Seanad Éireann debate -
Wednesday, 16 Jun 1982

Vol. 98 No. 4

Agricultural Credit Corporation Report: Motion.

Mr. Hourigan

I move:

That Seanad Éireann takes note of the 1981 Report of the Agricultural Credit Corporation and of the general situation in relation to credit for farmers.

In proposing the motion I will emphasise that there are a number of aspects of the entire agricultural and farming industries which need to be taken into account. We cannot simply take the ACC report in isolation. We must also take full and complete account of the various problems that relate to agriculture. Of course, at present, as in other businesses credit is the central issue with regard to farming and agriculture itself. However, before moving on specifically to the report of the ACC for 1981, there are a number of other issues which need in my view to be highlighted.

Very briefly I will emphasise the important part agriculture plays in our economy. I do not think it can be ever over-stated, or repeated too often, that agricultural exports represent 35 per cent of our total. This is not in my view at all times acknowledged by people either within the industry or outside it. We must make certain that in so far as it is possible our agricultural exports will be expanded, assisted, improved and perfected in the fullest way. In that way we will maximise the return to our country and help our balance of payments quite significantly.

In relation to the industry at present in my view there is an urgent need for an overall comprehensive plan to be brought into being. Such a plan ought to take account of the various facets in the production, processing and marketing areas. There is little point in taking any aspect of the agricultural sector in isolation and attending to it: we need now an overall agricultural plan and the Government, in co-operation with the different agencies involved, such as the lending institutions, the advisory services, the co-operative societies, marketing boards, semi-State bodies, farming organisations and others, should evolve a meaningful policy for this vital industry.

As I see it, at present there is need for the introduction of a national agricultural programme under a national agricultural development authority. Many of us have referred in the past to the need for such an authority: indeed it is urgent, if we are to get the best results possible from this vital industry. I do not think we can any longer afford a piecemeal approach to agriculture, as unfortunately has been the case.

May I at this stage welcome the Minister to our discussion? I would say to him that the Government should without delay set about the implementation of an overall plan for farming.

It is good for us to recap on how agriculture fits into the scene of things, because otherwise we might lose perspective and it may get lost. It has been stated on many occasions by many persons that 20 per cent of our population are directly engaged in farming — if one takes it in terms of numbers of persons, 3 per cent of the workforce. We are therefore talking about a great many people. We have between 7 and 8 per cent of the working population also involved in what is known as the food and drink sector, and this embodies meat processing plants, bacon factories, meat plants and various other processing agencies. Added to this we have a wide range of activities, which are very important, in which persons are one way or another involved in servicing the agricultural industry, which accounts for 18 per cent. Therefore, more than 45 per cent of our total population are engaged in agriculture in one form or another. I make these points to bring home to the House the enormity of the situation and the importance of a vibrant and thriving agricultural industry.

Unfortunately, agriculture has been in very serious decline since 1979. Agricultural land prices were buoyant in 1978, but since 1979 we have seen a steady slipping down the hill. The years 1979, 1980 and 1981 were three bad years in the farming world which resulted in the halving of incomes of farmers, or a reduction of 50 per cent. I do not wish to make political capital of this because in the middle of that time, 1979, the then Minister for Finance, Deputy Colley, introduced 2 per cent turnover or resource tax. Apart from the effect it had directly, it had the indirect effect of breaking confidence of people in the industry. That tax was removed after it had done a great deal of harm, but little was done subsequently to correct a decline in the agriculture.

I give the example of the resource tax to show the lack of positive planning and programming, displayed by the introduction of the resource tax. Anybody with business acumen would not think of introducing a 2 per cent tax on agricultural turnover because turnover bears little or no relationship with profitability or how a business is going. That tax eroded farmers' confidence. We are still left with that situation.

While inflation and high interest rates have contributed in a very major way to the difficulties in farming, it must be acknowledged that the Government did not do much to cushion the agricultural industry against these serious problems. During 1979, 1980 and 1981 the problem became extremely acute. The evidence is there to show that. We are still awaiting a recovery of confidence.

I come to areas in respect of which I hope I can make suggestions which might restore confidence. I hope that in 1982 farmers' income will keep abreast of inflation, assuming that certain optimistic forecasts will take place, for example, good yields and good production from animals and so on.

Cost increases have hit agriculture very seriously. One can say that this has hit all businesses, and I acknowledge that, but the very nature of the agricultural business is such that it is not able to withstand this cost price situation. For that reason, the position in agriculture is very serious. We know, and unfortunately we hear it day after day, that one industry after another is in serious financial difficulties or is going out of business. This is extremely regretful.

I would contend that if we had had a more vibrant agriculture in the last couple of years we might not have been able to eliminate that unfortunate development, but we could have reduced it. We have a number of industries that are agriculture-linked that have suffered serious financial difficulties in the last few years. A greater contribution from a more dynamic agriculture this year and in the years to come we hope will create an atmosphere in which we will be hearing of fewer of these industries going to the wall.

Coming specifically to the Agricultural Credit Corporation and their report, I would like first of all to compliment the ACC for doing a good job for farmers and the agricultural sector over the years. Like other Senators, I have studied the 1981 report from the ACC. It is obvious that there are certain constraints on the ACC which prevent them from doing an even better job for farming in the future. In so far as it is possible we must enable the ACC to do the very best job possible. By and large, it has helped many problem areas in the agricultural sector. We must bear in mind that the Agricultural Credit Corporation accounts for approximately one-third of total farm borrowings at present. We have, unfortunately, an all-time record of farm borrowings of £1,300 million, and the Agricultural Credit Corporation would have provided roughly one-third of that to farmers and to the agri-business sector.

It is essential that the ACC should remain competitive in the area of small deposits. From reading the report, this must be a matter of concern and of some contention. The ACC also remain competitive in this area and it is obvious from the report that with the impressive network of offices which the ACC have set up throughout the country and the personnel in those offices the corporation are capable and competent to deal with these small deposits.

One might ask why do the ACC not engage in getting more small deposits. Frankly, the corporation at present are at a distinct disadvantage with their competitors in relation to taxation of small deposit yields. The associated banks at present enjoy tax concession of £70 per person and £140 per couple on a joint account. The trustee savings bank have a concession of £150 per individual account or £300 per joint account. What I am suggesting is that the ACC should be put on a par with the trustee savings bank. It can be argued that the ACC funds go directly into the more productive sector of the economy. That is one point that would help enormously because vast sums of money would become available for our agricultural industry as a result.

During 1981, the year that we are considering and which the motion relates to, the profit margin from the ACC was 3.2 per cent compared with a profit margin of 3.1 per cent in 1980. I do not think anybody will disagree that these margins are inadequate for the corporation from the point of view of capital. However, and this is the nub of the problem, since the ACC lends almost exclusively to a single sector of our economy, it is expected that the profit margin will reflect the general pattern of lack of profitability in that sector. I have already referred to the lack of profitability in the farming sector, so that accounts for the lack of profitability in the ACC world.

To enable the ACC to do a better job, I believe consideration might be given to allowing the ACC to expand its business base. I have already referred to it as having offices and personnel to engage in various activities but I think it could perhaps engage in further activity, for example, loans for farmers for houses and loans for houses perhaps in rural towns, and it could utilise its manpower or its workforce to a better degree and then would be in a position to have more moneys available for the agricultural sector. I would qualify that by stating that definite provision would have to be made to ensure that the ACC would not find itself with less funds for investment in agriculture for productive and other purposes if it was to engage in this type of activity. My suggestion would be to enable the corporation to be more viable as an agency or as a unit.

The report indicates that the profit of the corporation in 1981, before providing for taxation, amounted to £1.91 million. This was a reduction in the corresponding figure of £2.32 million in the 1980 accounts. This figure, however, is arrived at after making provision for bad and doubtful debts, and regrettably this is now an ever-increasing feature and is likely, unfortunately, to continue. This is a very sad and serious situation: bad debts are becoming a reality, a fact of life, and it is not easy to find the absolute answer for it. The balance sheet in the report at 31 December 1981 showed the assets of the ACC to be £574 million. This was an increase of 11 per cent on the corresponding figure for 1980.

During the year in question, the ACC advances of loans to agriculture, separate from hire purchase agreements, totalled £114.4 million as compared with £131 million in 1980. That represents a decrease of 13.2 per cent. This is a clear illustration unfortunately, of the erosion of farmers' confidence which commenced away back, as I have said already, in 1979. This is important because agriculture, like all other businesses, now operates on the basis of credit, so obviously possible developments are being shelved.

Moving on to the current interest rates and the general difficulties in the farming sector, a further reduction for 1982 in lending requirements is forecast by the ACC in its report. This also is something we must be concerned about. If one looks at Table 2 in the report it is obvious that there is a very significant swing from development loans to short-term finance. This is a very bad sign because the country needs development and the potential remains great in many of our farms.

However, this development will not take place until confidence has been restored at farmer level. With interest rates at 20 per cent plus, and inflation at 19 to 20 per cent, there cannot be any worthwhile development. There is, therefore, a very urgent need for low cost finance over a period suitable to the industry. Serious difficulties are created by advocating borrowing at 20 per cent. I believe honestly and earnestly that people today borrowing money at the cost of 20 per cent are getting themselves into very serious difficulties, particularly in the agricultural sector where turnover is slow and a long drawn out process.

We also see from the same table in the ACC report that borrowing for livestock decreased from £25.5 million in 1978 to £12.3 million in 1981. This again is something to be concerned about, because increasing the national herd is a priority and must remain a priority, but above all we must do something about it because if we do not increase our stock numbers no progress can be made. We must bear in mind that total stock numbers in fact are now less than they were in 1972, ten years ago. This is something that, needless to remark, cannot be allowed to continue, particularly if we bear in mind that our estimated reduction in cereal acreage for the current year is something of the order of 100,000 acres. We are heading straight for a position of gross and utter and dire inefficiency in our agricultural industry.

In regard to our livestock industry and the fact that we have had this serious situation where our numbers now are fewer than they were in 1972, we must reflect and realise that our exports in 1981 were worth £700 million. That is something that we cannot and must not take too lightly. However, during 1981 the volume of cattle disposals was down by 25 per cent to 1.55 million. This is a very alarming decline in the output of cattle, or cattle disposals, and it clearly affects our balance of payments position. It is true to say, and few will contradict it, that it is largely due to a very massive and serious destocking in our herds in 1980 used almost exclusively to provide incomes for people who would otherwise have no income at all. This money was used not for luxury living but to provide bread and butter for many farmers throughout this country, and this has had very serious ramifications for us and will have more serious ramifications as we proceed.

