Agricultural Credit Bill, 1969: Second Stage.

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

The primary purpose of the Bill is to increase the financial resources of the Agricultural Credit Corporation so that its work may continue and expand. The total amount of ACC loans at present outstanding exceeds £20 million. Lending by the corporation in its present financial year, which ends on 30th April, will total more than £5 million and it is expected that this volume of business will increase steadily in the years immediately ahead.

The Agricultural Credit Act, 1965, authorised share capital of £6 million for the corporation and increased to £20 million the borrowing powers of the corporation. The share capital has now been fully subscribed by the State and total borrowing by the corporation amounts to approximately £15 million. The Bill proposes to increase the authorised share capital limit to £10 million (section 2) and to extend the borrowing limit to £25 million (section 3). It is expected that the proposed new limits will suffice for at least five years ahead.

Section 4 proposes to extend the authority of the Minister for Finance to guarantee the corporation's borrowings to accord with the new borrowing limit. Under present arrangements for financing the corporation, the Exchequer will take up the new share capital and will also make repayable advances to meet the annual deficiency when the corporation's other sources of capital—repayments of earlier loans and borrowings from the public—have been tapped to the full. Last year the corporation remunerated its share capital at four per cent and paid interest at the full lending rate on its Exchequer borrowings.

There are a number of other provisions in the Bill which are intended to facilitate the ACC in its day-to-day administration. With the increase in its volume of business, the corporation is finding it increasingly difficult to have the annual accounts prepared, audited and furnished to the Minister for Finance for presentation to the Houses of the Oireachtas within ninety days after the end of the accounting year. It is proposed in section 5 to follow modern practice generally in this respect in relation to State-sponsored bodies by removing the specific time limit of 90 days and substituting a requirement that the accounts be submitted as soon as may be after the close of the year. Under this new provision the corporation will still be obliged to have the accounts prepared as early as possible.

Under present legislation, requests to a county registrar by the commercial banks and the ACC for information from the register of chattel mortgages must be made under seal. This procedure has at times proved to be a source of delay for the corporation and it is proposed in section 6 of the Bill that requisitions to a county registrar may be made under the hand of a solicitor or law agent of the corporation or a bank. The county registrar will continue to be the only person with direct access to the register of chattel mortgages. I understand that the banks do not register chattel mortgages to any extent.

Section 7 is a consequential provision to empower the ACC to make the amendments in their memorandum and articles of association which may be necessary to give effect to the provisions of the Bill.

The ACC offer a wide range of loan facilities designed to meet the productive needs of agriculture. While overall lending by the corporation has fallen off since 1965, due to the general suspension in the autumn of that year of loans for land purchase and the funding of bank debts because of the shortage of capital, there has been a steady increase in loans for directly productive purposes. The number of unsecured loans issued by the corporation to farmers is rising rapidly and the maximum amount of loan which may be issued under the corporation's scheme of unsecured loans is now £750.

The budgeted loan scheme, which has been in operation since the beginning of 1968, enables farmers to finance their seasonal needs as they arise by means of a book of dated cheques issued by the corporation; no security is required for loans of up to £1,000 under this scheme. Business with farming co-operative societies is growing steadily, and outstanding loans to these societies at present well exceed £½ million. More than 80 per cent of all loan applications received by the corporation are approved, and the repayments record of borrowers is excellent. Because of the continuing shortage of capital it will be necessary to maintain the present restrictions on loans for land purchase and debt funding as directly productive needs must have first claim. Any significant relaxation of these restrictions would give rise to considerable extra demand for Exchequer funds and add to the difficulties of financing the public capital programme.

However, the corporation continue to make loans available for the purchase of land to enlarge uneconomic holdings. During the past 12 months £150,000 was issued for this purpose.

An important development in the ACC's activities has been the setting up of area officers in provincial centres. These officers provide a closer link between the ACC and the farmer and they help by their advice to ensure that credit is used to best advantage by the borrowers. As the corporation's business grows, further extensions to the area-officer system are envisaged until the whole country is adequately catered for.

In recent years the ACC have raised a considerable amount of capital from the public through the operation of a deposits scheme and the issue of farm credit bonds. Both deposits and bonds are guaranteed by the State. The total of outstanding deposits and bonds at present amounts to approximately £6½ million. The corporation's efforts to finance as much as possible of its lending operations from non-Exchequer sources were not very successful during the past year because of the general increase in interest rates which resulted in stronger competition from other borrowing institutions for the public's savings. In order to maintain their competitive position the corporation revised their borrowing rates in January and again in April of this year. The interest rates on deposits now range up to 7¼ per cent subject to six months notice of withdrawal and the interest rate applicable to the latest series of bonds is 6¾ per cent with a tax-free capital bonus of 2 per cent where the bonds are held for five years.

