Land Bond Bill, 1991: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Finance (Mr. B. Ahern)

In essence the Bill now before the House provides for nothing more than the tidying-up of matters in the wake of the redemption of land bonds in April, 1989. It is technical legislation which is necessary as a consequence of the Government decision at that time to redeem all outstanding land bonds for cash. Land bonds were State-guaranteed stocks—guaranteed as to payment of interest and redemption at par—which were used by the Land Commission to purchase land in order to carry out the land settlement policy of successive Government over many years.

The Minister for Finance was empowered to create those bonds and, over the years, some 25 series of those bonds were issued. Each series of bonds carried a fixed rate of interest payable to the holders twice a year by the Central Bank, until redemption. The rate of interest chosen related effectively to commercial rates of interest at the time each land bond series was being created. Redemption of the bonds did not take place on a given date, as is the usual practice in the case of Government stocks, but depended on the results of an annual random draw. If a particular bond number came up that bond was redeemed. In this fashion, bonds with a nominal value of some £40 million were redeemed in the years leading up to 1989.

The process of land purchase by the Land Commission would involve, normally, the payment to the seller of the land of the purchase price in land bonds. On redistribution of such land to other persons, the usual arrangement was for payment to be made to the Land Commission by way of annuities. Those annuities were paid into a fund called the land bond fund and, from 1933 onwards, when legislation providing for halving of annuities was introduced, an equivalent amount was also paid into the fund by the Exchequer on an annual basis. These moneys, together with any other income that might accrue to the fund, were used to service the land bonds, that is, to pay the annual dividends thereon as well as to provide a sinking fund or resource to meet the cost of redeeming those land bonds whose numbers came up in the annual draw.

Following on the decision by the Government, referred to earlier, to redeem all outstanding land bonds the raison d'être of the land bond fund as well as another related fund, the guarantee fund, disappeared. However, although existing legislation provided for the redemption of land bonds, it did not provide for the circumstances where the funds central to the administrative arrangements for land bonds thus became redundant. Hence the need for this Bill, whose main purpose is the abolition of the land bond fund and the guarantee fund. The sections of the Bill which deal with these aspects and the arrangements to be made in respect of moneys, in, or due to, the funds, are sections 4, 5 and 6.

As well as the provisions relating to the land bond fund and the guarantee fund already referred to, section 3 of this Bill makes a provision in respect of a third related fund called the costs fund. This fund was created to reimburse vendors of land for certain expenses incurred in selling their land to the Land Commission. Existing legislation provides that such costs are payable in land bonds only so it is necessary to amend the legislation to provide for payment of costs in cash — now that all land bonds themselves have been redeemed for cash.

Section 2 of the Bill makes provision for arrangements in relation to what are known as "unregistered" land bonds. When all land bonds were redeemed in 1989, some £1.8 million were classified as "unregistered". That meant that they had set aside for eventual registration in the names of persons from whom the Land Commission had acquired lands pending clearance of title to the lands in question. The moneys in respect of those bonds—the bonds were replaced by cash on their redemption in 1989—are held in trust and will earn deposit interest in a special account in the Central Bank up to the time when matters to title are settled and the moneys due to claimants are paid over.

Finally, section 7 of the Bill deals with cottage purchase annuities. These are annual payments due to local authorities and made by persons who have purchased cottages from the authorities. However, legislation provides that these annuities must be collected by the Land Commission in circumstances where the cottage owners are also paying land purchase annuities to the commission. The Land Commission is legally bound to pay the local authorities the full collectable cottage purchase annuity even under circumstances where annuities are in arrears. The guarantee fund, in turn, is liable for these amounts to the Land Commission. Since the guarantee fund is being dissolved, however, new arrangements have to be made in respect of the cottage purchase annuities.

The most satisfactory solution to the problem is to waive the annuities which total less than £2,500 per annum and are falling every year. However, this is only a partial solution since an obligation remains on the Land Commission to continue to pay the annual amounts due to the local authorities. Therefore, to resolve the matter fully, arrangements will be made for the Exchequer to pay over the redemption values of the cottage purchase annuities to the local authorities, thus releasing the Land Commission from its obligations. This will cost about £25,000.