An Leas-Chathaoirleach

The Senator has three minutes left.

Mr. Hourigan

The Minister for Agriculture has indicated that he wants to increase the numbers. I suggest very strongly to him that there must be central incentive schemes and that these must be coupled with low-cost funds at a fixed rate with an appropriate repayment period. Again, I suggest that the ACC should have a fixed interest rate as obtained in the past. Also we must have simple schemes such as the calf scheme without as much red tape.

I propose that the Government allow the ACC to bring in low-cost foreign funds with the Government covering the exchange risk, as has been done with other ACC loans. Due to the capital-intensive nature of agriculture, borrowing must be long-term at a reasonable rate and that rate must be fixed for the duration of the loan so that a farmer will know what he has to pay each year and can, therefore, plan. The rate of interest should not be more than 10 to 12 per cent and at least £150 million will be required to make any dent on agriculture at this time.

With variable interest rates as applied at the present time with ACC and the banks, there is no way a person can plan with confidence and certainty. ACC had interest rates on a fixed basis up to about five or six years ago and let us hope we can return to that position again. The European Investment Bank loan which applies and operates on the level of 14 per cent is to be welcomed. It is a step in the right direction, particularly since the European Investment Bank has not formerly engaged in agricultural investment and has confined its activities to the industrial sector.

The inter-dependence of agriculture on the industrial sector is something that cannot be over-emphasised. We have a situation now in 1982 — it obtained in 1981 as well — where there is a serious cut-back in fertiliser usage and much lower levels of animal feeding, all of which reduces efficiency and is costing us thousands of jobs in the agricultural and related sectors. I talked about our land carrying less stock than it did heretofore. A very vital area is that of machinery. Machinery is not being purchased and we are heading for a situation where we could have an almost collapse of our existing machinery where the basic machines would not be there to do the jobs that need doing. It is encouraging to learn from the ACC report that they are going to adopt a sympathetic approach to the problems of many farmers, and I urge all lending agencies to take account of this. We must make certain that there is a sympathetic approach to all problems in agriculture.

We have now a very fine infrastructure in agriculture. Since we joined the EEC a great deal of our investment has taken place in land reclamation, drainage and land restructuring and the erection of farm buildings. This investment can only be fully realised with a much higher stocking level and the provision of low-cost funds to increase the size of the cattle breeding herd much be a major priority at this time. Because of the effect of the high inflation rate and its major impact on agriculture the general level of indebtedness and exorbitant interest rates confidence in agriculture is at a very low ebb. The reality of the situation at this time, and the ACC acknowledge this very fully in their report, is that the continuation of high inflation and high interest rates has eliminated most of the profit from many farming activities. It has to be stressed that it is the prospect of profit that encourages investment and risk-taking. Without the prospects of profit or a reasonable margin from farming activity there will not be investment, and this is an indispensable condition for growth.

An Leas-Chathaoirleach

The Chair wishes to remind the Senator that he must finish his speech now.

Mr. Hourigan

In conclusion, I say there must be a radical look at agriculture and agricultural credit in particular. Credit is freely available but the price of credit is wrong. I suggest that agriculture cannot sustain a level higher than 10 to 12 per cent at the present time. I am sorry if I have exceeded my time.

An Leas-Chathaoirleach

The Chair must act in accordance with Standing Order 41. The remaining Senators who wish to contribute will have 15 minutes each. Is the motion seconded?

Mr. Durkan

I second the motion. As we are all aware, we are in the midst of a recession which affects both industry in all its aspects and agriculture. If we compare this recession with that experienced in the mid-seventies, the one factor which is immediately discernible is the fact that then the agricultural sector was in a healthy state and, consequently, the general recession did not bite so deeply into the heart of our economy. Unfortunately, on this occasion agriculture has taken a hammering also, and for a number of reasons outlined by the previous speaker. I do not propose to go into them, but suffice it to say that unless growth in agriculture is continued and increased and unless there is some recompense for farmers for their efforts, there will be a general decline in confidence in that particular sector and we will have an even greater recession. This confidence can only be restored in a number of ways.

While I accept that the Minister's scheme to help farmers who are in severe financial difficulty has great merit I feel that it does not go far enough. It is too short-term. For the kind of difficulties into which the agricultural sector has fallen at present there is a great need for a long-term interest subsidy which would carry the agricultural sector through a period of five or six years and incorporated in that should be lower interest rates even than those already proposed. That would be more than repaid in the increased productivity which would accrue in the next couple of years. In addition to increased interest rates coupled with inflation we must also take into account lower returns from grain and beef production and increased costs in machinery, which has already been highlighted in another area in the past couple of days. Unless greater emphasis is placed on the importance of resolving those difficulties we will experience a further recession in that area.

I would like to emphasise one point made by the previous speaker, that is, in relation to ensuring that the ACC can offer the same facilities to investors, and particularly those who wish to make small deposits with the corporation, by way of eliminating the anomalies in relation to taxation. The ACC have given a sterling service to agriculture and to the economy and it is absolutely essential that they should be in a position to operate on an equitable basis with what one could call their competitors. If they do not, the Departments will be hampered and their ability to help the agricultural sector will also be restricted. That would be very unfortunate. I feel also that the corporation should be allowed to extend their scope and provide current banking facilities in order to capitalise on short-term cash that may be available in the agricultural sector. Other lending agencies are in a position to avail of this cash but the ACC are not, except through deposit accounts. They are not in a position to compete with the other agencies in that area.

Finally, I would like to commend the chairman and board of the ACC for standing by agriculture in these very difficult times. Over the past five or six years there has been considerable lending by a number of agencies to the agricultural arena. Many of them have had second thoughts but it is to the credit of the ACC that they continued to make further finances available when necessary. In these difficult times we should all be very wary about making any public statement which would in any way affect our exports. If there is any evidence to suggest that we have done so, we should try to ensure that we can retract it. Our economy is very dependent on the success of our exports, particularly in the agricultural area. The consequences of any damage done in relation to our markets abroad, particularly in relation to our close neighbours should be carefully examined.

Minister of State at the Department of Finance (Mr. Barrett,

Clare): I should like first of all to make some comments on the first part of the motion — the 1981 report of the Agricultural Credit Corporation. While the report has been before the House for some weeks now and Senators are obviously familiar with its contents, it is, I think, worth while to draw attention to some of the salient features.

The corporation's profits, before tax, showed a reduction from £2.32 million in 1980 to £1.91 million in 1981. A factor in this reduction was an increase in the provision for bad and doubtful debts. The current cost accounts, as with other banks, show a less favourable position on profits as compared with the conventional accounts. However, the increase in the value of property assets under current cost accounting has compensated for the deterioration in the value of monetary assets, leaving the shareholders' funds virtually the same under both accounting methods.

Total advances by the corporation under loans and hire-purchase contracts increased by £33.5 million to £455.8 million, an increase of just under 8 per cent, while the amount of new advances fell from £131.8 million in 1980 to £114.4 million in 1981, a drop of over 13 per cent.

Total deposits stood at £376.4 million at 31 December 1981, an increase of £48.4 million or under 15 per cent. Within this overall growth, the growth of small deposits was disappointing.

It is clear that 1981 was not a good year for the ACC. This of course is not surprising. The ACC are confined to the agricultural and fishing sectors in so far as their lending is concerned. The difficulties experienced by farmers and by agri-businesses in recent years have, therefore, affected the ACC's activities more than those of other financial institutions with a broader customer base. Faced with a substantial decline in income, farmers have been slow to borrow. Confidence in agri-businesses has been adversely affected by the difficulties confronting farmers and, consequently, such businesses have also been reluctant to borrow. The farm income situation has also had its effect on the ACC's deposit intake, although I should emphasise that, in the matter of deposits, the ACC are open to everybody, farmer and non-farmer alike. When all the adverse conditions under which the ACC have operated in 1981 are taken into consideration, the corporation's performance must be regarded as creditable.

I should like at this point to refer to the second part of the motion — the general situation in relation to credit for farmers. The Central Bank's credit guidelines for the year to mid-February 1983 allow the banks to increase their total lending by 14 per cent. Within this overall total credit expansion, the Central Bank have laid down a specific guideline for personal loans and hire purchase finance whereby these two categories are being limited to an increase of 7 per cent. Thus, lending for productive purposes, including agriculture, will be allowed to grow by 15 per cent. In addition to lending by the banks, a provision of £100 million is included in the Public Capital Programme for 1982 to meet the expected level of demand on the ACC for credit by farmers. As a result, I do not expect that any farmer with a worth-while project for the expansion of the productive capacity of his farm will be denied access to credit.

I recognise, however, that current interest rates may deter many farmers from borrowing even for highly productive projects. The Government are most anxious to secure a reduction in interest rates as soon as economic circumstances at home and abroad permit. However, I should point out that a number of schemes are at present in operation which reduce interest charges to farmers.

Under a scheme included in one of the special packages of measures secured as part of the 1981 EEC price negotiations, farmers in the development category under the farm modernisation scheme or farmers following improvement plans under the western package receive a 5 per cent interest subsidy in respect of borrowing for grant-aided investment. This subsidy is payable for a period not exceeding two years commencing on or after 1 January 1981 and ending on 31 December 1983.

A loan facility of £5 million provided to the ACC by the European Investment Bank is being on-lent to farmers at a fixed rate of 14 per cent for loans of up to 12 years. This reduced rate of interest has been made possible by the assumption by the Exchequer of liability for the exchange risk involved. The maximum loan is £30,000 and is available for up to half the cost of a particular investment. So far, applications have been received for all of the first tranche, amounting to £2.5 million of this facility.

In addition, the associated banks have a facility of £50 million provided through foreign borrowing, from which loans are granted to finance development under a farm plan or to small and medium-sized agri-businesses. An exchange risk premium of 2 per cent is charged to the borrower and the Exchequer assumes the residual exchange risk, thus enabling an interest rate substantially below general domestic interest rates to be charged. This interest rate, which varies with interest rates abroad, is currently around 13 per cent. The ACC have a similar facility and while all of the original £50 million has been lent, some of the loans are short-term, and as these are repaid more funds become available for future lending.

I think it would be appropriate at this stage to strike an optimistic note in relation to agricultural production and incomes. In 1981 the downward trend in farm incomes was halted. This was brought about by a number of factors. The EEC price negotiations that year resulted in an increase of the order of 14 per cent for our main agricultural products. In addition, agreement was reached on two sets of special measures for Irish farmers which are worth an estimated £110 million, financed jointly by the EEC and the Irish Exchequer. Also, in the budget of 1981, the Government provided financial assistance and incentives worth £35 million for our farmers.