The interest rate charged by the ACC on new loans issued is 8½ per cent which compares with the present bank overdraft rate of 9 per cent. However as a concession to the small farmer, the corporation have maintained an interest rate of only 6½ per cent on all loans made under their scheme of unsecured loans where the borrower's total indebtedness to the corporation including the new loan, does not exceed £400.

Loans in this category constitute approximately one-third of all loans issued by the corporation to individual farmers and the concession should therefore, be of significant benefit to the small farmer. The corporation's loan interest rates and hire purchase charges are kept at as low a level as possible in the interests of the farming community. Comparison with the rates of interest charged by agricultural credit institutions abroad is very difficult owing to the varying conditions relating to State assistance to agriculture in the different countries.

The primary objective of the ACC is to ensure that the development of Irish agriculture is not impeded by lack of capital. The corporation aim to be the most convenient and the cheapest possible source of credit for the farmer consistent with their operation as a commercial organisation. They issue loans for a wide variety of farming purposes on favourable terms as to interest and repayment and, in so far as they can, they seek to ensure that the money borrowed by the farmer is put to the best possible use. The present Bill is intended to enable the good work being carried out by the ACC to be continued and I confidently recommend it to the Seanad.

Agriculture has many problems, a great many of which derive from its capital starvation during a long period. It is therefore with the greatest pleasure that we welcome any means to provide additional credit for farmers to help them to improve their holdings and to increase production. We all hope that in years to come credit can be provided at as cheap a rate as possible to those capable of using it to the best advantage. In such circumstances, the Minister for Finance will have very little difficulty with balance of payment problems, provided his colleagues get out and secure markets for the increased production which increased credit can bring.

It was quite a common feature in agriculture for farmers to fear credit rather than to accept it: first of all, they were afraid of revealing the state of their finances in case it reacted somewhat against them and, secondly, they were afraid of borrowing in case they would not be able to repay. They have come a long way in a short time to realise that agriculture is similar to any other business undertaking and that without finance the necessary improvements to their properties and the necessary increases in their production cannot take place.

We welcome this Bill but I am afraid that when the Minister suggests that this should be sufficient for five years he is casting a shadow across the future, implying that credit might be restricted during that period. On the last occasion he came to the House with a similar Bill I remember asking him if some of the money would be utilised for farmer's sons to buy farms for themselves. His reply was very definite, that that was one of the purposes of the Bill. However, within a short time, that was knocked on the head completely and nowadays a farmer's son, a second or a third son, wishing to engage in agriculture as a profession, wishing to have his own farm, has to compete with the moneyed men, many of them from the cities.

We have a situation today in which there are far too many hobby farmers in the country, people who can obtain credit freely, and the farmers' second and third sons are on many occasions forced to leave agriculture and to take up some other occupation because if they wish to settle down, to make their own homes, they are unable to compete at the price which land is making. They are not getting the assistance from organisations such as the ACC which we would hope they would get. Many of those young men have much to offer to Irish agriculture: many of them have been trained in agricultural colleges and they have the great gift of experience on their fathers' farms. To use the American expression, they have the know-how. If credit could be made generously available to those people with know-how the increase in production would be enormous and, as I have stated, the Minister's balance of payments problems would be greatly reduced.

During the years, the activities of the ACC have extended and one of the significant and welcome improvements has been the establishment of area officers. However, it all too often happens that with the publicity a a certain type of farm receives—for example, a farm such as that tried out by the Agricultural Institute—a farmer in an area remote from there might decide this is something he could do usefully. He would try it on borrowed money only to find that his area was quite unsuited for that kind of project. Therefore the establishment of area officers will help both the ACC and the farmers to try the type of production and project on which farmers could be best employed on credit from the ACC. In addition, if area officers did nothing more than to help farmers to complete application forms, they would be doing a good day's work.

The Minister said that short-term loans were the big end of the loans provided by the ACC. This is very welcome because most farmers at one time or another find they can do with a few hundred pounds which they want to use for a short term and they can go to the ACC and get the money. This is something they are becoming increasingly aware of and grateful for.

