The purpose of this Bill, which is quite short, is to increase the maximum amount which the Agricultural Credit Corporation may borrow from the present figure of £350 million to £600 million, and to increase, similarly, the maximum amount of borrowing which may be guaranteed by the Minister for Finance.
Borrowings by the corporation are approaching the statutory limit and, as Senators are aware, I recently authorised the corporation to borrow £25 million abroad for lending to the agricultural community for productive purposes. It is desirable, therefore, to have the Bill passed as quickly as possible.
As I gave a considerable amount of information to the House about the history and activities of the ACC when introducing consolidating legislation on agricultural credit—the Agricultural Credit Act, 1978—some two years ago, I do not think it necessary for me to go over the same ground in the same degree of detail as before, particularly as the present Bill is so specific and so short. However, I might say that the ACC were one of the first State-sponsored bodies established in this country. The ACC were set up in 1927 to provide a specialised credit service for agriculture, particularly long-term credit. Their level of business was small for many years, reflecting the general economic climate of the times and the reluctance of farmers to borrow. Today, however, the picture is completely different. The corporation are a highly-developed lending agency investing well over £100 million a year in Irish agriculture.
In the late 1960's improving market conditions, a growing confidence in the agricultural industry and the increasing willingness of farmers to invest heavily in their enterprises brought a rapid increase in the level of ACC business which, totalling £10 million in 1965, rose to £25 million in 1970.
During the Seventies, business expanded with increasing momentum. The corporation themselves did much to encourage greater investment and their own organisation evolved to accommodate the new production and trading environment. Investment in agriculture increased dramatically as farmers availed themselves of the opportunities presented by membership of the EEC and the many benefits flowing from the common agricultural policy. The recognition of the importance of a high level of investment and planned development was, and continues to be, one of the most encouraging features of agricultural development in recent years.
Last year the amount of advances issued by ACC increased to £143 million representing over 23,000 individual loan transactions. The total amount owing to the corporation, which stood at £130 million at the end of 1975, had reached £320 million at the end of September this year.
Close contact with the varied problems of the individual customers is maintained through the medium of a wide network of offices throughout the country, which brings ACC facilities within easy reach of the farmer. The corporation are continuing to extend this network.
In recent years the corporation financed a large proportion of their advances from buoyant deposit income. The balance is, in the main, financed from repayments of existing loans. Net deposit inflows averaged £55 million over the past few years, and the total amount on deposit at the end of September with the corporation was £265 million. These deposits carry a State guarantee and enjoy the status of trustee security.
With regard to the activities of the ACC, the corporation may give loans and hire-purchase facilities for any purpose which, in their opinion, is of benefit to agriculture or horticulture. The main demands relate to the purchase of livestock, buildings and machinery, seeds, grain and fertiliser, working capital, land purchase and improvement, and family settlements. In this context I should point out that only a relatively small percentage of ACC lending is in respect of land purchase, an average 12 per cent, and this percentage is agreed with the Department of Finance. In addition, the maximum loan in any one case is £40,000, for depositors £50,000. Where several of their customers are involved in bidding for the same parcel of land, the corporation endeavour to ensure that they do not bid against each other leaving the ACC to finance what would then be an unnecessarily and artificially high price. Loans are given both to farmers and to firms in the agricultural processing industries such as creameries, meat factories and grain mills. Repayment periods vary from one to two years for short-term loans to fifteen years for land purchase. Current rates of interest range from 17½ per cent for seasonal loans payable within one year to 18¾ per cent for term loans of ten years and over. It may be contended that these rates are on the high side, but these are the going rates for money at present, and this, like any other commodity, has its price. I would point out here that special loans at lower rates are available for small holders.
In speaking of the corporation's lending activities I might mention in particular the scheme of development loans, designed to encourage planned development of farm enterprises. These loans, which have proved very successful, are given on the basis of plans submitted by prospective borrowers, and repayment terms are geared to suit the type of project involved. In the current year over £25 million was advanced for such loans, bringing the total of development loans issued to £54 million.
Senators will be interested to know that the activities of the corporation are about to be reviewed by the Oireachtas Joint Committee on State-sponsored bodies. The Committee's findings will be awaited with considerable interest both by myself and, I am sure, by Senators in general.
As this stage I would like to comment on a matter which was the source of some confusion on the Committee Stage debate on this Bill in the Dáil last week, and that is the question of the control exercised by the Minister on the corporation's borrowing activities.
The confusion arose, I feel, on reflection, because of the difference which exists between the formal, legal position and what actually happens in practice. Do the corporation need the approval of the Minister for all their borrowing? The answer is yes. This is the position as set out in the terms of the present Bill and in previous legislation.
However let us consider what happens in practice. Every deposit made with the ACC by a member of the public represents a borrowing transaction. It would of course be ludicrous to suggest that the specific sanction of the Minister for Finance should be required for each and every such transaction. What happens in practice is that the corporation have general approval from the Department of Finance for the acceptance of deposits.
Similarly, in the case of other borrowing, the corporation have general approval for regular routine borrowing such as borrowing on the interbank market. However, as I pointed out in the Dáil, the Department of Finance and the ACC are in close and regular contact. If the corporation wish to undertake a single large borrowing transaction abroad or even at home—though this would be rare—then in practice they will discuss the matter in detail with the Department and get official approval before undertaking such borrowing. If, of course, there is a question of the State providing a specific guarantee for borrowing or guaranteeing the exchange loss, then in all such cases, whether the transaction is big or small, the formal approval of the Minister would have to be obtained beforehand.
I hope that what I have just said will dispel any confusion which may have existed after last week's debate—confusion which arose primarily because of the difference between the formal legal position and the day-to-day working relationship between the corporation and the Department of Finance. The system which exists is of sufficient flexibility to allow the corporation to pursue their legitimate business activities with no undue interference, while at the same time retaining for the Minister an acceptable measure of control in relation to those major items of policy with which the Minister would wish to be concerned.
Because of the continuing expansion in the corporation's business it is now necessary to raise the maximum amount which they are authorised to borrow. The new ceiling is £600 million for the total amount borrowed and outstanding at any one time. The Minister for Finance is authorised to guarantee borrowings by the Corporation. It is accordingly proposed also to increase the ceiling on such guarantees to £600 million. Given the likely future pattern of growth by the corporation, I think that the new ceilings should take care of their borrowing requirements up to mid-1982. I would be glad to have the co-operation of the House in having the Bill passed quickly because of the decision to borrow £25 million abroad which I mentioned at the beginning. Negotiations are at present under way to effect this borrowing, and it is hoped that the money will be borrowed and disbursed by the end of the year. I commend the Bill for the approval of the House.