I am glad to be able to say that we have also come out of the 1982 EEC price negotiations with substantial price increases — 10½ per cent for milk and 11 per cent for beef — as well as a calf premium worth £37 million a year to Irish farmers, and there is to be a national grant of £70 for each additional calved heifer. It is estimated that the overall result is worth £235 million to the Irish farm sector in a full year. The additional expenditure allocations and tax changes incorporated in the budget introduced in March 1982 provided a further £9 million for farmers, in addition to rates relief of £18 million provided for earlier in the Estimates. As a result of all these favourable developments I am hopeful that 1982 will be the year in which farmers' incomes will start rising again. It is obviously too early yet to make predictions, particularly in agriculture where so much depends on the weather. However, it is comforting to note that one prominent agricultural economist has forecast an increase in farmers' incomes of 5 per cent in real terms in 1982.

One of the more undesirable features of the agricultural situation in recent years has been the fall in cattle numbers. Present circumstances are now especially favourable for a major reversal of that trend. As I already mentioned, the EEC is providing a calf premium of about £22 for each calf that is calved in the current marketing year. Taken together with the beef suckler grant, the national aid on calved heifers and the headage payments for beef and dairy cows in the disadvantaged areas, farmers have now got a strong financial incentive to expand their herds. The benefits of such expansion will be felt not just in the farmer's pocket but in beef, dairy and other processing activities which depend on agriculture for their raw materials and which have in recent years suffered from inadequate supplies of such raw materials. Indeed, the inadequacy of cattle supplies and of raw materials for the food-processing industries has been a major factor in the deterioration of our balance of payments.

It is my earnest wish, therefore, that farmers will help themselves and the economy as a whole by availing of the unprecedented level of financial incentives to expand their herds. To the extent that farmers need credit to expand their herds, I am confident that sufficient funds will be available and that the special credit schemes, as well as the direct financial incentives which I have outlined, are such as to offset the deterrent of high interest rates. For these reasons, I look forward to renewed expansion in agriculture to the direct benefit of farmers and the indirect benefit of the rest of the economy.

Senator Hourigan mentioned an agricultural plan. The position is that the Government have established a group which is representative of many agricultural interests to draw up by October 1982 a four-year development plan for Irish agriculture. The Senator also mentioned savings problems with regard to small savers and small depositors. The ACC have made a case to the Department of Finance with regard to this problem and it is being examined at the moment by the Minister for Finance. With regard to the loans being confined to agriculture and fisheries, under statute the ACC are confined to giving loans only under these two headings. To do otherwise it would be necessary to have an amendment of the statute. I thank the Senators for their contributions.

Mr. Ferris

I should like to thank the Minister for instilling a bit of boom and bloom into this particular sector because all of us agree that it really needs some confidence to be injected into it.

For a number of years the agricultural sector has been suffering from a continuing loss of income. Any Government sponsorship or scheme or indeed the working party of which I have the honour to be a member, that can do something to instil confidence in the farming community must be welcomed. Unfortunately, in spite of the efforts of various Governments — the past and the present one — we are still faced with many dilemmas in trying to increase production and getting the industry moving again so that people will have confidence. We must realise that many of the schemes we initiated are having a very poor response.

Doctor Ryan, Director of An Foras Talúntais, when he wrote an article in a recent publication Farm and Food Research pointed to the fact that over the previous decade every £100 of gross farm output generated could only produce £31 which could be retained by the family farm income. The other £69 of this gross figure went to pay expenses and farmers had to have family farm purchases which involved a very high rate of inflation. In addition he said many farmers increased their borrowings at rising interest rates and many factors in domestic and external economic markets worked against the interests of farmers.

Farmers are progressing and have to survive on the land in all kinds of weather. In spite of that, even with the best advice available to them through ACOT and other institutions — in which we are all directly or indirectly involved — all their efforts seem to have come to nil over the past four or five years when their incomes dropped between 50 per cent and slightly less.

Taking that into consideration the impact of a falling income on the farming community had a direct effect on farm output and also on employment in agriculture, which has continued to decline by 2,000 or 3,000 people over the past decade. These are people that we can ill afford to lose because there are no jobs in any other sector, as can be proved by the continuing rise in unemployment figures. If we are to make a contribution to the farming community and their programme we must use the information available to us and implement the plan at the farm gates. The modest growth rate over the next four years which the plan would cover is about 2½ to 3 per cent. To achieve that we would have to increase our cow numbers, which have continued to drop for a number of reasons, most of them economic. If we are to increase our cow numbers by 300,000 which is the possible figure over the next four years, increase our output of milk and beef production, reduce our calf mortality rates where we lose a quarter of a million livestock per year because of disease and avail of this calf heifer incentive scheme, we would have to ensure that low cost funds would be available to farmers.

In this regard we would like to compliment the chairman and the board of the ACC and indeed the chief executive officer, who comes from the same county as the Minister. They realise how difficult it is to live on small farms in the west. I would ask them to do away with as much of the red tape or bureaucracy as possible and still satisfy the European bureaucrats in trying to ensure that farming credit is available.

I am extremely concerned at the low number of people who have applied to date — and the closing date is quite soon — for the various interest subsidies from the EEC and the lending institutions, including the ACC. We are aware from statistics that over 10,000 farmers are in dire financial difficulty. If the applications do not match that we must seriously look at how we have applied the scheme. Is there sufficient confidentiality? Is there sufficient lack of red tape? Do farmers have to go and bare their souls to peace commissioners throughout the country to benefit under these schemes? Farmers are a very proud race. They do not want handouts. They want assistance to increase production, assistance to implement schemes that they have been advised on. We must make sure that these low cost funds are easily available to enable them to do that. If the applications do not increase to a significant number something must be wrong and the ACC, the body with direct responsibility will have to have increased capital made available to them. The ACC will have to look at where the scheme has fallen down, because the necessity for it is beyond doubt. I notice that a previous Minister's budget included a figure which would allow the ACC to lend something like £70 million. That kind of injection of capital would increase production and help to put agriculture back on a good footing.

There are just a few other comments I want to make regarding help to farmers. One of them is in connection with the eradication of tuberculosis and brucellosis. We are now recommending through the Animal Health Council to the Minister that a realistic form of compensation be made available to farmers who find themselves in the dilemma of having their cattle locked up. There is an EEC scheme available to our own Exchequer in the sum of £4 million this year and it worries me that because of an embargo on employment in the public sector we are unable to implement this scheme, and it would only take about 70 or 80 clerical officers throughout the country to implement it. It would be a tremendous saving to farmers if this fund could be administered. I do not need to go into details about it because I am sure every farmer representative, and indeed the Minister, is aware of the terms of the directive of 21 April setting this up. If an exception could be made in the public sector in agriculture, which has always taken second place to most other industries in this country in spite of its importance to the community, this scheme of £4 million could be of direct benefit to the farmers in assisting them in disposing of animals at the appropriate time without fear of them being locked up and without fear of missing a market. This is something that the Minister, and the Minister for Finance, who is part of the team that negotiated the package, should look at. The Minister who now controls the purse strings was part of that team that negotiated the package and we cannot implement it because that Minister has now put an embargo on recruitment in the public sector. As it is a new unit, as it is a new scheme being funded by the Community and has nothing to do with our national Exchequer what we are doing is reneging on our responsibilities to eradicate disease and our responsibility to reimburse the farming community the expense which they must incur now if they are to survive. I would ask the Minister to look particularly at that. I commend the ACC for their performance to date. But I would say that if the scheme initiated recently does not attract an appropriate response from the farming community then something must be wrong in the implementation of it and we have responsibility to look at it.

Mr. O'Keeffe

I would like to welcome the Minister this evening. He has made a very worthwhile contribution on the accounts and the programme of the ACC. I would like to take this opportunity of paying tribute to the staff of the Agricultural Credit Corporation for the great work they have done in developing agriculture. Over the last four to five years the turnover of the Agricultural Credit Corporation has doubled. That is a measure of the confidence that the staff of that organisation have placed in the farming community.

The ACC is often expected to fund agriculture when other institutions have failed to do so. That puts it in the area of providing risk capital to develop the very industry which is the basis of our whole economy. They have an excellent network of branches throughout rural Ireland which are well staffed and quite capable of looking after the financial needs of Irish farmers. They have an excellent chief executive who knows the problems. They have a deputy chief executive who is known throughout the length and breadth of the agricultural community of rural Ireland in the homes of farmers for the great work and the great knowledge he has of the problems of Irish farmers.

I would like to broaden the thing and say a few other things here this evening. One of the areas I would like to refer to is our farm modernisation scheme. There are a number of categories in that scheme as some farmers who were classified over the past few years are now reaching their term in the categories they were in. One of the categories which was brought to my attention since my elevation to this House was the one relating to a farmer in the high transition category who had done a good job in farming, had improved his milk yield from 600 to 900 gallons, who did everything right but when he went for reclassification found himself in the commercial category. We must, whether at home in Dublin or in Brussels, correct that situation because that farmer was being categorised, on the farm accounts that he had kept himself, because he had done a good job, and not on the comparable income under which he should have been classified.

The real problem facing agriculture today is farming. According to statistics we have 150,000 farmers and 50,000 of those farmers are depending on an income outside of farming; they are really part-time farmers. We have another 50,000 farmers who are barely earning a subsistence income, and we have 50,000 farmers in the bigger category. Our smaller farmers have been the backbone of our country for generations. Many of our rural towns and villages have suffered from the downturn in agriculture — the service sector, the garages, the hardware shops. All of these have suffered because the small farmer was so hard hit in the economic situation. I know it is outside the control of the Government to correct the agricultural problem, because it rests with Europe. But let us go back to 1974, the year when we were entering the EEC when we were gaining handouts. It was quite easy to negotiate in Brussels, when anything one brought home was a handout and one did not have to fight as one does today, when one did not have to face the Maggie Thatchers or any other hard government in Europe. We saw agriculture slip in that year. That was the year when the rot set in in Irish agriculture, when we saw our national herd substantially reduced, having been built up in the previous term by the then Minister for Agriculture, Deputy Gibbons. We have never recovered from that. We were advised in certain sectors in agriculture that we would be better off to get out and close down than to continue.