In the course of the Dáil debate on this Bill on 10 December last, there were many interesting contributions from Deputies on a wide range of land-related matters. However, it has to be said that this Bill is not concerned with the issue of the abolition of the Land Commission or matters of land policy, land usage and a land authority—all subjects which arose in the course of the Dáil debate on this Bill. Even if it were the intention that the Land Commission should continue to operate, this Land Bond Bill would still be necessary in order to resolve certain technical issues outstanding in the wake of the redemption of land bonds in 1989. Therefore, the issue of the Land Commission and related land matters are not germane to this Bill. Rather, Deputies and Senators have ample scope, now that debate on the Land Commission (Dissolution) Bill has been resumed, to give full vent to such matters in their proper context.

Likewise, the waiving of cottage purchase annuities provided for in section 7 of the Bill should not be associated with the separate issue of land purchase annuities, in particular, the arrears issue. A departmental working group has been established to look at this very serious issue which involves debts owing to the State in excess of £5 million. The amounts involved in cottage purchase annuities, on the other hand, are very small— nearly all are under £20 per annum— and one must, therefore, compare like with like if one raises the question of land purchase annuities in this regard. Many of these latter annuities, similar in amount to cottage purchase annuities, have been already writen off: 77,000 in the early eighties and some 70,000 since 1989, leaving about 46,000 accounts outstanding. Tackling the problem of land purchase annuity arrears will be a job initially for the working group I have referred to and is not a matter relevant to the passage of this Bill.

In summary, it only remains for me to emphasise the stand-alone nature of this Bill which, as I have already said, is essentially technical, non-controversial legislation which becomes necessary as a consequence of the redemption of outstanding land bonds in 1989.

I commend the Bill for the approval of the House.

Professor Raftery

I thank the Minister for coming to this House to talk to us about this issue. As he said it is a technical Bill but nevertheless it is a rather important one. Land bonds have been a sore point with farmers for a long time, particularly farmers who had their land acquired compulsorily by the Land Commission and were paid in what I would regard as a very unfair way in the form of land bonds.

I am not sorry to see the end of land bonds. Not only were farmers who sold their land to the Land Commission dissatisfied but we find that farmers who got land through the Land Commission are quite dissatisfied. Many of them are in arrears with annuities and it is causing serious hardship. It is estimated that about 2,000 farmers have extremely high repayments which they are not able to meet. A smaller number have a less serious problem but overall about 14,000 farmers have difficulty one way or another in meeting these annuities.

The problem arises mainly with those farmers who acquired land in the late seventies or early eighties when land prices were very high and interest rates were in excess of 18 per cent. Annuities on the land acquired are now running at about £180 per acre. Given the present farming difficulties they are unable to meet these repayments.

The problem has to be faced because farmers are not able to pay and they are not able to sell the land because land prices have collapsed. There is the additional problem that many of these farmers acquired land before significant changes in the Common Agricultural Policy. For instance, the introduction of milk quotas caused a very severe problem for many of them who depend on milk for the main part of their income. The outlook for farmers, due to the proposed reforms of the Common Agricultural Policy, are very gloomy indeed.

The IFA estimate there is about £5.4 million in arrears due to the Land Commission as a result of the income crisis on many small and medium-sized farms. In view of the extreme hardship on many of these farmers, the Government should take a serious look at trying to solve the problem. It will not be in anybody's interest, neither the Government's nor the taxpayers, if these people are just driven out of business. It will create further rural depopulation. The Minister should try to solve the problem for these unfortunate people. They were advised at the time to develop, to invest in their land and produce more. Through no fault of their own, policies have changed significantly in the meantime. Land prices have collapsed. They acquired the land at a time when interest rates were exceedingly high. I urge the Minister to take positive steps to ensure the survival of up to 6,000 farmers who will certainly go out of business unless something is done to ease their problem.