There is one item I should like to draw the Minister's attention to and perhaps he in turn will remind the ACC of my remarks. That is in relation to the purchase of farm machinery. About ten years ago a farmer obtaining a loan from the Agricultural Credit Corporation to purchase machinery was given a maximum time of repayment of 36 months. An item of machinery costing at that time between £700 and £800 would today cost between £1,200 and £1,300. When it was costing between £700 and £800 the farmer had 36 months to repay. He could repay by monthly, quarterly or half yearly instalments. Today the repayment period is exactly the same but the machinery is costing almost double. I am perfectly aware that the corporation, in arriving at the period of 36 months, was probably taking into consideration the fact that at the end of 36 months a machine could be worn out. There may be isolated cases, such as agricultural contractors, whose machinery is working 24 hours a day, or where inefficient operators can wear out a machine very quickly but when the average farmer gets a new tractor or combine harvester it lasts him seven or eight years, and in many cases even longer. It is a great hardship nowadays to have to repay the huge cost of machines as compared with the amounts when the scheme was originally introduced, in the same period of 36 months. This matter should be considered and, if possible, the time should be extended.

The Minister has pointed out that the corporation are having difficulty in producing their reports within the time of 90 days specified in the original Act. In the 1947 Act—section 19—it is provided:

The Corporation shall, within ninety days after the end of each accounting year, furnish to the Minister such accounts (including a balance sheet and a profit and loss account) as the Minister may from time to time direct for that accounting year duly audited by the auditor of the Corporation, together with a report of the operations of the Corporation during that accounting year, and the said accounts and report shall be drawn up in such form and contain such particulars as the Minister may from time to time direct.

I wonder what has happened in the time between the 1947 Act and the 1969 Bill that would require that the 90 days be done away with and a provision brought in that the accounts and report shall be issued as soon as possible. It is irratating to find that the report comes out about something which happened a year or two previously. While I do not claim to know what problems may arise with the Agricultural Credit Corporation whereby they could not produce their report within 90 days, it seems strange that in this day and age of computers and such machinery the Minister is asking us to change that provision and allow them to bring in a report at some future time which they may decide themselves. I would imagine that their accounts are usually very up-to-date, that they would have half-yearly accounts, and nine months accounts, and would have to wait only for the last quarter to produce their final account, and then their report. It is rather a mystery to me why the change is necessary at this time. The House is entitled to get some further information as to why it has to be done just now.

The section dealing with mortgages is, I am afraid, somewhat beyond me. The Minister might give some further explanation of it. I should like to compare the drafting of the Bill with that of the Industrial Grants (Amendment) Bill where instead of referring to sections in previous Acts, the section is re-written, which makes it much clearer and much easier to follow. The activities of the corporation are growing. They are doing an excellent job. The costs of each farmer's operation are increasing. A great problem arose in the past because farmers in seeking credit seldom looked for enough. They always found themselves, when it came to meeting the first instalment of principal and interest, in the position that they were not ready to do so. The area officers can help to ensure that the farmer is prepared to relate his credit requirements to his ability to repay when the time comes to start repaying, because in the establishment of a project he may meet heavy weather during the first 12 or 18 months. All too often when the first instalment is due the farmer is not ready to meet it. For working capital as well as investment it is necessary that the farmer should provide himself with sufficient money to meet it.

Finally, might I ask the Minister how near we are to the day of implementation of the recommendation made in the Gilmore Report Survey of Agricultural Credit in Ireland issued to the then Minister for Agriculture on the 9th September, 1959, in which subparagraph (b) of paragraph 3 states:

The legislation should also provide for the ultimate purchase of the capital stock in the Corporation by farmers. The stock purchase or farmer ownership feature should be the long range objective and should not be undertaken until farmers are ready and willing to invest their money in the capital of a permanent specialised farm credit organisation. The gradual retirement of Government stock would be accomplished through the required purchase of stock by borrowers. Ultimately the Corporation would become completely farmer owned and would operate as a farmers' co-operative. In the meantime net worth could be gradually accumulated from earnings.

How near are we to achieving that very laudable objective?

It is the aim of all farmers' organisations that they control their own finances, and here is a great opportunity for farmers to invest in an organisation which is designed to assist them. I hope that the day is not too far distant when the desire expressed in that recommendation by Mr. Gilmore will be realised and that the Agricultural Credit Corporation, as time goes on, will be able to increase the credit to farmers, and that they, in turn, will invest in that organisation.

In common with many Bills which we have had in this House in the last few months, this is another Bill which enables the Government and their agents, in this instance the Agricultural Credit Corporation, to extend their investment in the productive outlets of the country. As indicated by Senator Malone, one can expect unanimous agreement that the moneys now being made available to the Agricultural Credit Corporation for investment in agriculture and for facilities for the raising of such moneys are being extended in this Bill.

