but I think a protest should be registered now and I hope that the protest would be followed up by some kind of action to consider this matter an a more general way.

I would like to refer very briefly to one particular subsection of this measure. Senator Garret FitzGerald has already referred to the same subsection. I would like to express with Senator FitzGerald my welcome of the measure. It increases, as we all know, the borrowing limit of the Agricultural Credit Corporation from £10 million to £20 million and its share capital by £4 million, from £2 million to £6 million. If this House was so inclined I feel we could discuss this whole question of agricultural credit for hours on end. We could discuss, for instance, the reluctance of the agricultural community in this country to seek credit and to avail of it. We could discuss the advantage of agricultural credit to the agricultural community and the nation as a whole The Agricultural Credit Corporation have made wonderful progress over the past five years. Some five or six year ago the lending rate per annum of the Agricultural Credit Corporation was less than £250,000. Last year that lending rate reached the sum of £5 million and I confidently predict that the lending rate of the Agricultural Credit Corporation in the next year or two will double that, to reach £10 million. I feel that the Minister will be coming back to this House to seek additional financial provisions for the Agricultural Credit Corporation. The Agricultural Credit Corporation have made wonderful progress in recent years in the appointment of agricultural agents, the introduction of a very satisfactory hire purchase scheme and the encouragement to the farmers of this country to invest their monies in the Corporation.

That brings me to the particular point I wish to make. It is subsection (1) of section 10 which has already been referred to by Senator FitzGerald. This subsection simply states "where a director of the Corporation is nominated, with his consent as a candidate for election to either House of the Oireachtas or is nominated as a member of Seanad Éireann, he shall thereupon cease to be such director". I cannot for the life of me see in this enlightened age why that provision should be included in any measure of this kind. I agree with Senator FitzGerald that some such provision is included in Bills of a similar nature to this one but I cannot understand it. I agree with the provision that a member of this House should not be a member or a director of a Board such as the Board of the Agricultural Credit Corporation. But I cannot agree that once a man is nominated to seek election to these Houses that, on such nomination, he should be debarred— and seemingly debarred forever—from being a director of the Agricultural Credit Corporation or of a similar Board. I cannot see any reason for such a provision. It simply means that a top-class man, who could give excellent assistance to such a board and who is prepared to give his time, at very great disadvantage on many occasions to himself, will be debarred.

I would certainly appeal to the Minister to change that provision as far as the directors are concerned. I agree that the provision might be left in practice, as it stands at the moment for officers of the Agricultural Credit Corporation but I would appeal to the Minister to have the provision with regard to directors altered.

In approaching this Bill we are given an opportunity of having a brief look at the question of agricultural credit in so far as it is administered by the Agricultural Credit Corporation. We are happy that in the last couple of years the situation has improved very considerably and that the concept of the Agricultural Credit Corporation seems to be taking shape and that some of the resources necessary for a proper development in this field are being given to them. We notice especially the returns for last year when more than £5 million was lent. This is quite encouraging.

I had some practical experience in connection with these matters recently when I was helping to get a young man and his family back from England to take over a farm here. I saw the appalling way he was treated by the local bank when, for a fifty acre farm, just a trivial credit request for £900—which was much too little to do the development job required— was first agreed to by the bank and subsequently turned down by the head office. This man was merely told to contact the Agricultural Credit Corporation. It was proof, if proof were needed, of the great credit squeeze being exercised by the commercial banks at present. Were it not for the Agricultural Credit Corporation being able to meet some of the demands at present, the credit situation for the small and medium sized farmers would be very disastrous indeed. As it is, I think the Agricultural Credit Corporation are doing all they can with the resources at their disposal, and which are scarcely adequate for the demands made on them.

One of the big developments in the past few years has been the close link up between the Agricultural Credit Corporation and the local agricultural advisers in the drawing up of a plan for development. This is an excellent scheme and it endorses what the farmers themselves consider reasonable. We are happy to feel that the Agricultural Credit Corporation in their decisions are far more influenced by the soundness of the plan or recommendation given to them than by the magnitude of the sum involved.