I have long felt we should have a land use policy—the Minister says this is not germane to the Land Commission or land policy but it is related to it in its own way. We lack such a policy and, as a consequence, we are now suffering in all sorts of ways. If we had a proper land use policy and a proper policy for agriculture, we would have been at a much higher level of development than we were when sugar, milk and cereal quotas were introduced. As a consequence we have suffered greatly, not only in rural Ireland but in the economy as a whole.

The Land Commission, when it is disbanded should be replaced by some form of land authority that would bring order into how land is used and avoid a free-for-all, with land going to those who are not farmers or to foreigners who would introduce different methods of operation into this country. I am not against some coming in but a wave of them would not be in our best interests.

As a consequence of the high price of land and falling income from land it is quite impossible—and has been for quite some time even when prices were good —for young people to purchase land, meet repayments and make a living from that land. For that reason, we should have, as is the case in many countries, a system of long term land leasing. We must have the highest level of land ownership in the Community. In one sense that is desirable but in the sense that people cannot afford it, is not desirable and it is keeping young people out of farming. As of consequence, we have the highest average age in our farming population of any country in the Community, and possibly in the world.

If we look at our competitors and take an example outside the Community, in New Zealand they have what they call a share milking arrangement or a land leasing arrangement, where the owner of the land normally ceases to be an active dairy farmer at about the age of 50, at which point he retains ownership of the land but he can share the income with some young person who does the more physical work—perhaps the young person might own the cows—and in that way, in time, the young person would buy the land as well. It is working extremely well and it is of interest to note that they got the idea from Irish people. Farmers from west Cork who went to New Zealand introduced procedures they had practised in west Cork. The farmer moved his cows from one farm to another and leased land year after year and that system has been brought to a fine art in New Zealand. The efficiency of New Zealand dairy farming today is very closely related to that system which kept young, active, vigorous young people coming into dairy farming at an early age, sharing in the profits and in the ownership and ultimately having total ownership of the dairying enterprise on the farm. It is regrettable we did not go down that route. We are paying a very high price for not doing so.

I am happy to see section 7 in relation to the waiving of cottage purchase annuities. I know it was a pragmatic decision from the Department of Finance's point of view as it cost more to collect these annuities than they were worth. The cottage owner endured hardship in getting together the few pounds to pay the land annuity. It is a welcome step to get rid of it.

I hope the Minister will also take into account the plight of those people who are trying to pay annuities when farm incomes are declining. Through no fault of their own, they paid prices that were excessive for land at a time when interest rates were extremely high.

Mr. O'Keeffe

In dealing with this Bill one is tempted to engage in a discourse on the Land Commission itself but because the Bill dealing with the dissolution of the Land Commission is before the Dáil there will be ample time to discuss the operation of the Land Commission. Suffice to say that people with small holdings were moved and were given a reasonable chance to eke out a good existence in places like Meath, Kildare and Cork. Houses were built on these lands. There were other benefits in that the land they were moved from was made available in what one would call reasonable holdings to those who were left behind. The congestion in many parts of this country was relieved and, to that extent, I congratulate the Land Commission on a job well done over the years. The Bill is a technical one. It aims to tidy up the area of land bonds following their redemption in 1989. Now that the land bond fund and the guarantee fund must be wound up excess moneys there should accrue directly to the State. We all welcome that. It is important to state that even if that did not happen, if the Land Commission (Dissolution) Bill did not exist, this Bill would be necessary.

When land was sold to the Land Commission the sellers normally received bonds in payment. When these lands were subsequently allocated to new owners, payment to the Land Commission was usually made by means of annuities. These annuities were paid into the land bond fund and the Exchequer made a matching contribution to this fund on an annual basis. The total resources thus provided to the funds were used to pay dividends on the bonds and to provide a sinking fund to finance the annual land bond redemptions. As a result of the redemption of land bonds in 1989, £80 million will accrue to the Exchequer. This Bill provides the mechanism to do so and any reasonable person looking at the overall scenario will say that given the financial constraints under which any Minister for Finance operates, he would only be too happy to make use of such funds to generate economic activity within the country rather than having them lie dormant. From that point of view this Bill is very welcome.

