The main purpose of the Bill is to increase the borrowing powers of the Agricultural Credit Corporation. The corporation, with almost fifty years of service to Irish agriculture, are now investing over £55 million a year in the industry. The big expansion in lending began in 1970. In 1972-73 their total lending was £28 million: by 1974-75 it had doubled to £56 million.
The corporation, a registered company whose share capital is held by the Minister for Finance, get their current funds mainly from deposits, repayments on existing loans and borrowing abroad. In 1975 for example they expect to lend £55 million and to finance this by means of £25 million deposits, £21 million loan repayments and £9 million foreign borrowing.
I should point out that the deposits scheme has been very successful and can be readily recommended to investors. Deposits earn 10 per cent interest at present and carry the guarantee of the Minister for Finance.
The corporation will give loans for most purposes designed to improve agriculture, the more popular loans being those for livestock, land purchase and improvement, buildings and equipment. They accounted for 45 per cent of ACC advances in 1974-75.
ACC also give loans for the purchase of seeds, grain and fertilisers, repayment of debt and family settlements and hire purchase for farm machinery. Of £56 million advanced in 1974-75 £40 million went to farmers and £16 million to merchants. meat factories and creameries.
Repayment periods vary. Loans to grain millers for grain purchase may be repaid within six months. Other short-term loans such as budgeted loans for seasonal farm operations are repayable within 12 to 15 months. Loans for livestock run for five years, land drainage for 15 years, land purchase and buildings for 20 years and dweiling houses for 25 years.
Interest rates charged by the corporation are based on the current cost of borrowing which has been exceptionally high in the past few years. Examples of their present lending rates are 12 per cent for budgeted loans, 13¾ per cent for a repayment period of one to five years, 15 per cent for periods of ten years and over.
The corporation sometimes operate schemes to meet special needs. For example they had a loan scheme for breeding stock at low interest rates from June, 1972 to December, 1973 to help farmers to increase their livestock numbers. A similar scheme of loans operated last winter to help small farmers buy feedingstuffs. The Associated Banks operated such schemes also. The State paid an interest subsidy on both schemes.
A high demand for credit is likely to continue as farmers and food processing firms will wish to increase their capital investment, modernise their premises and equipment and adapt their business to changing markets. As in the past the Agricultural Credit Corporation will have a very important role to play in financing agricultural expansion and adaptation. The corporation are constantly reviewing their pattern of lending, their credit terms and their organisation in order to meet the needs of their customers. I compliment them on their continuing progress and wish them success in their plans for the future.
I now turn to the main provisions in the Bill.
Section 1 contains the usual definitions. Section 2 increases the maximum amount which may be borrowed by the corporation. The ceiling of £120 million set in the 1973 Act is increased to £220 million. The revised limit should suffice for the next two-and-a-half years.
Section 3 deals with Ministerial guarantees. The Minister for Finance may guarantee the repayment of ACC borrowings. To coincide with the new ceiling on borrowing, section 3 increases the maximum amount of such borrowing which may be guaranteed by the Minister.
Section 4 gives the Minister for the Public Service authority to regulate the pay of the corporation's chief executive. It provides that the remuneration and allowances payable to this officer shall be subject to Ministerial consent.
Section 5 corrects an omission in the Act of 1972 which, in dealing with foreign borrowing, empowered the Minister for Finance to indemnify the corporation against losses or to receive any benefits arising from changes in exchange rates. Section 5 formalises the accounting provisions for such losses or gains.
I recommend the Bill for the approval of the House.