I should like to welcome the Minister back to the House and congratulate him on his re-appointment as Minister for Agriculture which will be, I hope, as successful as I am allowed to hope it will be short. At any rate, in dealing with this Bill or any other measure introduced to this House by him or by any of his colleagues, I hope I will make the kind of speech I would make if I were on the other side of the House and it was his predecessor or any of his predecessors who was introducing it.
The Bill is short but it relates to a very important matter. The importance of the matter can be gauged by reference to a figure published by the Food, Drink and Tobacco Federation recently in the quantification of the proportion of our total exports represented by agricultural produce which, in relation to year 1975, they gave as 47 per cent. Taking dairy produce alone including processed food it was 15 per cent. We are talking about an industry which generated 15 per cent of our total exports in that year. That figure and that percentage may, of course, vary one way or another but it is an immensely significant figure and additional support for the view that we are talking about something very important is to be found in the publication the McKinsey study commissioned by the Bank of Ireland which appeared in June of this year from which to me an immensely interesting fact emerged. There are many interesting things in it, but what interested me most was that, taking the six top industrial companies in this country, if you take the six top dairy co-ops, the 12 come together in a pattern and there is no other industrial company which could replace one of the six dairy company co-ops in terms of turnover.
I do not think it is necessary for the Minister — and certainly not for the Minister's Department — to be formally told this but I should perhaps declare an interest. At various times in the past on specific things I have advised Bord Bainne. I do not think that is relevant to this debate but it should be recorded that I have done so. The skill of the board to which the Minister has referred is made very clear when you realise that the vast proportion of the exports affected have been affected under the aegis of the board whose marketing skills have been immensely useful in this important area. The board, as the Minister has indicated, is a voluntary body. An Bord Bainne, and from the beginning it has had the difficulty of small specific assets as they were originally called. I think the figure in 1973 was £2½ million, which led on to a guarantee of £20 million which was later increased to £40 million. Now we are talking about quantification. We are talking about a financing requirement which runs at certain periods of the year for a board with assets which I see the McKinsey Report puts at £6 million only which indicates the small extent to which these assets have increased since 1973, a borrowing requirement of £110 million if not more.
The guarantee is left at £40 million and different views can be formed on that. I do not have a particular view as to whether that figure should be enlarged. I see again in the McKinsey Report there is talk about a possible financing requirement of £380 million by 1981. This makes the whole business of the financing of Bord Bainne, which is what we are talking about, of very great significance not merely to the board but to the farmers, manufacturers, employees and future employees. Therefore anything which can be done to facilitate that financing and help it and make it successful in its enterprise is worth doing. The Minister made the point in the other House that, through the marketing skills employed by this voluntary body, we have contributed nothing to the butter mountain and only minimal quantities to the skim milk powder situation.
A point which may not have been brought out is that, in doing that, considerable cost has been saved the Exchequer, apart from the substantial strength that is given to the Minister's political or shall I call it national arm in arguing for the maintenance of the Common Agricultural Policy in so far as the expansion of our dairy industry has not been costly in terms of throwing up intervention costs and throwing up marketing problems within the Community. I think what I am now saying is in considerable sympathy with what the Minister has already said to the other House and indeed here today.
This Bill cannot be read without reference to the Principal Act, the Dairy Produce (Miscellaneous Provisions) Act, 1973. Here I have to be boringly exact in a manner which may be distressing to those who like to hear oceans of vast generalities being debated by the Seanad from time to time. Perhaps if we deal with care and attention with legislation which comes to us we may be making a more direct contribution to the welfare of our people than we make by debating large issues which are not capable of immediate types of solutions. However, that is a side which can be dealt with at another time by anyone who may have listened to it.
