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.