We should, at this stage, try to glean some picture of the magnitude of agricultural credit which is involved. I believe this £5 million is only trifling with the problem. I raised this question and developed it in the discussions on the Land Bill in this House on January 20th last—volume 58, No. 4, column 250. There I gave a calculation showing, in fact, that the capital input necessary to bring the standard of living of farmers of under 45 acre holdings up to what they might expect out of a holding of that size, was £110 million. I think that is a fairly reasonable figure. It would appear that this is something which should be tackled on a five to seven year basis at the most. I do not think we could be happy until the present rate of capital input for these small and medium sized farms is at least four times the present figure.

I hope the Agricultural Credit Corporation and the Minister will see to it that we have a rate of development on a par with the Government's proclaimed policy of increasing and giving an adequate standard of living to the small and medium sized farmers and that this will be realised by giving them the necessary capital, either by way of grants or by way of loans through the Agricultural Credit Corporation to enable them to make a living which the Government and the Minister consider reasonable, out of the acres which they have got. We will see, if that is done, very spectacular developments by the Agricultural Credit Corporation in the years ahead. We can, of course, be quite impressed by their new offices but there is plenty of scope for development at the Harcourt Street station office.

We should look into this whole question of credit and see what the funds we give to the Agricultural Credit Corporation and other bodies really achieve. If we take average figures in this regard we find that an investment of around £130 in capital on a farm, say, for the purchase of more livestock or some other addition to its resources, will increase the total output from that farm by about £100 per annum. That £100 average figure again shows that about two-thirds of somewhere over £60 should remain with the owner as a reward for the labour that has gone into producing it.

The amount that has been created circulates through the economy and it picks up strength. This eventually means that the national income is up by £160. This eventually means that an average of more than £30 is deposited into Merrion Street. Therefore, for £130 lent by the Agricultural Credit Corporation in accordance with a sound agricultural plan and for work carried out under the guidance of the agricultural instructors it might be expected to leave the farmer £60 extra and leave the Exchequer £40 better off. Consequently, everybody benefits by that.

There was mention during the last election of a scheme for giving interest free loans. This is by no means an impracticable one for agricultural development. After all, if you take the £130 capital that was required in the example I cited the interest on that was somewhere around £8. I have shown it should deposit on an average about £40 into Merrion Street thereby giving a hand back of £8 and giving 40 per cent for the stake involved. There should be much greater annual funds available for the Agricultural Credit Corporation to really achieve the task of getting increased production from the farmer by its investment.

You have of course, to realise that the figure of £130 I mentioned might in some cases call for pound for pound. In the early stages of development a small farmer might have to look for a capital of £250 for that £100 output but, within those limits of capital investment. I venture to say it will return far more than capital which can be invested anywhere else in our economy at present. Therefore, there is need to apply capital to agriculture and to the other ancillaries with the same liberality as applies in respect of industry. Factories can get up to 50 per cent or 60 per cent of the factory buildings and I think 75 per cent of the equipment. There is no such liberality in the agricultural field because I suppose the problem is so enormous and the costs in many instances are so great. Every agricultural instructor and every agricultural person in the country is convinced of the wonderful return that can be got for investment in agriculture.

There are, of course, pitfalls that have to be guarded against here. The one guarded against at the moment in issues from the Agricultural Credit Corporation concerns replacement of capital. That is a vital factor. You may give a farmer a loan and he may buy stock with it. He makes his repayments to the Agricultural Credit Corporation out of the extra income involved. He has a little left over for himself and he spends that. His stock has reached the end af their cycle and he is still in the Agricultural Credit Corporation. In other words, there is not that provision for replacement or depreciation that should mark sound business activities. Some form of automatic depreciation should be built into the abatements to the Agricultural Credit Corporation. The person who has borrowed from the Agricultural Credit Corporation as well as paying to them their interest and principal should be able to pay through some co-operative or other organisation or a deduction could be made from the money as it passes through so that there would be a fund available when replacements have to be made. It is only by that means that they can develop for the future.

They can get an agricultural credit loan for seven years. At the end of that time they pay off the loan for their stock but as the stock have to be replaced they have got to begin all over again. They have got to get another loan from the Agricultural Credit Corporation in order to replace their stock. We should really tackle this replacement problem in future legislation which may come before us dealing with co-operatives linked up with agricultural credit. There is also, of course, replacement figures in another activity of the Agricultural Credit Corporation that is dealing with the question of——

Perhaps the Senator would now move the adjournment of the debate in order that we may take items Nos. 11 and 12 on the Order Paper.

Debate adjourned.

Items Nos. 11 and 12 will be taken together.