I move:
That Seanad Éireann approves of the following Regulations in draft:
Industrial and Provident Societies (Financial Limits) Regulations, 1978,
a copy of which Regulations in draft was laid before Seanad Éireann on the 9th day of March 1978.
Industrial and Provident Societies (Financial Limits) Regulations, 1978: Motion.
Part I of the Schedule to the Credit Union Act, 1966 last fixed the financial limits which apply to certain aspects of the operations of industrial and provident societies. These societies are incorporated bodies which may be set up to carry on any industry, trade or business and they include within their ranks agricultural co-operatives and credit unions. The areas affected by the financial limits concerned are: first, the amount a person —other than another registered society—may hold in shares in an industrial and provident society; secondly, the amount of property in such a society a member may nominate, that is, leave to any named person or persons on his death, with the minimum of formalities—a nomination is legally a will; thirdly, on the death of a nominator, the limit on the amount of shares a nominee may receive if he is also a member of the society—he may, in fact, receive only such amount as would bring his total shareholding in the society up to the maximum individual shareholding permitted; and, fourthly, on the death of a member who has made neither a will nor a nomination, the amount of his property in the society the committee may distribute among such persons as appear to be legally entitled to receive the same.
The amounts fixed for these purposes under the 1966 Act were £1,000 in each of the first three areas I have just listed and £500 in the last one. They have not been adjusted upwards since. The purpose of the regulations now before the House is to give effect to some badly needed increases in these limits. Two factors, mainly, underlie the need for increases to be made.
First, it has to be accepted that the real value of any sums fixed in 1966 will have been severely eroded due to the decline in money values since then. The second factor is largely a product of the first. Because of the decline just mentioned, a serious strain has been placed—and I have been led to believe that this is particularly so in the agricultural co-operative sector —on the adequacy of the capital structure of societies. My intention, therefore, in proposing the present regulations is not only to compensate for the drop in money values, which is a desirable development in its own right, but also to relieve any capital constraints that may exist in the agricultural co-operative sector in particular.
The new limits now proposed consist of a trebling in each case of the limits fixed in 1966. The result will be, for example, that the new limit on an individual's shareholding in a society will be £3,000 instead of the £1,000 which at present applies. As I have said, a similar multiplier is being applied in the case of the other three limits as well.
There are some, indeed, who would say—and it is frankly a view with which I can sympathise—that an increase even of the magnitude proposed, in the case of an individual's shareholding, may not be enough to alleviate fully the problems which some agricultural co-operatives may be encountering as regards capital adequacy. I regret, however, that I cannot introduce at the moment a greater increase in their case. This is because existing law provides me with power only to apply the same limits to all classes of industrial and provident societies without distinction. As I mentioned before, credit unions are industrial and provident societies and, notwithstanding the splendid achievements of that movement, I am not satisfied that the time is right for a limit higher than £3,000 on an individual's shareholding in a credit union. I shall, however, introduce amending legislation shortly which will enable me to fix different limits for different classes of society, and I intend to use this power without delay to increase further the limits now being fixed, in the case of agricultural co-operatives.
Such, therefore, is the background to the preparation of the present regulations. I am confident that, given their nature, and more importantly, their aims, they will meet with the full approval of the House. I strongly recommend their approval.
I am very disappointed in the Minister's speech. He has anticipated everything I was going to say and also said some other things. He has anticipated by answering my query as to why the multiplier was so small. I see the explanation and it relates to the position of credit unions. In the original Act of 1973 the figure was £200 and the multiplier to bring that in line with current values would bring it to a higher figure even than £3,000. The figures would now be about 17 or 18 times the 1914 figure and I do not think there was a stable price era between 1893 and 1914.
While the Minister should certainly rush this legislation he should also have under consideration the whole framework of the industrial and provident societies which is antique in its language and in very many of its provisions and not geared for the government of the type of bodies, which are agricultural co-operatives, under its code which conduct some of the largest businesses in the country, many of them larger than the biggest quoted companies on the Stock Exchange. We have had no changes in the law, and this is surprising considering the extraordinary change in trading experience and the increase in the capital needs for business over a period of 84 or 85 years. Let us not have tit for tat about why it was not done before if the Minister would indicate that he recognises the importance of it now. I obviously cannot go into the question now but a small committee of this House could consider how the status quo could be changed and improved for the good of the economy and of all the people employed by these co-operatives.
Towards the end of his speech the Minister referred to his intention to introduce further amending legislation and instanced one matter for which that would provide. In the category of industrial and provident societies there are some at least that carry on functions akin to banking and advertise and attract deposits and shareholdings. As far as I am aware they are not subject to any supervisory authority. Certainly they are not subject to central banking legislation. This has been the cause of some disquiet from time to time. Does the Minister intend to deal with that matter also in the amending legislation?