In section 6 there are a number of deficiencies. The first and important point to make with regard to this amending Bill is the period which, in a slightly curious manner incidentally from a drafting point of view, it is intended to change. The period for the life of the guarantee which the Minister is capable of giving is extended from 1977 to 1979. In fact, the Principal Act, which created the original guarantee and which was enacted, on 4th August, 1973, provided for a period of four years. A period of four years from now will bring us not to 1979 but to 1981. Coincidentally that happens to be the period of expiry of the five year marketing plan of the board.
Let us be clear about this. When we are extending the Minister's power of guarantee, the Minister knows very well that this power of the Minister to guarantee is absolutely vital to the financing of the business of Bord Bainne. It is absolutely vital to the successful marketing of dairy produce. That guarantee, that power taken in that Principal Act, has helped the board to achieve the purposes for which it was established. It is only a voluntary body. May I make the point which is of considerable importance that the fact that it is a voluntary body has made more important the ministerial guarantee? It is not taken automatically and has not been taken automatically to be a semi-State body. It is not a semi-State body. Therefore, it has not the ranking as such. It has to deal with banks, many of them not domestic banks. They can run up to 50 banks who simply see a co-operative society in Dublin but who are greatly encouraged, and understand the status of that co-operative society, when they see the ministerial guarantee of quality.
The Minister's proposal in this Bill will only deal with the financing of the board's operations for this coming year 1978 and the year 1979 because, as the year 1979 comes to an end, the board will have to start its financing for what will then be very much larger sums, very likely. Financing for 1980 and 1981 will have to be dealt with at the end of 1979. I argue very strongly indeed, because of the importance of the contribution of this voluntary body to the balance of payments, the importance of its function in saving the Exchequer, the costs of selling to intervention because it is so important to strengthen the Minister's political arm in regard to the common agricultural policy, that the five year plan should be backed by ministerial power. This is all I am arguing for at the moment: ministerial power to give a guarantee expiring by December, 1981, rather than December, 1979.
The Minister will still be Minister and will be in charge of the matter of exercising this power. He does not have to exercise it if he does not want to. The existence of the power is of considerable importance from the point of view of the injection of confidence into the members of the voluntary society and into its financiers. That confidence being enchanced will increase the ability of the board to get that build-up of reserves which is so important.
My own judgment is that it is almost inconceivable that the kind of build-up which will be required will take place without major changes of a financial character. However, for the moment that is my first argument. I hope the Minister and Senators listening to me on the other side will realise that I am not, and could not conceivably be thought to be, making a party political point. I am sure this Bill is in the form it was in when the Minister's predecessor left office. If Deputy Clinton introduced it, I would be making this point. That provision should be extended.
The Minister has helped me by the language of his speech to make my second point with regard to this section. The Minister referred several times to borrowings. He said: "This gap between expenditure and income has to be bridged by short-term borrowings each year.... As the assets of the then board were far from being sufficient to enable it arrange borrowings on the scale needed... to enable the Minister ... to guarantee borrowings." But the point is the Act does not refer to borrowings and if it did many problems would be solved for the board. The Minister is not empowered to guarantee borrowings. I refer the House to the section which is proposed to be amended by this Bill, section 6. Subsection (2) starts: "Whenever the Minister guarantees a loan under this section...." Subsection (5) reads: "Moneys obtained by the Society on foot of a loan guaranteed under this section shall be used solely by the Society for the acquisition in the course of its ordinary business of dairy produce." It is extremely doubtful whether the Minister has power to guarantee under the existing section liabilities of the board-borrowings if you like which fall outside a strict definition of borrowings. I hoped this would be dealt with in the Bill when I heard it was coming forward and that it would contain a substitution of the word "borrowing" or "indebtedness" or "liabilities" for the word "loan". There are a number of different words which can be used for the word "loan".