The small farmers put in 50 per cent of our total milk supply. They are the basis of our whole cattle industry and we must look after those people. They must get incentives to improve their income and those incentives must be production incentives. There is no point in giving hand-outs for doing nothing. Farmers do not want that. If a farmer produces 600 gallons of milk and increases that to 800 he should get something to compensate him for doing that. That is how we are going to keep our people on the land. If we continue to go in the direction we are going we will see a rural Ireland denuded of farming and of farmers. That would be tragic for this country. We cannot afford to have another 10,000 or 20,000 people a year on our dole queues. That is not the way we must do it. We must keep those people where they naturally belong.

Referring to the area of credits, I would like to go back to the years 1979-80. We will see a very realistic approach made by our Ministers for Agriculture and Finance at that time, Deputies O'Kennedy and MacSharry, when they went about negotiating credit in Europe. The exchange under-written by the Government introduced £50 million into the Agricultural Credit Corporation which was lent out at that time at approximately 12½ per cent. Due to currency fluctuations the interest rates crept up to about 15 per cent and settled at about 14 or 13½ per cent. We must have a further injection of this sort of capital into agriculture. We must have something similar again for the purpose of a productive investment scheme. The restrictions that have been placed on the European Investment Bank money which have been in the hands of the corporation for quite a while are too restrictive, and I believe we must look at a broader area of finance, something like the productive investment scheme that was introduced in 1979-80.

The other area to which I would like to refer is the area of deposits within the corporation. Depositors are the life blood of the corporation, particularly the small depositor and he must get concessions. The corporation must have equity with other institutions who take in money in deposits, so as to have a very strong and useful source of funds to develop agriculture. As things stand at the moment they are restricted because of taxation restrictions against the banking institutions and the trustee savings banks.

I would like to refer to the Central Bank report which stated recently that farming incomes would increase by 28 per cent. Taking that as starting at a very low base and looking back over the period of years it is some time since agriculture slipped to such a low level. I would like to take this opportunity of congratulating our Minister for Agriculture on the great work he did in Brussels this year under the greatest difficulties ever faced by an Irish Minister in the introduction of the calf subsidy, which is a substantial means of income to Irish farmers. I would also like to say that the interest subsidy which was introduced at 5 per cent is indeed a substantial help with the rescue package which has been referred to by Senator Ferris. It is the approach of some of our financial institutions which is frightening people away from applying for that package. There is quite a substantial amount of paper work involved. I would like to see the banking institutions being more co-operative with clients than they have been. It is in the interest of the institutions to fully participate in that package. It is a good package. We have waited quite a long time for it. But for the change of Government and having a new Minister for Finance we would probably never have seen it.

We have seen quite good packages introduced by Deputy MacSharry when Minister for Agriculture. There was the lime subsidy. We had seen a substantial drop in the use of lime in the country, which was very serious from the agricultural point of view. I am glad to say that the conscientious farmers have purchased substantial quantities of ground limestone and employment is increasing at some of our limestone quarries. This is a good result of an incentive which was brought in from Brussels.

We have other incentives, the subsidy in regard to the animal breeding programme which resulted in a substantial swing back to artificial insemination which was in the interest of the national economy because we are going to see a very substantial increase in breeding of female cattle, namely, friesians which are so badly needed for the dairy industry and for the national herd.

Senator Ferris referred to the embargo on the public service. It was not Deputy MacSharry who put that embargo on the public service. Farmers are asking why the animal disease moneys that were available from Europe were not made available to the Irish agricultural community. We all know that it was for a different reason. It was like the budget we had in July 1981 when agricultural grants were substantially reduced, when we had a reduction of 5 per cent, when incentives which were so badly needed by the farming community were removed. We have seen the standard of farm yards. We have seen that high standards are so necessary that we should have the incentive to develop them and bring them up to the right standard. One very important point was that grant aid was totally removed in the area of concrete yards. That was a retrograde step. This must be reintroduced. We must continue with the development in that area if agriculture is to be modernised at farmyard level.

I have said all I wanted to say. The staff of the Agricultural Credit Corporation are the most dedicated and sincere people; they are basically agricultural people who qualified and who know the problems of Irish farmers. I would have no fear for the agricultural industry while we have a State institution staffed by such good and dedicated people.

Mr. Lennon

I do not wish to go over the ground which has already been well covered by the other Senators. Being a farmer myself and coming from what I believe is a very good part of the country, I am sorry that the position is not as Senator O'Keeffe sees it. I do not know what county he is from. I am not talking politically, but I do not see it that way.

First I want to congratulate the ACC. From my experience of them — I have been involved in farming and all types of committees for a very long time — they are doing a very good job. One of the crippling things is the interest. That is something they can do very little about. But as far as the farming community is concerned interest and the inflation are crippling blows. Everyone would agree with that. I have heard it said here — and quite rightly so — that the confidence in farming at the moment is very low. It is also true that farmers' incomes have fallen dramatically over the last few years. This is part of the problem at the moment. It is a question of confidence.

No doubt it is a question of money. Farmers borrowed, perhaps too heavily. I am not sure of that, and they would be the best judges of that themselves. But when they borrowed they were then caught in the situation that times got bad and between inflation and interest it was extremely difficult for them to meet their commitments. We would all concede that point. Their incomes fell dramatically. Nobody in this House would dispute that. Anybody with experience of farming could not dispute that.

I am sure the ACC are very conscious of the fact that many farms and many of the agri-businesses have been in difficulty over the last 12 or 18 months. Many of them have gone to the wall. I am sure every effort was made by the ACC to try to keep those places in business. I know they have sympathy for these businesses and I have been involved in some of the deputations to them in relation to some firms in trouble. But sympathy is not enough for anybody. An ounce of help is worth a ton of sympathy. For that reason I hope they will make every effort to keep farmers and agricultural businesses which are in difficulty going. In this day and age the dole queues are long enough without adding to them. I was involved quite recently in meeting a firm which had gone to the wall where a staff of 55 were possibly going to lose their jobs. Fóir Teoranta, the ACC and the Minister should step in and see if anything can be done to keep these firms going. I am not suggesting that good money should be poured in after bad in these situations. But with the dole queues so long at the moment we should be trying to keep these places going, because every effort is being made in most of these industries which have been in existence for a very long time and some of them have given a great service and employment. For that reason I am appealing to all concerned to do everything they can in this regard.

Confidence in farming is at a very low ebb at the moment. The advisory staffs and the Government encouraged farmers to borrow money and produce more. They did this. They were one section who produced more. But unfortunately some of them found themselves in trouble. A survey carried out by ACOT showed that about 10,000 farmers were in trouble. I was on the board of ACOT at the time and I felt that the figure was on the low side, that it could be far greater. The survey was carried out by the advisers of the ACOT board and they were not in touch with all the farmers in the country. Many farmers are not prepared to tell everybody if they are in financial difficulties. Nobody would dispute that. If one has plenty of money one does not mind letting people know, but if one is in dire trouble most people would prefer people not to know it.

The ACOT board had great problems. They were a new board, getting off the ground. One of their greatest problems was that they had very little money to get started. Most of the plans of the directors and the board for the development, advisory and education side of it are still on the shelf because the money was not there to do the type of things the ACOT board had in mind. Regional offices around the country remain nearly unstaffed at the moment. I had an experience only the other day with my own ACOT committee in Louth where the number of scholarships is being reduced from possibly 16 to eight, the reason for that being that the allocation of money was reduced. We are being told we must work within this allocation of money. Then we talk about educational programmes. In regard to educational programmes, reducing scholarships must be a step in the wrong direction. It is a sad thing to have to say that this will have to be done. That could be the position in other counties too.

The Minister spoke about the great deal made in Brussels in regard to cattle. I do not want to belittle the efforts of any Minister in Brussels. I am sure all of them do their best. But the Minister presents a false picture. It always leads to problems and divisions between town and country, because when Ministers down through the years came back from Brussels with packages, they were met at the airport by bands and all the fanfare because they brought home millions for farmers. When our friends in towns and cities read about it they think we are all marching up the steps of the bank with this money. Does anybody realise the amount of money which reaches the farmers' pockets as a result of some of these deals? In this speech we hear the farmers will receive an 11 per cent increase for cattle — I am sure that is over 1981. I sold cattle in June 1981, and the price is lower today, in 1982, than this time last year. How does that 11 per cent affect the situation?

I want to refer to the calf subsidy. If it is operated as it is intended I would look upon it as a real disaster. Inspections were to have taken place at certain points, and I think that was called off because some people do not agree with the way it is being done, and I for one do not accept it either. We have now a situation when people must take their calves to certain centres to be inspected every so often. It is not a great arrangement; I think it is the worst arrangement we could think of. I have had many phone calls from farmers throughout the county about this. They were dissatisfied with this arrangement. They felt it was not workable. They felt that there was a great danger from the disease eradication point of view in taking these animals to the inspection points. Nobody can disagree with that. Anyone who had suckler herds would find it almost impossible, or a very difficult job, to collect animals and keep them tied in a shed for a day, and bring the calves along as well.

When it is an EEC scheme, we should try to get every farmer to benefit from it. We should be making everything as easy as possible. I want Government Senators to tell the Minister involved to have a rethink on that, because as far as I am concerned — and I think I am speaking for a great number of farmers in my area — it is an arrangement that does not suit. I do not think it is very difficult for inspections to be carried out as they were some years ago and the cow scheme, or any other schemes, where animals were inspected or tagged in the man's farmyard. Because we have not made a lot of progress down the years with the disease eradication programme there is an additional risk now. There are many people I know who will not take their small animals to an assembly point because of the risk of disease. I would like the Minister of State to carry that message to the Minister responsible, because this is very important.

I am not presenting a gloom and doom situation. We would like to get away from that situation, but we cannot bury our heads in the sand and say everything is well, because nothing could be further from the truth. There is no doubt that some farmers are in dire trouble. Not everyone wants to admit this, but it is a fact. We have gone through a few very bad years. For that reason ——

Acting Chairman (Mr. Ross)

Senator Lennon, you have two minutes left, and please relate your remarks to the motion, which deals with agricultural credits.

Mr. Lennon

I will refer to the motion, as I see it. I hope what I am saying is relevant at this stage because we are talking about agriculture and the problems that exist in agriculture at the moment.

In relation to the borrowing of money and to the lending agencies, I want to congratulate all the lending agencies, particularly the ACC who have been kind to the farmers. I do not disagree with this at all. Maybe most of this money was lent when things looked good, but at the moment there is a reluctance on the part of many farmers to borrow. This is indicated in the ACC report where the proposed borrowing for 1982 appears to be downwards. Interest rates are such — and hopefully something will be done about them — that they prohibit anybody from borrowing because farmers simply cannot repay. For that reason I consider that to be one of our greatest problems.