I understand that a further £5 million is due to the Exchequer on an annual basis. This is another figure that cannot be sneezed at and is something the Department of Finance would be very anxious to acquire annually. A great deal of economic activity could be generated with such a sum of money. A further £5 million are due in arrears. Farmers purchased land in the seventies and borrowed at very high rates of interest — at one stage they were as high as 18 per cent. The Opposition would know all about that. When the Land Commission handed on this land they passed it on at the rate at which they purchased it and the rate of interest they had to pay to service the land. The result is that many farmers today have difficulties as a result of acquiring land from the Land Commission at that time.

There have been calls from the Opposition to write off money. It has been suggested that the interest rate should be alleviated. I welcome the fact that the Minister has set up a review group to look at the servicing and collection of arrears. While the Land Commission had no right to reduce the level of interest charged, I suggest that the Minister and the review group keep this in mind and they might see an opportunity to reduce the level of very high interest charged on some of these annuities.

Many farmers find it exceedingly difficult to meet these annuities. In fairness to many of them, they would be quite willing and are anxious to pay and if the interest rate were reduced by the review group they might be in a position to meet their bad debts. By and large, people do not like to have debts like that hanging over them.

It was suggested that because the cottage purchase annuity was written off the £5 million arrears should also be written off. I do not think that is comparing like with like. The cottage purchase annuity, amounted to only £2,500 per annum and there were only a few hundred accounts. It is not that easy to write it off given the times we are living in and the constraints under which we operate. It behoves the Minister for Finance to bring in as much of that £5 million arrears as he can.

We must remember the cost at which the land bonds and guarantee bonds were redeemed. The land bonds were redeemed in 1989. My understanding is that in 1989 it cost £76 million to redeem them. That money had to be borrowed and the Government are still paying interest on that money. It is reasonable to suggest that the £5 million that is expected in annuities every year to the Revenue Commissioners is spent in part payment of the interest on that £76 million. That is another area we have to look at. If we do not collect that money, it means further borrowing by the Exchequer. We had experience of borrowing in the past; thank God that era has now passed. I agree with the Minister that it is incumbent on us to collect that money every year.

The farmers are suffering hardship. With regard to the £5 million arrears to be collected, the review group can make recommendations to reduce the interest which will make it possible for farmers to pay their debts.

I commend the Bill to the House.

Mr. Howard

I am glad the Minister, Deputy Gallagher, is present. He comes from the north-west which is more or less on the same side of the island I come from. He will be familiar with the problems that have arisen for some people who received land from the Land Commission, particularly during the seventies.

A speech was delivered to us by the Minister for Finance. We said, and Senator O'Keeffe accepted without question, that this was simply a Bill to tidy up matters in the wake of the redemption of the land bonds in 1989. The Minister said:

I agree with the Minister that this Bill is not concerned with those matters but having read in the last day or two the entire Dáil debate on this Bill on 10 December, there were other relevant matters referred to during that debate. At the very least, I am disappointed the Minister avoided referring to the very important matters that were raised. Perhaps the most important matter raised during that discussion on 10 December last and which was ignored by the Minister today, was the incapacity of many land owners to meet repayments on land allocated to them by the Land Commission. It is estimated that something like 2,000 farmers have a chronic problem with extremely high payments and high levels of arrears. On top of this figure, a further 4,000 farmers have high annual payments and although no arrears may have yet arisen these people, with the recent drop in farm incomes, may soon find it difficult to continue to meet their repayments.

The IFA estimate that 14,000 farmers are encountering or will shortly encounter repayment difficulties, already 2,000 experience severe difficulty, 4,000, some difficulty and the remaining 8,000 on present indications will find themselves in difficulties before long. Of the first two categories of 2,000 and 4,000, a number are forced at present to rely on social welfare payments. Ironically, some who applied for social welfare payments were deemed ineligible; the land annuity was disallowed as a legitimate expense because they were not in a position to pay it. I would like the Minister to pay particular attention to the plight of these disadvantaged farmers.