The Minister in introducing the Bill has outlined some very significant points in connection with the manner in which the farming community are using these facilities and the positive use to which they are putting the loans available to them. In the first instance, one is almost gratified to note that something in the region of £20 million of loan fund is at present outstanding from the Corporation. That in itself proves the fact that the farming community are now availing of these credit facilities. I agree with Senator Malone that for a considerable period up to 5 or 10 years ago, the farming community did not avail to the same extent of credit facilities as did the industrial or business community in general.

Obviously in a normal development which requires so much investment, it is desirable that they should avail of the facilities being provided, and it is very significant they are now doing so. What is even more significant is the fact they are not just availing of them but they are using them effectively and properly. The Minister indicated in the Dáil in connection with this matter that the amount of bad debts outstanding on that very significant loan figure is almost negligible—in fact hardly such as could be rendered as a minimal percentage. We can begin to realise that these debts are not just being repaid because the farming community are an honourable section of the community, as indeed they are, but because, in fact, farmers are using the loans to the fullest advantage.

I am glad to note from inquiries which I have made outside the House that County Tipperary, which is one of the extensive and intensive farming counties, ranks high in the loan fund which has been distributed and low in the amount of outstanding bad debts. This pattern is what one would expect from the progressive farmers in County Tipperary.

The increase in productive and short-term loans which has been mentioned is a type of development which will ease the minor credit problems that will arise in any farming or business project from time to time. I am glad to see that the amount of unsecured loans at present available reaches up to £750 and under almost every heading of the loans which are available there has been a significant increase both in demand and in use.

One of the things that has not actually arisen on this discussion, except by inference from Senator Malone, is the question of suspension of loans for land purchase, with the qualification that they are still available for the relief of uneconomic holdings. My experience in discussing this matter with farmers is that they will readily agree that it is still appropriate that that restriction be retained until such time as the productive purposes for which the loans are being made available—short-term loans and loans of that sort—could be fully and adequately satisfied.

I think the farmers realise that in many ways this was to a certain extent due to over-enthusiasm for these loans for farm purchase before this limitation was introduced and that it was this which was partly responsible for the inflated price of land which became current at that time. I have certainly not heard any complaints and no significant group of the farming community have indicated that these loans should now be made available for land purchase, even for the case mentioned by Senator Malone. The important thing is to avail as fully as possible of the limited resources, and resources are always limited, for productive purposes as is being done at present.

It is fair to comment at this stage that the return from farming investment is probably comparatively lower than the return from other industrial or business investment at present in this country, and indeed in many countries. It is equally fair to comment that for that reason the extent of investment in farming projects will always be quite severe in many ways on the actual resources of the farmer himself and I am glad to note that the Minister has indicated that the intention is to expand these facilities, to extend the amount of credit over a period of five years, or as the occasion may demand from time to time. It is not now possible to indicate what the position may be in three or four years time but the Minister has clearly indicated that within the range—and I think it is a reasonable range—of the increase which he proposes in share capital and the borrowing limit of the Agricultural Credit Corporation, it should be possible to make adequate facilities available for increasing investment in the ACC.

Another matter which caused some problems from time to time is the question of loans for the purchase of machinery. It has been suggested, quite widely in recent times, that if anything we are over-mechanised. This is due in many ways to the historical structure of our small farms and I think one of the problems which face the smallholder is the fact that if he wishes to avail of these facilities for the purchase of agricultural machinery he will have to undertake liabilities which he conscientiously feels he is not capable of meeting. Perhaps the Minister could consider in the area of unsecured loans the possibility of introducing or extending—I am not sure if it has already been introduced —the acceptance of joint applications from small farmers who may jointly apply for facilities for the purchase of agricultural machinery. This is something which would be desirable in the interests of the farming community. It is also desirable to ensure that such machinery as we have will be fully used by those who possess it.

When a particular unit, whether it be business, farming or any other productive unit, is not making the fullest possible use of the machinery and equipment available to it, it is inevitable that the balance of payments position will not reach the target it should otherwise reach at the end of the year. I therefore suggest to the Minister that he explore fully the possibilities of accepting joint applications in cases of this sort.

I, too, commend the extension of the appointment of area officers, particularly in Tipperary. The proof of the service of such area officers is, as often as not, in the advice they give in matters not directly related to the loan application. We are particularly fortunate in Tipperary to have a well-informed officer who has the rather unusual experience on occasions of advising people that their resources are not sufficient to meet the loan they require but advises them about what other loans they might consider. Indeed, sometimes he refuses the applications which they make and subsequently leaves them happier than they were before the applications were made.

This is certainly something which those of us who know the farming community can readily understand. Before taking on such a loan, the farmer—as indeed all of us should ask ourselves from time to time—should ask himself three basic questions: firstly, how much will it cost, secondly, where will it come from and thirdly, how will it be paid back? Surely this is good business. Incidentally, I suggest it is equally good business when running the country. I think one of the Opposition Parties should ask those very questions before setting out any proposals for the expansion of the business of the country.

