Jackie Cahill
Question:7. Deputy Jackie Cahill asked the Minister for Agriculture, Food and the Marine his plans to introduce a new low-cost loan scheme to help farmers as debts and costs mount. [41474/18]
View answerThursday, 11 October 2018
Questions (7)
Oral answers (6 contributions)
We had the budget on Tuesday and there was extreme disappointment because there was no new low-cost loan scheme for farmers. There is a serious cash flow crisis and large merchant debt is building up. The co-ops and private merchants cannot afford to carry this merchant debt. Farm families are under extreme financial pressure. What plans does the Minister have to introduce a new low-cost loan scheme?
In his budget speech, my colleague, the Minister for Finance and Public Expenditure and Reform, Deputy Donohoe, formally announced progress in the development of a key Government Brexit response, the future growth loan scheme for small and medium enterprise, including the primary agriculture and seafood sectors. This is a long-awaited source of finance for young and new entrant farmers, especially the cohort that does not have high levels of security. It will also serve smaller scale farmers, who often do not have the leverage to negotiate for more favourable terms with their banking institution. Food companies have identified long-term investment finance of up to ten years as a critical need currently unavailable in Ireland. I am pleased that the Government has been able to deliver this product and its effects will be felt all along the food production chain.
My Department is providing 40% of the funding so an overall agrifood package of €120 million will be available. However, unlike previous schemes, this can be reviewed and adjusted according to demand. Further details will be provided in the coming months. The scheme is expected to be in place in early 2019 and will run for three years from its launch date. The funding required to prime this measure will be paid by my Department in 2018.
With respect to cash flow pressures arising from the effects of the weather on grazing and fodder stocks, the agreement I secured from Commissioner Phil Hogan to make higher advance payments this autumn will result in a very substantial €260 million in additional cash flow for farmers shortly. I have had ongoing engagement with the banks in this regard. I am pleased to see that this engagement and the delivery of last year’s agriculture cash flow loan scheme has acted as a catalyst to encourage financial institutions to improve and develop new products for the sector. A recently announced initiative by one of the main banks mirrors the scheme in offering a discounted interest rate with extended and flexible repayment terms. All three main banks have dedicated offerings in response to the current position and co-ops have introduced recent initiatives on credit facilities for their suppliers. A spending review of the agriculture cash flow loan scheme, published with the budget, concluded that this was one of the main impacts of the scheme. In the context of these new and improved supports in this area, the focus of the Government has been to address market gaps, the most critical of which has been identified as unsecured longer term investment finance.
I thank the Minister for his response but he is missing the point I am making. To renege on his responsibility in the area and give it to the banks is not satisfactory. The people who want this money the worst will not get it from the banks. Two years ago a loan scheme was introduced in the budget that was most welcome but again on that round, the people under the most financial pressure did not get the loans from the banks. The banks offered the loans to their better customers. We might think the banks will step in and help the people under the most pressure but unfortunately that will not happen.
One of the milk co-ops introduced a flexible milk loan scheme a month or six weeks ago and the demand was phenomenal. Unfortunately, the appetite or need for credit among farmers is absolutely immense. We had one of the longest winters on record, with major costs, and a summer that saw large costs being incurred as well. Unfortunately, this winter will see a significant increase in the level of costs on farms also. Farmers, whether they are involved with pigs, beef, dairy or tillage, have a huge demand for short-term credit. A section of farmers have also invested very heavily in their businesses and are under extreme pressure to meet repayments. A short-term fix is required and the banks will not solve this matter. The Minister cannot renege on his responsibility to the various sectors.
Short-term credit at low cost must be provided if these sectors are to be kept sustainable.
When the State is putting in money, the challenge is whether it is getting value for that money. The report published with the budget on the €150 million low-interest loan working capital scheme clearly showed that it was value for money but that it had also delivered in terms of generating other competition in the finance sector for working capital. This raises the question of getting value for money in further initiatives with taxpayers' money. I believe it would be a mistake to repeat that kind of scheme when the market is already delivering a similar type of product in terms of working capital. The gap in the market that now exists is not for working capital because all the indications are that this is available. The gap in the market is for longer-term solutions, by which I mean those over seven years, so it would provide money over eight to ten years in the form of unsecured borrowing at interest rates that are very competitive. The product we are bringing out will meet all of those challenges in terms of unsecured borrowing at less than 5% over eight to ten years for capital investment. The working capital side has been addressed by the €150 million scheme but, more importantly, it has also generated further competition in that area.
I will not knock the initiatives introduced by the Minister as they are all welcome but there are a significant number of farmers who cannot get access to the credit they need. That is the factual situation. Many farmers have a very significant tax bill at the end of this month and the cashflow is just not there to do it so there is a problem.
Another issue in the budget was the lack of any attempt to address volatility and swings in farmers' income, the significant problem caused by tax bills in a year when income is down very substantially and the fact that farmers must pay tax for a previous year where income was far higher. There was grave disappointment on the part of all the farming organisations that there was no attempt in the budget to address those problems, which are significant problems for farm families involving as they do volatility and high income tax bills that can arise in a year such as this when incomes and costs are running very high. There is a problem with regard to short-term credit and volatility and, unfortunately, the budget did not deliver on either of these two key issues. There are farmers who cannot get access to credit and they are the ones who need it most.
I must disagree with the Deputy. The tax measures in the budget will benefit farmers with income difficulties caused by volatility because the income averaging arrangement has been further tweaked to allow those farmers with an off-farm income or whose spouses have an off-farm income to be able to avail of the opt out. This will benefit a substantial cohort of farmers who are currently excluded from that income averaging, the purpose of which is to address volatility issues, so it is not the case that there was no acknowledgement of the challenges around income averaging.
With regard to financial products, I do not think the Deputy and I will ever agree on this. The challenge for us is that if we have some money to spend, are we replicating something with taxpayers' money that is already in the market and, therefore, in a way, not delivering something new because the product will not be delivered? Farmers will not apply to the Department of Agriculture, Food and the Marine for this working capital; they will apply to the pillar banks. If we are not delivering something new and it is already in the market without State support, could that money not be better spent on other things such as investment finance, areas of natural constraint payments or a beef initiative?