The problem of high annuity repayments arose in relation to land that was distributed during the good years of the seventies and the early 1980s. Confidence in agriculture was high at that time. Many enthusiastic and enterprising farmers who received land from the Land Commission during this period were confident that this new addition to their holding would enable them to obtain a satisfactory livelihood. Deputy Gallagher will know precisely to what I am referring.

Unfortunately, that buoyant situation no longer prevails and confidence in agriculture is now so low that I wonder if it will ever be possible to restore the confidence necessary to develop the types of farm I have referred to. The next few years will be crucial; unless confidence and hope can be restored the fabric of rural Ireland will be threatened and destroyed possibly beyond the point of redemption.

The land distribution which caused the greatest problems was the distribution of the seventies and early eighties, for a combination of reasons. High interest rates of up to 18.5 per cent and high land prices pushed repayments as high as £180 per acre. The IFA recently published a table based on a survey of seven separate farms which indicates the magnitude of the problem. This table is relevant to my point.

Case number one on this table is a 48 acre dry stock farm with an annuity of £1,960, estimated farm income of £3,000 and the annuity payable to the Land Commission amounts to 65.3 per cent of income. Case number two is a 62 acre dry stock holding with an annual repayment of £1,980; estimated farm income is £4,500 and the percentage of income payable as annuity is 44 per cent. The third case is an 96 acre dry stock farm — we are moving now into the 100 acre farm bracket which is now the minimum size viable for economic farming — with an annuity repayment of £2,340, farm income is £4,000 and annuity repayment as percentage of farm income amounts to 58.5 per cent.

Case number four is a 57 acre dairy farm. It is recognised within the farming industry that dairying gives the best possible return. Yet on this 57 acre farm the annual repayments are £3,000, farm income is £6,500, and the annuity as a percentage of farm income is 46 per cent. Case number six is a dairy farm of 75 acres. With a reasonable amount of land one would expect this farm to survive with reasonable management. Repayments are £2,160 per annum, estimated farm income is £4,000; annuity as a percentage of farm income is 54 per cent. The final case is a 61 acre dry stock farm with an annuity of £2,650, estimated farm income is £4,000 and the annuity as a percentage of farm income is just 50 per cent.

These statistics illustrate the serious situation prevailing in relation to matters included in this Bill. Why did the Minister choose not to refer to this important aspect of the matter when it was drawn to his attention during the Dáil debate on the Land Bond Bill on 10 December last? Many of the farmers I am referring to acquired their land before the introduction of milk quotas which had a profoundly limiting effect on the capacity of many of them to meet their repayments. Proposed reform of the Common Agricultural Policy and reduced prices which may arise from the new Common Agricultural Policy could render it impossible for many of these people to continue their repayments.

It has come to light that the Department of Agriculture and Food are refusing to pay headage and other grants to farmers unable to repay their land annuities. I deplore this miserable attitude and I think Senator O'Keeffe referred to this matter. Of all sections of the community, small and medium-sized farmers as the Minister and An Leas-Chathaoirleach will testify have always taken pride in their capacity to pay their way. Finding themselves obliged to rely on social welfare payments and being refused badly needed grant and headage payments from the Department of Agriculture and Food because of their annuity arrears will undermine whatever remaining confidence they have in themselves and in their capacity to obtain a livelihood from farming.

It is estimated that there is now something like £5.4 billion owing in arrears to the Land Commission due entirely to the income crisis of many small and medium-sized farmers; they constitute all the problem cases. These arrears can be expected to rise significantly in the year ahead. Many farmers are experiencing extreme hardship and we are facing a problem that is not merely financial but a major social issue for rural Ireland. The fact that these farmers received the land necessary to make them socially viable from the State places an onus on the Government to alleviate the problems they now face.

There are a number of ways to deal with this situation. I am aware that a recommendation was made during the debate in the other House that a scheme similar to that which allowed the sale of local authority houses to their owners sometime ago could or should be considered for farmers in serious repayment difficulties; it would not have to apply in all cases. This proposal is within the capacity of the Minister concerned and may be a suitable response to the problem.