I hope that the facilities which are being extended here will continue to be extended so that the services which the Agricultural Credit Corporation make available will be used, as they have been up to the present, to the best possible advantage of the farming community.

I, too, should like to welcome this Bill and I congratulate the Chairman, directors and staff of the ACC on the striking progress that the Corporation have made since we last had an opportunity of discussing their affairs in 1965.

In common with the previous speaker, I feel that one of the significant improvements in the facilities offered by the ACC has been the appointment of agricultural graduates as area officers. This has done a lot to help the agricultural community, especially during the last year or so. I also think the Corporation should consider appointing a graduate of experience and status equal to a CAO in their headquarters, specifically to assess the merits or demerits of the farm plans that are continually being sent up from applicants. These farm plans are designed and drafted by the applicant's own agricultural instructor and there appears to me to be a credibility gap between the man who drafted the plan and the people in Harcourt Street who do not either accept the figures submitted or appreciate them.

We must organise in the shortest possible time, if we are going to be sincere and really effective in helping agriculture, some kind of seminar or committee, consisting of the officers of the Department of Agriculture, the Agricultural Institute and the advisory services in the ACC. I presume Deputy Blaney, the Minister for Agriculture and Fisheries, would be the person best able to organise it. To my mind no two of these agencies, which are designed and full-time employed to help agriculture, appear to be of the same mind at any one time. This is a deplorable state of affairs The Institute should at least be asked to supply the results of their many excellent trials and their scientific findings in agriculture to the ACC in order to keep these people abreast of modern developments in agriculture.

As a member of a committee of agriculture, I find that practically every month our committee are asked to release instructors to go to seminars in various places and on various topics, but I have yet to hear of a seminar being held on the question of agriculture and farm finance. Senator Malone mentioned the Gilmore Survey of some years back and even though the figures are outdated, because they are all too low to apply to the present time, I imagine the percentages are still valid. I should like to see the ACC organising some kind of sit-in with the advisory services throughout the country in order to keep themselves abreast of each other's plans and commitments right along the line in agriculture.

It is true to say that the credit which our farmers are receiving at the present time is the dearest in Europe. The ACC have increased their interest rates twice in three months and this sets farmers off at a disadvantage, especially in a year when they know they will receive less, for instance, for the price of wheat. One of the thoughts which are tormenting many of the grass farmers at the present time is how they can afford to buy their cattle for grazing this summer with the price of store cattle going very high. It is very necessary for the ACC to be in a position to keep their schemes changing.

They have, and I must compliment them on it, brought up the unsecured loan facilities to £750. However, they should be in a position to do this right along the line as costs rise and the value of money falls. They would appear in my opinion to be a little republic on their own. I quite agree they are doing wonderful work but when people send up an application with plans on which one or two county instructors have worked for many hours and perhaps weeks in drawing up those plans with meticulous care, they are often passed off as being unrealistic or too big. That to me does not seem to be consistent with what the ACC should be.

They are certainly heading in the right direction with regard to their work generally but I feel they could go a step further and do much more if they broadened their scope and had first-hand information and advice from some of the other State-sponsored agencies that are directly involved in Irish agriculture. As I stated they could seek the advice of the Agricultural Institute and of course the Department of Agriculture.

The last point I want to make comes under section 5. I, too, fail to understand why this is necessary. One would imagine any finance institute would of necessity have their books kept up to date and if we leave the audit over even longer than specified under the 1947 Act surely it will be more difficult for the board and the people directly involved to know exactly where they are. However, if this thing is of such great importance I feel the House might now not want to hinder the wonderful work being done so I welcome the Bill and wish the work to continue. I should like the people involved in Harcourt Street to get down a little closer to the people directly involved.

We can all join in welcoming this Bill which provides some increased capital for agriculture The amount, when we analyse it, is a projected increase of about £15 million during the next five years. In other words, that is providing new capital at the rate of about £3 million a year It looks rather small in the context of our gross agricultural output of somewhere about £200 million. Perhaps when it is weighed against the increase in agricultural output proposed, the two per cent increase of £4 million to £5 million, it is comparable but nothing like what a really galvanised agriculture could produce.