Something has to be done about the cattle population. While I welcome any scheme which will increase our cattle population, I felt this calf scheme could have helped, but I am sorry to say that at the moment this does not seem to be on. I would like the message carried back to the Minister that while I believe these millions are there on paper for a calf scheme, I do not think that is going to be taken up if it is operated as it is proposed to operate it at the moment.

In conclusion I want to thank ACC who in my experience always have been very helpful and very co-operative. They should take note of the few points I made in relation to people in dire trouble and I believe there are many of them, unfortunately.

Mrs. Hannon

Senator Hourigan said it was very important that we have a plan for agriculture. I am aware that the ACOT board produced a four-year plan for agriculture and this was presented to Deputy Dukes, who was Minister for Agriculture at the time. The Minister of State stated that the Minister for Agriculture has set up a committee to produce a four-year plan for agriculture, and this is to be brought back to him in six months' time. As far as I know, Senator Ferris is a member of that committee. He is a representative of farming organisations and farming interests.

We are all aware that agriculture is of major importance to Ireland in terms of employment and output. The agricultural interest is of greater relative significance to the Irish economy than to any other EEC member state, except Greece. Farm production accounts for 70 per cent of GNP and about 75 per cent of agriculture is exported. Because of the low import content of agricultural produce, the industry's contribution to the country's balance of trade is indeed significant. Almost one-fifth of our work force is engaged in farming. The EEC average is just 8 per cent. However, the importance of agriculture as a source of employment extends well beyond the farmers' gate.

The use of credit services by farmers has increased ten-fold in the decade of the seventies, and in cash flow terms is probably the biggest single input into agriculture accounting for a higher proportion of growth output than either feed or fertiliser. Expertise in the use of credit and the associated tax accounting and financial management have not grown in the same proportion, unfortunately. Profit margin in farming has dropped dramatically in recent years so the management of finances is of prime importance at the moment. The consequences of this drop in profitability are very serious, particularly for farmers who are in the early stages of development and are depending on surplus cash to reinvest in development or to service loans. A survey carried out by ACOT in July 1981 identified 9,997 farmers in serious financial difficulty who could not meet their repayments. I would say this situation has deteriorated since then, and in my own county of Meath I know of 100 farmers in such serious difficulty that their only option is to sell.

A large proportion of finances for farming comes from the ACC, and the Joint Committee on State-Sponsored Bodies believe that the ACC are fulfilling a useful function by providing specialised credit to agriculture which would otherwise be unavailable, and by stimulating competition in agricultural banking.

Again in that report it was pointed out that in recent years ACC's profitability has remained low in part because of the predominance of fixed interest lending and substantial losses on foreign exchange borrowing. In his report, the chairman of the ACC said that advances under loans during the year up to December 1981 amounted to £455.8 million. However, advances for the year amounted to £114.4 million, a decrease of 13.2 per cent. This drop in the level of lending activity reflects the continuing erosion of farmers' confidence which started back in 1979. In arriving at the profit for the year of £1.9 million, the corporation took into account, and increased the provision for bad and doubtful debts, again, I feel, a sign of the times.

The major contribution to the recurrent recession in farming and a most important deterrent to borrowing is the high level of interest rates. Few, if any, farming projects taken in isolation can service loans of up to 20 per cent. For a number of reasons Irish farmers pay a higher than average interest rate and higher repayments than other Irish borrowers. This is not because of any bias by the lending institutions, but because the credit system, as used by consumers and businesses, has a longer period over which to borrow and match their needs. The fact that home loans are often subsidised and are always long term, and that such a high proportion of credit to commercial sectors is either revolving overdraft, or tax-based, results in the anomaly of farmers paying more and repaying faster.

A recent survey by the Agricultural Institute suggested that financial aids to farming should be more flexible. The study showed that the setting up of a new dairy enterprise would need a term loan of 15 per cent over 50 years on borrowed capital, whereas the expansion of an existing enterprise would need only a five year loan repayment period. The ACC report, however, points out that farmers are still prepared to borrow at reasonable interest rates, as evident by the interest in the loan negotiated by the ACC from the European Investment Bank at a rate of 14 per cent. This was made possible because of the Government underwriting the exchange risks. These loans are available for up to 12 years and for most development purposes.

I was delighted to hear the Minister say that in addition to lending by the banks a provision of £100 million is included in the Public Capital Programme for 1982 to meet the expected level of demand on the ACC for credit by farmers. Hopefully as a result, no farmer with a worth-while project for the expansion of the productive capacity of his farm will be denied access to credit.

Everybody has pointed out the need to increase the size of the national herd. This must be a top priority as our stock numbers are now at an all time low, in fact they are as low as they were in 1972. The provision of low cost funds to achieve this is essential. The £22 calf premium and the £70 for each additional calf heifer will we hope, reverse these trends. Foreign borrowing for this and other purposes is justified by the productive nature of the expenditure involved. Looking to the future, the primary national economic objective as pointed out in the report must be to restore confidence and growth to Irish agriculture. The potential for substantial and sustained growth still remains in the main section of agriculture. National economic and fiscal policies should be designed to encourage such growth.

I would like to compliment the staff and the board of ACC for all they have done for the agricultural sector over the years, and hope they will continue to do so in the years ahead.

Mr. Dowling

I welcome the Minister to this debate which I regard as very significant and important, but I am disappointed there are so few Senators in the House to listen to what we have to say about what we regard as our most important industry. They do not have the time either to listen to what is going on or to make a contribution.

I listened with interest to what the Minister said about the proposals and dissertations on our farming problems, and I think he covered almost all aspects. I was disappointed to find that public representatives seek kudos for bringing back from Brussels what they were sent out to get and for doing the job they are paid to do. I make no apologies to any Minister for saying that. He is sent to Brussels to do a job and he has the necessary expertise and advice available to him. This is what we expect from him. I will compliment any Minister for coming back from Brussels with a package, be it big or small, although there is a division of opinion regarding the value such a package will bring to the farmer's pocket. The Minister of State stated that the latest package will bring home something in the nature of £235 million, but that is disputed by the various farming organisations, and one feels it could be less than that.

I have every respect for the politician's point of view, but equally I have respect for the non-political view, particularly the farming view, because it is in their interests to say exactly what is in this package for them. We got an 11 per cent increase for beef. These are sizeable figures. When we talk about a 14 per cent national pay agreement, or an even higher figure, which is adding fuel to an inflationary situation the 10 per cent to farmers is below what one could reasonably expect and is only half the inflation rate. Consequently, I cannot see any improvement in real terms in farming incomes in the current year. I have come across very few economists who predicted an increase of 5 per cent in real growth terms in farming incomes for 1982.

Most of this ground has been covered. We came here to debate farming credit and the causes which brought about the lack of confidence in farming over the last few years. While I am not directly involved in farming myself, nonetheless I have a deep interest in it because of the value it has for all of us. When farmers' incomes are high, all sectors of Irish society benefit. We have various processing factories closing down. Meat factories and various other plants, garages and so on are experiencing what the farmer experienced over the years. I hope we have reached the low point in the experience of the farmer because I am interested in the development and growth of the economy and in the prosperity of the Irish people rather than in creating any division between the rural and urban dwellers.

I was disappointed when I heard what Senator O'Keeffe had to offer — and he mentioned specific names. The industry is far too important to be used to score political points. I once had occasion to debate important farming issues with a previous Minister for Finance — he was not of my political persuasion — and we came to the conclusion that the industry was too important to be used for party political gain. I hope we will refrain from that and get down to the important business of promoting growth in agriculture, which is vitally important to all sectors of our economy. During the time of the high interest rates, over the period of 1979 to 1981-82 — and it took possibly a few years for the message to strike home to the respective Governments — farmers experienced difficulties, they had promoted and developed their farms for the purpose of increasing farming output, and that is to be commended. In line with the advice given to them by the advisory service, an excellent service, they borrowed money at 10 per cent to 12 per cent and within a few years were paying as high as 20 per cent. That is where the real problems arose. I doubt very much if farmers who got caught in that web visualised a time when they would experience the awful trauma of having to face bank managers and various lending agencies. I compliment the ACC for their patience, but like all lending agencies, they are paid for a specific purpose and we should not come in here to flatter them. They are a State-sponsored body doing a fine job, and I congratulate them for it. I hope they will continue to exercise prudence in offering moneys to particular types of farmers. I say "prudence" because farmers sometimes have borrowed money recklessly and in anticipation of growth that never materialised. It has been the experience of the farming sector that the high prices paid for land, in competition with people who may have deserved land, has created enormous problems, and in these circumstances they expect to be bailed out by the finances of the State. The majority of people who borrowed for productive purposes were caught in that web of high interest increases. That was the problem. It will take time before we undo the damage that was done in that period.

I will refer briefly to the rescue package that was promoted by the banks, the IFA and the other agencies to try to provide some form of support and assistance in their dilemma. It is bordering on the ridiculous that we should ask any farmer — and it was mentioned here that few people have come forward and it is estimated that 10,000 people are in severe financial difficulties — to disclose his innermost thoughts, so to speak, about his financial difficulties to an outsider — a peace commissioner. While peace commissioners may sign documents, and may not wish to know what is written in them, nonetheless it should be their responsibility and their obligation to know exactly what is in a document before they sign it. We should dispense with that type of activity and allow the banks and the agricultural advisory service to do that job. They have all the relevant knowledge. Let them do it.

The £22 calf subsidy came very late in the year. I do not think it will benefit farmers in the current session because most calves will have been born before the 20 May. We are now arriving at a situation, again equally ridiculous, when we are asking to have the births of calves recorded — the issuing of birth certificates for calves. Not only that, but we are expecting farmers to bring them to a central location point so that these certificates can be issued. There are problems of disease attached to that. We all know from experience — and I know from experience on my family farm — that when you go to the mart and bring home a few calves you may have a large number of uncontaminated animals and automatically they become disease prone. That is the fear being expressed by many of my farming colleagues.

There was a motion promoted at a committee of agriculture meeting recently where the Department were asked to dispense with that method of trying to find out what calves are available for the subsidy in the current, or any future, years. I suggest that the Minister of State carry back to the appropriate authority the suggestion that they carry out spot checks and make the penalties so severe that if a farmer wishes to deceive in this respect, he will refrain from doing so because if he is caught, he will lose far more than he could ever benefit. That is the way to do it — spot checks. Farmers are decent honest people in the main and very few of them would even attempt to deceive in that respect. This would be the simplest way to do it, and it would be far less costly administratively and so forth.