This kind of point, obviously, will have to be developed in detail on Committee Stage. In general I will indicate the kind of thing it is thought doubtful would be covered by a "loan". It is doubtful that an overdraft facility is a loan in so far as it contains future loans which may not necessarily be within the power of the Minister's guarantee. The finance which the board receives covers acceptance credit facilities. Acceptance credit facilities do not necessarily fall within the ambit of the word "loan". They include counter-guarantees of Irish banks who have to guarantee the board in respect of borrowings made from banks which are not domestic, where bills are discounted, for example in London. They do not necessarily include facilities provided to cover performance guarantees given to the EEC. They do not necessarily include the binding nature of the obligation to stand over a bid to supply dairy produce in a foreign country which has to be backed by a bank guarantee, which bank facility, or bank guarantee, may require the benefit of a ministerial guarantee. They do not necessarily include facilities for buying forward or selling foreign exchange.
Therefore, my first point would be that the period should be not 31st December, 1979, but 31st December, 1981. My second point would be that the word "loan" should be deleted from the section and an appropriate word substituted which would get over difficulties the Minister's advisers know perfectly well exist. These are not difficulties created by Bord Bainne. These are not difficulties created by the marketing body we are talking about. These are not difficulties created by anybody other than highly cautious, sensitive financiers who, in bad times at least, are sensible enough to require full precautions and to be quite sure that the Minister's power to guarantee covers all their situations. The Minister putting into a guarantee document a definition of a loan which would go beyond what a court might construe that word to mean will not necessarily help in a legal sense anybody who takes that guarantee from the Minister who has only got such power as the word "loan" is held to give him by the empowering statute.
My third point is that subsection (5) is extremely embarrassing because it is just simply not extensive enough. In fact, the subsection does not cover even a significant part of the field of the financing we are talking about, where the guarantee is of such importance because of the small reresources of the voluntary society itself. The moneys which can be guaranteed are: "Moneys obtained ... on foot of a loan guaranteed under this section shall be used solely by the Society for the acquisition ..." of dairy produce. The moneys provided by banks are used for all sorts of other purposes than the acquisition of dairy product. They are used for the storage of dairy produce. They are used for investment in the creation of other outlets in other countries, for the marketing of dairy produce. Money is used for expert finance of one kind or another.
A question would arise with regard to somebody receiving the benefit of the guarantee. Maybe at the end of the day the judge would say: "This guarantee was all right", but there may be people on the borderline in these matters who are not prepared to take the risk of the judge not so finding. It may be that somebody would say: "We may be put on proof that we should have monitored the moneys we provided to see that they were used solely for the acquisition of dairy produce. We might be required to secure the benefit of this ministerial guarantee to see that a separate account was created through which moneys provided by the bank, with the benefit of this guarantee, went into that account and could be traced as having been expended only for this purpose."
Think of the sums we are talking about, £110 million, 50 banks. Everybody is extremely cheerful about money nowadays. I remember days when this was not so and I could foresee days when it might not be so. We must have legislation which will deal with both kinds of days. I asked the question as to what is the cost of putting this right. Is it that somebody somewhere or other along the line will have to admit he was wrong at the beginning. I am not concerned to discover who he may be. All I want to say is that this word "loan" does not appear in the Industrial Credit Company's guarantee. This word "loan" does not appear in the Industrial Development Authority guarantee. This restriction for any purpose other than the purpose of the corporations in question, does not appear in either of the other Acts.
I want to come back to the point that the very bodies where these restrictions do not appear are less in need of ministerial guarantees than the body which appears to anyone outside of this community to be only a voluntary body. We all know what confidence it enjoys in the community but if you were in Chicago you might not know the same. This is where the policy of ministerial guarantee becomes of importance.
I think — though I do not believe that in the past there has been any need for a guarantee to take in the foreign exchange obligation — there ought to be an up-to-date revised form of guarantee on this. My own judgment is that the guarantee figure is not big enough, but I would not press any argument on that if anybody disagreed with me. Quite a number of things with regard to this would require a development which could only be made when you are dealing with a specific— I do not think we could call it an amendment, as it is a Certified Money Bill—recommendation which is all that this House could make, subject to correction from the Chair, on the matter. I attach sufficient importance to these points to wish to table amendments or recommendations on Committee Stage for consideration by the Seanad.