Indeed, we can set the £3 million side by side with that great effort by the Irish farmers some months back when they raised £3 million to take over International Meat Packers. This was a wonderful example of the co-operative spirit and of what can be done by it. The development of agricultural credit is proceeding well but not along the lines one would expect in the country which pioneered the co-operative movement through such people as Horace Plunkett, Father Finlay and others. Perhaps there is some move in the right direction where the Agricultural Credit Corporation have appointed area officers in an effort to get closer to the people and to decentralise the administration involved, but surely when you follow that to its logical conclusion is it not time we linked up at that level with the co-operative movement itself and that the co-operative units and co-operative societies were taking in each of the basic local units in the administration and the provision of agricultural credit in the community?

Of course, we know the co-operative societies are already providing a great measure of credit for their members from their own resources but it is not of the long type of credit which comes from the Agricultural Credit Corporation. It would be worthwhile at this juncture in our development to see if we can create more integration in that we would have greater co-operation and more advisers at local level when our whole salvation depends on the co-operative approach. I would envisage that the Agricultural Credit Corporation of the future would act more in the role of a central bank to the co-operative societies, giving them, as it were, block credits but letting the responsibility for the allocation and indeed for the recovery of the loan and interest remain with the local societies themselves. That, after all, is the type of agricultural credit that is involved in places like Denmark and elsewhere where the co-operative movement has gone from its very promising stages here to the full fruition of what it should be in the middle of the 20th century.

I believe the time is opportune for this because already there are two or three reports on the development of the co-operative movement in this country which are gathering dust on the bookshelves. No action has been taken on them and I suggest it is time we had a comprehensive plan. Finance will be one of the main factors in this. It is not just sufficient in the case of giving capital for production purposes that a form should be filled stating that the project is a sound one and that it is likely to be of continuing benefit to the farmers of the country. That is all very well as far as it goes. Under that heading you might put the provision of capital for additional livestock. Then, this form of giving capital and, of course, recovery of principal and interest over some period of say three to five years, makes no provision for depreciation. Unfortunately most agricultural requirements depreciate. Whether they are machinery or livestock, they must be replaced.

In proper development through the local co-operative society, the society would have the task of recovering the loan and interest, a very simple task because the farmer's produce in any case would be going through the society and the matter would be only an agreed deduction on a weekly or a monthly basis. I should like to see a depreciation deduction which would mean that if a farmer got a loan for an additional cow, at the end of the normal useful life of that cow, say five years, there would have accrued in the farmer's account in the co-operative sufficient new capital to replace that cow when she would be disposed of. It is in that way that we can keep the assets in good production—we guarantee that the cow will live forever and continue to produce forever.

That has been the weakness all through in our efforts to put productive capital into Irish agriculture—this weakness at the depreciation level, the provision of a fund for renewal. Our farmers, naturally, are not businessmen to the extent that they will make such provision of their own accord. Many of those being helped are at a very low level of income and it does not take much imagination on their part to be able to spend whatever increased income results from investment over and above their commitments for paying back. They make little or no provision for the rainy day except to go back again to the ACC for a new loan for almost the same purpose after the four or five year period. We should try to get away from that.

There is the question of the interest rate of 8½ per cent. I know it is the current rate but it is an extravagant one and it is too high for capital for productive purposes. First of all, the rate should be made attractive. Some of the money we are spending on various schemes for agricultural incentives could be very profitably diverted to helping to lower the rate of credit for approved productive purposes. That is not as general as it sounds.

In agriculture at present, excluding land, you might expect a gross return on £200 of at least £100. In other words £100 invested should produce £50 gross. When you examine that £50, which is a net increase within the economy, that net increase, that money, circulates within the economy and it is captured by the tax laws whether it is spent on an additional gallon of petrol or an additional drink or any of those things which bear taxes. The money is deposited in the Exchequer. It is calculated that £100 of a true increase benefits the Exchequer by almost £40.Pro rata, on a Budget basis, it works out at about £25, and when you take the multiplication factor that arises when the increase is on a primary product, you get a factor of anything between 1½ and 2. It has been estimated at about £40.

Therefore, a £100 new increase would produce 40 per cent increased revenue, and £200 new capital at 8½ per cent would produce £17. Therefore, is it unreasonable to ask the State, which benefits by an increased tax yield of £40, to make some contribution to reducing that £17.

Many of us will be sorry that the time is not opportune to do something about loans for land purchase or at least to provide some imaginative scheme to enable young men to acquire land. At present, with inflated land values, it is not a practical proposition because when you take the situation where land is going freely at £200 an acre, you certainly appreciate that you will not stock it and equipit for less than another £100. That brings it to £300 an acre. If you take current interest rates, it means an additional £25 per acre. Yet, if you are doing a very good job on beef, which is being pushed at the moment, a £30 return is very good and £40 is exceptional. That leaves no room for a man who has to pay interest on capital for land. In other words, it is not a practical proposition at the moment to finance people into land purchase.