Many of the points I wished to raise have already been discussed. This is a vitally important industry to our nation, and any attempt to bring cheap finance to it is most commendable. I applaud it and support it fully. I echo the sentiments expressed on numerous occasions by our European member, Mr. Maher, when he said that quite a large percentage of imported foreign agricultural produce is being sold in our supermarkets for the housewife. While that situation obtains, if you go down the country on a May Saturday morning you will find most of the cauliflowers on display in the local supermarket have come in from Amsterdam. That is the situation we have to contend with. Unless we face up to it we will have fewer and fewer farmers producing these commodities because there will be no profit in it for them. Farmers will expand and develop their farms if they can be assured of a reasonable return for their investment. We have ploughed a tremendous amount of money into various kinds of export-orientated industry and the return might be as high as 25 per cent to 30 per cent. On a similar type of investment, farmers would be lucky to get 2 per cent to 5 per cent, and I am using figures liberally in that respect. They are open to check.

Again I would like to emphasise the importance of agriculture and the importance of investment. A farmer should not be restricted from investing because he is afraid he will be putting a noose around his neck at some stage in the future. Marketing our produce is vitally important, and I compliment the various marketing agencies for farming produce — An Bord Bainne, CBF and others. Any incentive through State aids that can be given to them are worthwhile, and I support them.

I am glad to have had the opportunity of speaking on this motion. It was a worthwhile motion and, again, I would like to add my voice and congratulations to the ACC and hope they will continue to extend and expand their work in providing much needed finance for many hard-pressed farmers. Equally I hope they will prudently apply their powers in the application of that finance.

Mr. Smith

I would like to make one or two remarks about the special rescue package which the present Minister for Agriculture introduced some time ago and which has been referred to by quite a number of speakers here this afternoon. Perhaps, having discussed this package as we have done, we may have even further dampened its prospects of success. It is a very worth-while and necessary scheme, and one which took a very considerable time to bring to fruition. Speaking as one who was involved in its initial stages and with the negotiations with the banks, the ACC and the farming organisations, many of us would have felt that this scheme could have gone into operation earlier. However, now that it is in being and the numbers that have applied not being indicative of those in the farming sector known to be in financial difficulty, it behoves us to try to improve that situation in the remaining fortnight available for applications and to look for an extension of time.

There is a fear amongst some in the farming community who are in financial difficulties and who would be eligible for this scheme that the statement of their assets and liabilities could involve them at some time in the future in some problems with the Revenue Commissioners. It is important that these fears be allayed and that the Department of Agriculture and the agencies interested in this scheme aim at finding out those who are genuinely in difficulty, and making the scheme available 100 per cent to them. These farmers should be encouraged by their agricultural instructors and their lending agencies to complete application forms in full and on time. Senator Ferris's earlier remarks that people may have to bare their souls to a peace commissioner is a gross exaggeration. A peace commissioner has to sign those forms and be a witness to one's signature, but is in no way involved in the detailed analysis of what is on the form, and there may be a way around that difficulty.

For far too long, we have exaggerated what can be done. All the State can do in situations like this is deal with the genuine situation, and this is a fairly genuine attempt at doing that. Therefore, as a farmer myself, I would encourage, in so far as I can, any farmer in financial difficulties to avail of this scheme.

Regarding the overall situation, emphasis has been placed time and time again in the course of the debate on the importance of agriculture to our economy. This could not be emphasised too much. We in this economy are uniquely dependent on agriculture, with farmers making up virtually 25 per cent of our population and a further 25 per cent depending for employment on the processing of milk, beef, and other foods and on the service area. A developing, prospering, growing agriculture is something which we all want to see at the earliest date. Agricultural produce accounts for 40 per cent of our total exports and the buoyancy and growth in that sector help greatly our balance of payments. Any rescue scheme or scheme to improve credit facilities, helps a sector which, as I have outlined, covers a very wide range of employment in exports and in our total economy.

Over the past ten years we have had two massive haemorrhages in the national herd. We had the 1974-75 crisis when the best part of 750,000 cows were slaughtered. We had again in the 1979-80 period a very significant drop in our cow population. The reasons for these occurrences have been well outlined and there is not great need to re-emphasise them, but one or two points have to be made. With the amount of farm development in the four years between 1977 and 1981, 500,000 acres were reclaimed in this country. In-wintering facilities were provided for vast numbers of cattle and we had begun to reach the day when we could see most of our cattle being brought into adequate housing at some realisable date in the future. The confidence that was there and the additional jobs in the service and other areas in agriculture were all great boosts to the economy. The farmers were confident and the whole economy benefited. We must see to what extent we can reintroduce this momentum, even if never to the same degree.

The ACC and other agencies' figures show that, provided finance can be got at interest rates which farming profits can repay, farmers are prepared to borrow. Since it is traditionally a very under-capitalised sector, there is vast room still for improvement on many of our farms. With the climate at the moment and with interest rates what they are, it is very difficult to ask small and medium sized farmers to get involved in intensive development on land improvement and the provision of in-wintering facilities which, if they are going to increase their yield of milk, beef or other farm produce they will require. Present farm profits could not sustain the borrowings required for such improvements, and it may require restrictive measures in other non-productive areas of our economy. There is no way in which you can have increased social welfare, extend your health services and provide new schools — all these essential areas — unless the productive base of the economy is expanding, and expanding to an extent adequate to cater for these needs. Our balance of payments and our inflation rate have to be corrected as expeditiously as possible, to bring down interest rates to the level where productive sectors in our economy can afford them.

A number of schemes introduced over the last four or five years have relieved the pressure — interest subsidy schemes, the European Investment Bank and the underwriting by the Government of the difference in the exchange rate. All of these have contributed to stabilising the situation. But we are coming from a base which, as other speakers have said, is a bit too narrow. When you are talking, as the Minister did, about arresting the decline in agricultural incomes in 1981 — and this is obviously the true position — you were arresting it from the declining state of the previous couple of years. The necessary momentum will only happen when the overall economic situation is such as to allow profitability in enterprises and interest rates at levels which the industry can stand.

I referred earlier to the decline in the cattle population, the fact that in 1972 we had almost 7 million cattle, of which slightly over 2 million were cows and that at the moment, the total cow numbers are below the 1972 level. This is, for people engaged in that industry, a fairly frightening prospect. Most of the borrowings we are talking about here were incurred to provide facilities for carrying additional cattle numbers. If we want to justify investment we obviously have to be able to enlarge the enterprise. We have got to increase milk yield. We have to increase cereal output. This has been fairly largely achieved. The decline in cattle numbers is the fundamental problem.

I am glad to see some members of the ACC staff here this afternoon, and tribute was paid to them earlier. I think I should add a word of praise to that organisation for the great work it has been doing down through the years for agriculture. I will encourage that organisation to be as expansive as possible in the design of schemes particularly aimed at increasing our cattle numbers. I know land improvement is important and provision of in-wintering facilities, where possible, but all of that goes to nought if we cannot get cattle numbers up to the level that our land can carry, and most of us know that the capacity of our land is still well under-utilised. Our whole economy, which uniquely depends on a thriving agriculture, will benefit from these schemes. I would say to officials in the Department of Agriculture and to the Minister for Agriculture in relation to the calf subsidies scheme not to paralyse it with the type of organisation which would frustrate the whole scheme, taking into account disease eradication and the fears farmers have in relation to this area and the unnecessary documentation, and what have you. To have a broader look at the operation of the new scheme, which has come late but obviously will be of tremendous benefit provided it is operated effectively and not frustrated, I feel confident that the Minister for Agriculture and his officials will organise a successful scheme which will be a forerunner of a very significant expansion of our cattle herd, so fundamental to a thriving agriculture.

I want to refer briefly to imports of food. We have read about over the years, and far too often see the evidence on shelves in our shops and supermarkets, food imports from different parts of the world. Figures have been thrown out of something like £400 million a year being spent on food imports. Perhaps half of that is on imports which we could but do not produce ourselves: it is fair to say that at least half of that amount of money is being spent on produce which we produce here but which we produce badly, process badly, market badly. In the area of organising the modernisation of our processing plants and marketing, taking into account the conditions we have here — disease free, climatic conditions and our natural conditions for the production of food — as a country we must explore to the limit the possibilities there are for developing that side of our agricultural industry. The downstream activities and the jobs that are available in the fuller and finer processing of agricultural produce obviously all of us want to see developed, with a growing young population, with so many people looking for jobs and with the prospects having to come from the productive side of the economy which can sustain the services and the other expansions that we want to see in the social areas. I would ask the Minister and his colleagues to do all they can to work out a new vigorous intensive programme for the development of agriculture, particularly processing and marketing.

Mr. McDonald

I compliment the chairman, the board and the staff of the ACC on their report and on their performance during the year under review and on the expansion which they have obviously worked so hard to bring about over the past decade or so. It is regrettable that there has been a downturn in that rate of expansion over the last couple of years. I know of course that the modern generation does not save for the future, it borrows to spend today. At the same time I am convinced that the customers of the ACC borrow to develop their holdings and their business and to increase production in their own, in their families' and in the national interest as well.

Of course I recognise the strains and restraints under which the board operate their policy. I should like very squarely to put on record my total opposition to the manner in which the Minister for Finance and the Central Bank control the affairs of the Agricultural Credit Corporation, which has a statutory responsibility to provide the finance to develop Irish agriculture. On 10 May 1972 the people voted in the referendum to join the European Economic Community. I contend that the very next day the ACC and the lending houses should have altered their policies to cater for that decision, to put Irish borrowers, Irish farmers, on the same footing as the people with whom they compete in the agricultural industry. It is very difficult to be able to put our produce on the market in competition with people who have much more favourable conditions in which to operate.

It is for that reason that the ACC should have been given a free hand to negotiate hard currency loans from the money markets of Europe, from the European Investment Bank, where then and now interest rates are some ten or 12 points cheaper than the going rates here. It was in my view a grave error of judgment of the then Minister for Finance and the Central Bank because they frustrated the Agricultural Credit Corporation in their efforts to negotiate hard currency loans direct from the European banks. They could have made an arrangement to have the Central Bank or the Government underwrite the fluctuating interest rates if and when they took an upward turn. However, after the experience of the last three years we find the Government and the Central Bank operate the very same policies whereby borrowers are now charged 21½ per cent when everybody knows that the return on capital investment in agriculture is not much more than 2 per cent. I think it is criminal.