I welcome the measure, and obviously its benign intentions towards the co-operative movement ought to be welcomed because of this decline which the Minister refers to and the strain that has been placed on the agricultural co-operative sector. It is, at least on the face of it, a group measure which increases the manoeuvrability of that factor within these co-operatives from £1,000 to £3,000 per shareholder, and to that extent the Bill is to be welcomed. Anything that will aid these co-operatives to carry out their duty, particularly in times of economic stress like the present, is to be welcomed.
However, I would like to ask from the point of view of the layman whether the Minister could explain for us—and I do not mean this in any hostile interrogatory way—what seems to be a very arbitratory facet to the measure. Limits were fixed in 1966. It is now 1978, 12 years later, and the limits set in 1966 are deemed to be inadequate by 200 per cent. In other words we jump suddenly today from £1,000 to £3,000. Would it not be possible to have some kind of indexation introduced, some means by which some kind of yearly review of this would have to take place, or will there be what appears to be arbitrary intervention by the Minister every 12, 14 or 16 years? The measure in itself is good. It will help co-operatives particularly to carry on their business and to have greater manoeuvrability and greater resources. It is there to correct an evil or at least to fill a lacuna, but the lacuna has been widening dramatically over 12 years. There is suddenly an intervention and the amount is raised to £3,000. Why were there not smaller interventions over the years? Why is it not £6,000 instead of £3,000 at this moment? When is another intervention to be expected, and why?
I welcome this measure, and I encourage the Minister, particularly regarding co-operatives, to give more recognition in the future to the fact that in the co-operatives we have a model of industrial democracy in this country which has been successful and which could be built upon. In the industrial area the EEC are encouraging certain measures to be taken in relation to greater participation in the running of industries. In our co-ops we have shown that this can be done and the large turn-over that is being achieved in the co-operative area, which has been referred to in relation to financial matters a moment ago, indicates that here we have a model. I would hope that in the future the Minister might, when examining aspects of legislation concerning the financial side, take into account the broader aspects of this and the implications for the future of running large concerns in this country. I have always been struck by the anomaly of people being paid dividends in the co-operative movement at the input side before the surplus was created through, for instance, setting the price for milk and so on. I believe there is a positive side to this and I hope the Minister will take it into account in the future.
I thank the House for its apparent approval of the proposed regulations. I will refer briefly to the matters that were raised. Senator FitzGerald spoke about the fact that the industrial and provident society law is in general terms out of date now and that some of the undertakings which operate as industrial and provident societies today are large undertakings—he said larger in many cases than many public quoted companies. That is all perfectly true and legislation has been in progress for some months—unhappily it is taking longer to draft than one would have wished—and it will bring up to date many aspects of industrial and provident society law. I agree with what the Senator said. The same considerations apply to what Senator Whitaker said.
In the Dáil, in her speech on this motion, one of my Ministers of State, Deputy Geoghegan-Quinn, referred to what Senator Whitaker mentioned and what is one of the urgent aspects of the Bill at present in preparation, namely the fact that it is possible at the moment to form a deposit-taking industrial and provident society when one cannot form a company to that effect. One can form a deposit-taking society which is not subject to the control of the Central Bank under the Central Bank Act of 1971. There are potential dangers for the depositing or investing public in that situation and for that reason I am seeking as a matter of urgency to try to have it rectified.
I am not suggesting that any particular society or group of societies or anything else are a danger to the public and I want to make it clear that I regard the great majority of these deposit-taking societies as quite legitimate and quite properly run, but I think that I should once again avail of the opportunity here to say to the public that they should be careful of deposit-taking institutions which offer what at today's rate of interest appear to be abnormally high returns. When one sees advertised, for example, a 14 per cent dividend at a time when one can borrow from the commercial banks at perhaps 8 or 9 per cent or so then one should be very wary indeed and enter into a transaction of that kind only after considerable consideration. I hope that that Bill will be ready within the next couple of months.
Senator Martin referred to the fact that the limits had not been changed for 12 years. This is a perennial problem. There are many other limits— Senator FitzGerald referred to some of them—which have not been changed for 70 years and perhaps should have been. At least these have been changed after 12 years. I would hope that the limits can be kept up to date. When I get the opportunity of setting a different limit for agricultural co-operatives I will envisage a substantially higher limit than the figure of £3,000 which is here. I think the £3,000 is adequate for the purpose of credit unions. It does not mean that a person can have only £3,000 in a credit union; it means that he can have only £3,000 worth of shares. If he has more money to invest in the credit union—and there are many such people nowadays I am glad to say—then he is of course free to put it on deposit with the credit union and there is no question of his being limited necessarily to £3,000. From a proprietorial point of view £3,000 is enough, given the nature of a credit union and the desirability of not having it dominated by a small number of perhaps wealthier people than the average member might be.
These are the main points which were raised in the course of the short debate and I would like to thank the House for the reception given to the regulations.
Question put and agreed to.