I have had some experience of the good work done by the ACC through their small farm plan and, above all, of the beneficial effects on the farmers concerned of having to plan with a number of agricultural authorities including the CAO of their respective counties. I have experience of a case in point, a family who had spent 15 years in London. I am proud and happy to have been able to encourage them to come back to take a modest holding of 50 acres. With the help of the ACC and the planning necessary to get the required loan from the ACC, the family have returned and made a success of the project. It is the type of pattern that many other families abroad might be encouraged to follow with the same assistance, guidance and friendly compulsion that the giving of credit by the ACC entails.

There is little more I have to say on this except again to welcome the Bill and to ask the Minister to take the big jump and to let us have real agricultural credit where the State's role will be that of providing a type of central bank from which the dispensation can be done by the co-operative movement at grassroot level.

We welcome the Bill and the fact that the ACC have been a success. We all perhaps, city folk especially, have a mental picture of the farmer of being very conservative and somewhat lazy, disinclined to invest their money in their holdings, in equipment, in expanding their own resources. That situation, if it was ever correct, is rapidly changing in this country. I am struck by the very progressive young farmers that one now meets around the country. The provision of credit to those people is essential and is something to be encouraged.

I am glad that the provisions for credit in previous legislation are being used up and that we now need to provide for the future. Having said that, may I make the point made by other speakers that the rate of interest is a disincentive to those progressive farmers? Mention was made already that the rate of interest here is the highest in Europe. I know that the Minister will deny that and will make the justifiable point that account must be taken of the grants given as well as the rate of interest. I accept that. Perhaps we might think again about this sort of package which we send to the farmers. Grants do not now seem to the progressive farmers to be a very determining factor. They are very coni cerned about the rates of interest which they will have to pay on loans and the amount of profit they can make out of their holdings and their equipment in order to provide for repayments.

We are all inclined to regard a grant as something you get and forget about, whereas it is an inducement to the people to better their position and to make their holdings more efficient and more productive. I should like to see special consideration given to the lowering of the rates of interest by way of a subsidy, as it undoubtedly would be. It would be a more useful productive subsidy than might be spent in other aspects of agriculture at the present time. We should be concerned about keeping the enterprising young farmers on the land. We should encourage them to make the very best use of their acres.

More important still, it is very good for the country and the nation as a whole to have these young farmers. The face of agriculture is changing. I should like to see it change even more rapidly and to see more enterprising, intelligent and well-trained young farmers in control of the farms. We should do everything possible to encourage these people to bring their equipment and their holdings up to the most efficient level. I am in favour of subsidy by way of reduced interest rates on the loans which these people would find it necessary to borrow. It would be a good and useful subsidy and possibly far more productive than other subsidies we might give to agriculture.

I am not knowledgeable enough in the field to be able to say which branch of agricultural subsidisation should be pruned in order to divert money to this particular aspect of it. From my rather limited contact with farmers and agriculture I think the present interest rate is a disincentive to the younger farmers at the present time. The rate of interest is too high and subsidy assistance from the State in this direction would be well worthwhile.

Coupled with that, I plead that special assistance in this direction by way of subsidy for loan charges might be given to the co-operatives or to farmers working through a group. Sometimes you find in the country an individual farmer who is very enterprising and intelligent. His neighbours are not so enterprising. It would be a great help all round if they co-operated and acted in a group and we would then have the intelligent people helping their neighbours.

The Seanad has agreed to adjourn this debate at 4.15 p.m.

I have finished my points.

I should like to put one question very briefly. We are all in favour of extending help to the farming community. I notice the limited share capital is to be raised from £6 million to £10 million, a rise of 66? per cent, and the borrowing limit from £20 million to £25 million, a rise of 25 per cent. I notice that the maximum amount of loan which may be issued under the Corporation scheme of unsecured loan is £750 and that the maximum amount of loan upon which a return of interest rate of 6½ per cent is charged to the farmers is now £400, including any new loan.

I would like to ask, first of all, who decides these two maxima of £750 and £400 which seem small to me at present money values, and secondly, has the Minister considered recommending the raising of these maxima also? The share capital and the limit of borrowing of the Corporation has been raised in view of the present money values which have dropped. Might it not be good to raise these £750 and £400 maxima since the farmers too suffer from the diminished value of money? A loan of £400 at reduced interest rate seems to me a fairly small maximum. I am not quite sure how much could be done on such a loan.

The Minister to conclude.