It is extraordinary how the people with all the figures and all the facts and directives do not take into account what is happening to the agricultural industry at present. One does not have to be an economist to understand that if one has to service developing capital at those high interest rates, and to cope with record inflation rates, it is not possible to survive and to service that. The lending institutions, both the ACC and the commercial banks, are slowly but surely grinding the agricultural sector into the ground. Unless a change of policy is brought about agriculture in Ireland will continue to slide even faster down the slippery slope to insolvency that it has done for the last couple of years.

You will recall that some years ago we had a great national scandal here which involved Telefís Éireann, who had highlighted the money-lending debacle in the city of Dublin. The entire country was aghast at that time with the brutality of the usury that was rampant in the city. But when one thinks today that the conservative and respectable lending agencies are operating the very same interest rates and policies that members of the board of a semi-State body were sacked over, because they allowed it to go on the media, one must agree that there is a change in the attitude the public have to this kind of problem. The farmers in the country, especially those with faith and hope for the future and with the best advice available both from the advisory services and from the lending agencies, who borrowed to develop their farms and to increase their output a few years ago at interest rates of 9¼, 10 or 11 per cent now find that in two years these rates have shot up to more than 20 per cent. It is very difficult for them to meet the commitments they genuinely undertook. Their hope at present is based purely on ministerial promises that have been very slow to materialise. Their faith in the future is being frustrated by well-heeled self-interest groups who themselves are trying to squeeze the very last pound of flesh in recompense for the extra work they say all these schemes necessitate for them, while at the same time farmers, their wives and their families are being slowly driven to the edge of despair.

I believe that farmers, and especially young farmers, should read again the history of this country from the 1870s to and including 1883 and into the 1890s because I believe that unless policies change people who want to remain on the soil that was dearly won for them will have to pluck an occasional appropriate leaf from those history books that are stained with the blood and toil and sweat of so many of the generations that are gone before us.

There must surely be a future for the Irish farming industry. But if that is to materialise and if the living standards are to be maintained at a level of decency, then policies must be changed to accommodate the unfortunate downturn that has been experienced in this country in the past few years. It is difficult to explain to the ordinary person, especially in rural Ireland, how interest rates here are in excess of 20 per cent while in the Northern counties the interest rates are not much more than half that amount. The co-ops there are facilitated with hard currency loans subject to an interest rate of 8½ per cent, with the 2 per cent currency fluctuating levy, and in turn charge their members and customers 2 per cent per month interest charge. This is something that makes one think.

This century certainly has seen great changes and great improvements. We have had the machine age, we have had a scientific age and we have had the technological age, but as far as Irish farmers are concerned they are going through the age of the rip-off, because at every sector, whether it is public or private, they are being ripped off. Take a case in point. At this time of the year we go into silage but those who are in haymaking avail of bailing twine, the price of which has increased since this time last year by 32 per cent. Farmers are supposed to meet that by the much heralded 9 per cent farm price increases that took four, five or six months to negotiate. But nobody seems to mind the cost of agricultural input. That is indicative of the trend of agricultural cost inputs and what farmers have to face. It is something which is not taken into account by the lending agencies.

In his annual statement, the Chairman of the ACC, Mr. Molony, a gentleman for whom I have the height of respect and recognise his commitment and his ability, commented on the growth of the corporation's lendings over the past five years, shown in Table I, which indicates a downturn. For instance, the restructuring of debts increased from a total of 9 per cent of the facilities offered in 1977 to 15 per cent in 1981, and the provision for land purchase was reduced from 14 per cent of their business to 7 per cent in 1981, and on livestock it is down from 18 to 11 per cent. That again shows the slow down in the industry as a whole which has been highlighted here by practically every speaker. Senator Smith dealt with it very concisely.

I should like to ask the Chairman what exactly have they done? The ACC recognise the problems, they give us the figures but they still carry on with the rack-rents on their merry way. I think that they must demonstrate a realistic commitment to the improvement of Irish agriculture. I would ask them to do something to give some hope to the industry that is on its knees at present.

Mr. Mullooly

In view of the importance of agriculture to the country as a whole, it is appropriate that the first Private Members' Motion to come before the new Seanad is one dealing with farming. I attended a meeting of farmers recently and I described agriculture as a vital arm of the economy. I was quickly told in no uncertain terms that agriculture is the backbone of the economy. I had to concede that the correction was justified. When there is prosperity and progress in agriculture every other aspect of the economy benefits, but when things are not going well for the farmers, as had been the case for some time past, all other sectors of the economy suffer also.

Therefore, I agree completely with the chairman of ACC when he says:

The primary national economic objective must be to restore confidence and growth to Irish agriculture. An unambiguous national commitment to this objective is now a matter of urgency. Agriculture is the country's major source of export earnings and the development of agriculture lies in a core of renewed development and growth in the economy generally. This is vital if we are to help ourselves to emerge from the present economic recession. On the one hand we can wait and hope for an upturn in the world economy in the belief that a rising tide will lift all boats and that our economy will rise with the rising economic tide throughout the world. On the other hand we can remember the old saying that God helps those who help themselves. We can help ourselves by striving for renewed development and growth in agriculture.

An increase in agricultural production will result in increased exports and in the expansion and development of the processing industry. In this connection I welcome the recent IDA review of the agricultural processing sector, namely a strategy for the development of the agricultural processing industry in Ireland. If the developments envisaged by the IDA in that document are achieved, the result will be a substantial increase in the number of jobs both in the processing industry and outside it. I accept, however, the statement by the ACC chairman:

Because of the effects of inflation, the general level of indebtedness and high interest rates, confidence in agriculture is still at a low ebb. There must be a restoration of confidence before farmers will be prepared to commit themselves to the level of investment that will be necessary to bring about a substantial increase in agricultural production.

That confidence, however, will quickly return when farmers see the prospects of increased profits, in other words, a considerable improvement in the farm income situation.

In the short time since he became Minister for Agriculture, Deputy Lenihan has been responsible for the introduction of a number of measures which I regard as steps in the right direction towards the restoration of farmers' incomes and farmers' confidence. The new reduced interest subsidy scheme for farmers in severe financial difficulty, even though it has come in for some criticism, will ease the pressure on many farmers who had serious problems with debt repayments. In this connection also, I welcome the commitment that the ACC will continue to adopt a sympathetic approach to any customers who are in genuine difficulty. Other low interest loans and interest subsidy schemes which are available can also play an important part in encouraging investment and restoring confidence in farming.

Unfortunately, it would appear that many farmers are not aware of the existence of these schemes or how they operate or who are eligible to avail of them. Steps should be taken to bring these measures to the notice of all farmers. The recently announced heifer subsidy scheme and the calf premium scheme should lead to a considerable expansion in cattle numbers. Farmers will respond, and as a result of these schemes we will see a much needed increase in the national herd.

I agree with many of the comments and criticisms that were made of the arrangements in connection with the calf premium scheme. Some of these arrangements are not in the best interests of the scheme and should be changed. However, due to the negotiating skills of the present Minister for Agriculture, difficulties which had arisen in relation to the introduction of the three schemes which I have referred to were all resolved within three months of Deputy Lenihan assuming office.

It is vital to ensure that any increase in cattle numbers will benefit the farmers and the country and that there will never again be a repetition of the disastrous chaotic situation which arose in 1974-75. Here again I am satisfied that the Minister for Agriculture realises the importance of developing our Third Country trade for both live cattle and beef. I compliment the Minister on the recently negotiated contracts with Libya and I wish him every success in the negotiation of similar contracts with Egypt and other Middle East countries. It is now up to the Irish meat factories to adopt a vigorous marketing approach so that they can fulfil their responsibility to the farmers. It is a sad situation when so many of the Irish farmers involved in cattle production do not trust the meat factories. This is an attitude which should not exist between the supplier of the raw material and the processors, but unfortunately in many cases it is justified. The onus is on the meat processing industry to reverse that attitude. The only way in which they can do so is by paying Irish cattle producers the highest price possible rather than the lowest. They can do this if they adopt a more energetic and imaginative approach to the whole area of marketing.

When steps have been taken to improve the situation, there are many other problems affecting farmers which need to be looked at as a matter of urgency. The first I will refer to is the problems which exist in connection with disease eradication schemes. Farmers who are unfortunate enough to have reactor animals, to put it bluntly are being robbed or ripped off. Smaller reactor animals are realising approximately half the replacement value. I know a case of a farmer who recently had to dispose of five reactor weanlings. They realised £750 or an average of £150 each. The market value of these animals was at least £300 each. That man could not afford to lose £750. Farmers are morally entitled to the replacement value of any reactor animals they may have. This can be done by considerably increasing the compensation payable, or by reverting to an arrangement under which the Department will purchase reactor animals by weight at current market prices.

As well as suffering because of the low compensation for reactor animals additional hardships arise because the herd in question are locked up. Many farmers, in particular smaller farmers, whose herds are locked up cannot conserve any hay or silage for winter feed because they cannot relieve their stocking situation by selling off some of their animals. I know of a farmer with 17 acres and 23 animals whose herd is locked up. That man is going to have some serious problems when winter comes. The hardship fund which exists in connection with the disease eradication scheme should be restructured so that payments from that fund can be made irrespective of the types of stocks involved. One way in which the pressure on farmers with locked up herds could be alleviated would be to allow animals from locked-up herds to be eligible for purchase for export to Third Countries, provided they were taken directly from the farm to the boat. This is something that should be considered. I would also like the Government to consider bringing in the pre-movement testing which was promised so many months ago.

Another area that needs to be looked at as a matter of urgency is the bringing up-to-date the costings for grants under the farm modernisation scheme. I understand that the costings which are now being used are based on 1978 prices, and everybody knows the extent to which costs have increased since 1978. Actual grants for drainage, land reclamation and farm buildings are working out at about one-third of the percentage they were supposed to represent. In other words, the 30 per cent grant for farm buildings represents about 10 per cent of the actual cost of those buildings and the 70 per cent grant for drainage represents 25 per cent of the actual cost involved. Perhaps this is one of the reasons ACC lending under these headings declined substantially in 1981.

There are other measures which would help considerably in the restoration of farmer confidence. In my own county of Roscommon, for instance, we would wish to see the remainder of the county designated as severely handicapped under the disadvantaged areas scheme. At the moment only the northern and western parts of the county are designated as severely handicapped areas. The remainder of the county has a large proportion of marginal land, low income farms and declining agricultural population. Much of it also is affected by major flooding problems caused by the Shannon and the Suck.

Fragmentation is another serious problem. During the years the Land Commission did very good work in trying to eliminate this problem but now, their activities have been scaled down very much. I believe this has been a mistake, certainly as far as the west is concerned. I ask the Government to instruct the Land Commission to re-activate the policy of acquiring and dividing land for the relief of congestion and the elimination of fragmentation. There is no other way in which these problems can be solved in the more disadvantaged parts of the country.

I am pleased to have had an opportunity of participating in this debate. I compliment the ACC on the very excellent work they are doing for Irish agriculture. I have every confidence that with a constructive approach on the part of the State and the State agencies involved in agriculture, such as the ACC and the farmers, both individually and through their organisations, the prosperity that we all want to see will soon return to agriculture.

Mr. Mallon

There is one central point I would like to make. No other industry in this island points as clearly the nonsense of having two sets of policies within this small island as does the agricultural industry. As one who lives and works in a rural area I can see at first-hand the way in which this nonsense exemplifies itself every day of the week. When we in the North look at the situation of agriculture in the South there are many times when we go green with envy.

Many remarks have been made about the Agricultural Credit Corporation. We would appreciate having a body like that, because we simply do not have such an organisation. Anybody involved in farming over this past number of years will realise the way in which development farmers have found themselves being hamstrung to banks as a result of the absence of such a body. It is one of the tragedies we face but the real tragedy is that the farming industry will never realise its full potential within this island until there is a central authority to deal with it.

Senator Hourigan in his opening remarks made reference to a national programme under a national agricultural authority. I do not have any doubts that it is one of the areas which would cross the political and religious divisions that exist in the North of Ireland. I support the type of approach that has been suggested by Senator Hourigan, because I would interpret the word "national" in its truest sense as meaning a policy and an approach to suit the whole of this island. Indeed, it was known in years past that the best Minister of Agriculture the North of Ireland ever had was a former Minister of Agriculture here. Unless there is a serious input from the Irish Government in terms of EEC negotiations and in terms of the common agricultural policy the North will not be catered for properly under the present arrangements. Catering for the 3 per cent involved in agriculture in Britain is not going to be to the benefit of people in the North of Ireland. Indeed, the policy is consumer-orientated rather than producer-orientated.

There is a real role here to be played by the Irish Government in terms of agriculture. As I said, it is quite ludicrous to see the way in which there are two sets of prices, in some cases for people on the same farm. We have got a new type of pig and cattle in the North of Ireland. It is known as the commuter. Those who know the Border area will know the type of pig and cattle I mean: it is the pig or the cow that makes constant trips up and down in the same lorry. The reasons are perfectly obvious. There is that type of anomalous situation right throughout the agriculutral industry, and it is soul-destroying to see. In the debate here the shortcomings as they exist at present in this part of the country have been recognised but when we look at it from the Northern situation we see something which we envy very much because we see a vibrant approach to a very central industry.

This also applies to all the ancillary industries connected with the agricultural industry. Indeed, if we had an approach on an all-Ireland basis we would eliminate many of the problems that exist in terms of processing and marketing and we would arrive at a situation when the Irish agricultural industry instead of being sold in two sections abroad would be sold as one. This would give it a new dynamic.

I want to put on record that irrespective of what happens within this island there is one thing certain, that the only way in which the agricultural industry in the North of Ireland will ever be seriously helped is by the efforts of an Irish Government. I would like to put on record that this has happened in the past. I would like it to be on people's minds in relation to the future. It is something which has been referred to by the Ulster Farmers' Union and by farmers of every tradition in the North of Ireland. In the last analysis no British Government catering for a consumer society will ever give the type of consideration especially to the small farmer in the North of Ireland that is needed.

The real potential as I see it will never be fulfilled until we have got one policy for the island. I would like to thank Senator Hourigan for making the point about a national agricultural authority. It is very important to have one set of negotiators in Brussels from our point of view, because unless we have got this harmonisation within the island in terms of prices we are going to have many sleepless nights — I refer to those of us who live along the Border as lorries come and go at all times of the night. It is also important to have one set of marketing proposals, and one set of marketing structures and, above all else, one approach to the structural problems. It is unbelievable in this present day that in the North of Ireland 32 per cent of the land is designated as under-used. That is a tragic situation where there is so much unemployment.

One of the starkest exemplifications of this was brought home to me quite recently in a little townland between County Armagh and County Monaghan. It is excluded from the designated less-favoured areas but all around it, north of the Border and south of the Border, was included. This little piece of land, sticking out like a sore thumb, was excluded. It exemplified for me the nonsense that exists within a small island when there is this division in a very central industry which is crucial to everyone's livelihood.

Mr. Fallon

As a person living in an urban area I feel it appropriate in some way to make a brief comment on this motion. I realise that much of the emphasis by the ACC in recent years has been on the urban areas. If you examine the decentralisation programme you will find that they have 50 branches in the big towns and cities of Ireland, which indicates to me that they are seeking, and rightly so, the urban deposit. They are looking to people working in our factories or offices to deposit money with them and to continue the further growth of agriculture and this is only right and proper. As we said before, we all realise that if agriculture is booming then the rest of the economy does well also. Agriculture is the very basis of our whole economy.

The report we are talking about is an excellent one. The directors of the ACC and their staff all over Ireland, a real physical presence of expert agricultural people in our towns and cities, are to be congratulated on a fine report. The report indicates that their deposits are up by £33 million and, having regard to the recessionary situation, they had an excellent year. Their advances, which show an increase of £17 million, are still in keeping with the general financial climate. It was interesting to note that in dealing with the distribution of funds and advances since 1977 they gave 14 per cent for land purchase and in 1981 they gave 7 per cent for land purchase. It indicates to me that the ACC have been mindful of the way land prices have been rocketing over the past few years. They said they should put a halt to the high prices and, therefore, they did not advance money. That was responsibility at its best. They endeavoured to keep land prices at reasonable figures.

I am glad to note that every effort is being made to encourage the small savers. As the report indicates they are not coming forward as much as the ACC would like for reasons of taxation inequalities that exist between the ACC and the other deposit-taking institutions. The problem of loan arrears has been discussed. This was mentioned in a very real way in the report, and they give a lot of attention to the reduced interest scheme. It is regrettable indeed that it has not been as successful as we all thought: it has been in many ways a failure. I spoke recently to one bank manager who indicated to me that he had processed 12 applications and not one of them qualified for assistance. It seems to me that there is something wrong with the scheme. While I know there is a period of two weeks extension, every effort should be made to help as many people as possible who have financial difficulty. In so far as loan arrears are concerned, I think the ACC would be sympathetic to people who are in arrears, but at the same time it is right to say that they should not be asked to write off any debt where there are known assets. Many people think that the ACC should be the last to be paid if their debts are due. The ACC are doing a good job and should be paid in accordance with the terms on which they give out their money. This allows them to continue the good work they are doing. They are totally committed to the long-term development of Irish agriculture.

In a debate on agriculture that we had in the Seanad before Christmas, I briefly referred to the fact that industry and other sectors seemed in some way to have a national plan. I am glad that the Minister for Agriculture, Deputy Lenihan, in a very short space of time has seen fit to introduce a national plan. It is right and appropriate that he should do so, and he has given us some date in October for it to be finalised.

I congratulate the ACC, its directors and staff. Long may they continue to work for the betterment of Irish agriculture.

Mr. Hourigan

First, I should like to thank the Minister of State at the Department of Finance, Deputy Barrett, for being with us and for his very lucid address this afternoon. I would also like to thank the various speakers for their contributions. It is fortunate that this debate was taken quite seriously. It is true to say with perhaps with a few exceptions nobody tried to make a political football out of the situation. There was an acknowledgement that this matter is so serious that we cannot start trying to score points on a political front. However I could not let one point go without mentioning it, that is, that in the period of 1974 when we experienced very serious difficulties in the cattle trade, it had nothing to do with the then Minister for Agriculture, Mr. Clinton. He was a very capable man in his position.

I want to reaffirm for Senator Mallon that my concept of a national agricultural authority would certainly be on the lines of the authority he would envisage.

With regard to people who are in dire straits and for whom rescue packages and so on are being designed, for most of them it will mean shedding assets and in many cases the disposal of stock on farms and Senator Fallon referred to this. I think there is a very serious dimension in this. We have several situations where perhaps a family farm of 50, 70 or 100 acres was developed and where the owner incurred indebtedness over the years which has now become intolerable. As a result of even modest development on a farm, or the addition of a few acres of land, the entire holding may be at risk.

Frankly, I do not think this can be allowed to happen. For that reason I urge very strongly a freezing of interest, the implementation of moratorium or a combination of these in certain circumstances. I am not saying that all circumstances must be treated equally but there are some very genuine ones and I am sure the Minister is quite well aware of them. We cannot allow such farms to go the wall. The people concerned who might be in their fifties and sixties would be out of business totally and they would not be trained for any other line of activity. We must take cognisance of that.

Personally I support the concept of grants. Grants are very useful and good in their own way, but the most important things for farmers are realistic prices for their produce and realistic levels of input costs, which would include credit. If we have these things right it will enable farmers to carry on. One thing we must bear in mind is that we have a very low income position. We are expecting farmers to deal with a backlog of arrears and indebtedness that is mounting steadily day-by-day with an income that is only just sufficient for daily living. There are these special cases that a rescue package or a Minister will not be able to deal with successfully unless there is an acceptance by the lending agencies that they will suffer some losses too. This is the reality of the situation and there is no point in expecting a solution otherwise.

In my view, unfortunately we have not witnessed all the problems as yet in agriculture. A lot of the dirt — if I can use the expression — has been shoved under the carpet because most of the real problems in agriculture will surface, unfortunately, in the months and perhaps in the year ahead. It gives me no joy to say this but that is the reality. If we take into account the last figures published by ACOT in relation to agricultural incomes, it is rather frightening to see that the levels of incomes for farmers for 1981 are lower than those who would qualify for the position of clerk-typists and so on. It is rather alarming that out of those incomes we expect people to meet credit commitments and so forth.

I will not go on because I appreciate the time constraints existing. As far as land prices are concerned, there is one point which must be corrected. I do not think that the ACC had a major influence on land prices. The biggest influence on land prices was the commercial banks and that is a fact which must be put on record. I ask the banks, together with the ACC, to be aware of the very serious position of farmers at this time and to give the kind of sympathy and tolerance that is required.

Finally, I would like to pay tribute to the chairman, board and staff of the Agricultural Credit Corporation for the excellent work they have done. I am very pleased that some members of the ACC have been with us during this afternoon's discussion.

Question put and agreed to.

An Cathaoirleach

As the matter allowed for the debate on the Adjournment is not being proceeded with by the Senator involved, that concludes the business ordered.

The Seanad adjourned at 8.20 p.m. until 2.30 p.m. on Wednesday, 23 June 1982.