I am grateful to the House for this facility to enable me to conclude and I will not keep the House very long. Most of the points which Senators have raised are matters which come within the jurisdiction of the Board of the ACC and relate to their day-to-day administration. It would be better for me not to go into the particular merits of suggestions put forward but rather to convey them to the Board for sympathetic consideration. I will certainly do that.

I will take the all-over point made by Senator Quinlan in which he spoke of the total volume of credit available to farmers and to agriculture. It seems that the Senator is overlooking the fact that the commercial banks also lend to the farming community. At 31st December, 1968, the figure of loans outstanding to the farming community by the commercial banks was £55 million. You can add to that the ACC figure of £20 million and then there is a fair amount of lending by other financial institutions by way of hire purchase transactions. There was at least £5 million more lent to the farmers from that source.

You can readily identify at least £80 million of credit made available to farmers to the end of last year. I am sure there is some more, but that is probably the bulk. The Agricultural Credit Corporation do a fair bit of business with the co-operative societies: they issue block finance to them for the purchase of fertilisers and they also arrange for the issue of unsecured loans through creameries.

In reply to Senator McDonald, there are a number of senior agricultural graduates in ACC headquarters and the Corporation maintain very close liaison with the Department of Agriculture and Fisheries. This brings me to the point raised by Senator Sheehy Skeffington. I imagine these limits of £400 and £750 are decided by the Board in discussion with the Department of Agriculture. The idea is to try to channel whatever money is available to small farmers at cheap rates. That is why the limits are imposed and I am sure that both the Department of Agriculture and Fisheries and the Agricultural Credit Corporation keep the limits under review from time to time.

Senator O'Kennedy dealt very ably with the question of the policy decision that the Agricultural Credit Corporation should not make loans available for the purchase of land or funding of bank debts, with the exception of land purchase in the case of uneconomic holdings. I do not think the time has come to change that decision and I agree fully with Senator O'Kennedy in regard to this matter. I think the decision as it stands at the moment has the support of most farmers and farming organisations. They are agreed that whatever capital is available—and it is always limited—should be directed to the most productive purposes possible.

I am sorry Senator McDonald should repeat what was said earlier in the Dáil that agricultural credit here is the dearest in Europe. That is not so. There is the point made by Senator Murphy that in deciding on the overall cost of a loan for a particular project to a farmer, account should be taken of a grant already given, in regard to the amount of interest repayable. Apart from that, the ACC loan rates are substantially lower than those prevailing in Great Britain and they are endeavouring to keep the rates as low as possible. They are still below the ordinary bank overdraft rate in all cases and they are considerably below the bank rate in the type of case mentioned by Senator Sheehy Skeffington. That is why we have this capital made available by the State to the Agricultural Credit Corporation. We make capital available to the Corporation in two forms, one a very cheap form of share capital at 4 per cent and the other repayable advances which carry the full going rate of interest. This enables the Corporation to be flexible in their approach to interest rates to farmers.

I consider the suggestion by Mr. Gilmore totally unrealistic. As long as the Government are prepared to make money available to the ACC in the form of share capital, and to accept a rate of remuneration of 4 per cent, I do not think it would be realistic to expect that farmers would be prepared to take over that share holding from us.

I would not expect them to do that. Any farmer who has capital available would be much wiser to employ it for his own productive purposes rather than to buy the share capital of the ACC. It would suit me as Minister for Finance if I could unload the entire share capital of the ACC to the general public but I do not think it would be in the interests of the farming community if they should try to undertake this.

Senator O'Kennedy raised the question of joint applications for loans. My reply is that the Corporation entertain joint applications and consider them as favourably as possible. I repeat that the ACC hope to keep on lending at an increasing rate. They anticipate their annual investment in Irish agriculture will increase at a rate of about half a million pounds yearly —perhaps more, but at least that amount. We will place no restrictions on their activities subject to the particular policy decision I have mentioned. Within the framework of activities which are authorised, there will be no limit on the amount of money they make available to the farming community. We will try to make that finance available to the ACC at a reasonable rate so that they will be able to lend it to the farming community at as low an interest rate as possible.

I promise the Seanad that I will submit all the points raised regarding the administration of the Corporation to the board of the ACC and, in so far as it affects them, to the Department of Agriculture and Fisheries, for sympathetic consideration.

Might I ask the Minister a question? Would he consider giving farmers who are engaged full-time in agriculture and who qualify for the farm loan, the choice of drawing the dole or availing of the credit at very low rates of interest, say 4 or 5 per cent.

The Seanad will appreciate that that would represent a major policy decision and one I should not like to answer extempore. It would involve consultations with the Ministers for Social Welfare and Agriculture and Fisheries, but it is an idea that could be explored and examined.

Question put and agreed to
Agreed to take remaining Stages today.