A buy-out arrangement at a much reduced price should also be considered. Many of the farmers concerned have been adversely affected by EC membership and national policies have diminished their incomes since they acquired the land. Circumstances have changed dramatically since the seventies and we should move to meet present difficulties. A category of farmers should be acknowledged as hardship cases, qualifying for relief measures of some kind. A solution to their problem is crucial to the very survival of the first two categories I referred to, the 2,000 farmers in serious difficulty and the 4,000 in moderate difficulty. If more farmers get into difficulty making re-payments due to the reform of the Common Agricultural Policy, the social and economic costs are all too obvious. Incomes have declined so much on Irish farms and particularly on the farms I referred to that finding a solution to this problem should be a major priority for the Government.

Senator O'Keeffe in his concluding remarks mentioned the obligation and duty of the Minister to collect these annuities for the Exchequer. What price does one put on the survival of the small farmers concerned? That is the real cost we should be estimating. The fabric of rural Ireland is breaking down and the next few years will determine whether there is to be a vibrant rural society in many parts of this country. The confidence of many small and medium sized farmers has been seriously undermined. I do not say this for political reasons but to state facts which I and people on the other side of the House are aware of. Over the next few years we must restore whatever confidence we can to the rural community. If we could get over this immediate hump things may not be as bleak on the other side of the hill.

Much has been said about the green image of this country, but we have failed so far to exploit that image. Perhaps, in the next five or ten years that image could be exploited to the economic benefit of rural Ireland especially but if the fabric of that rural society has disappeared by then, we may look back in despair at our failure now to respond to the present situation.

As many as 6,000 people face a crisis if this proposed measure is enacted. The Seanad would be failing in its duty if it did not highlight that difficulty and if it did not impress upon the Minister the need to take appropriate action where these cases are concerned. In view of the seriousness of the situation I regard it as somewhat flippant of the Minister to refer to the Bill simply as a tidying up measure particularly since many of the issues I raised were brought to his attention in the other House. This Minister knows of the problems I am talking about and I look forward with confidence to his speech.

Mr. Dardis

I thank the Minister for his attendance here. As the Minister for Finance said during his opening address we have before us technical, non-controversial legislation. Most people would say that this legislation is desirable and nobody could be sorry to see the end of land bonds and everything that was associated with them over the years. The point was made that land bonds should not be confused with the Land Commission; nevertheless the two are related. I am aware that legislation to abolish the Land Commission is going through the Dáil at present.

No tears will be shed if land bonds pass into history; twice a year I have been in receipt of a large cheque for several pence from the Minister for Finance and I wonder at what cost I was given those few pence? Even the stamp on the envelope would have cost more than the contents of the cheque. It would have been wise of the Minister to offer me some small amount of capital for what I was receiving every year by way of land bond payment. The amount of land acquired in my case must have been very small indeed.

How equitable or constitutional was it in the first place to pay people by this method for land acquired? I acknowledge the great work done by the Land Commission taking people out of congested districts and relocating them where land was available so that they were able to make a living under new circumstances but I dispute the way in which people were paid for land acquired. I had a neighbour who in the days before farmer taxation was introduced received a notice to the effect that he was liable for income tax. He told me he was going to take his land bonds up to the Minister and to the Revenue Commissioners, and demand that his land bonds be taken in payment for his tax because if the State could pay him in land bonds they could have them back in taxation. He had a point. It was inconsistent that he should have to raise cash to pay his tax but could not repay the State in what was, after all, the State's money.

This method of buying land in some circumstances amounted to highway robbery. All of us would have to admit that unhappy stories have survived political influence or meddling in the way land was acquired and subsequently allocated. I hope these stories will fade into the mists of history.

Reference has been made to arrears in land purchase annuities. I share the concerns already expressed about the 2,000 people now facing severe problems and the large number of others in some difficulty. Those difficulties will increase and multiply. I take the Minister's point that the problem should be tackled by a working group initially and that it is not relevant to the passage of the Bill. Nevertheless this problem of arrears remains the single most important issue to be addressed here today.

The collection of land purchase annuities has precipated personal tragedies. All of us from rural areas will know of genuine cases where people living in considerable poverty are still asked to meet these arrears which reflect the high price of land in the late seventies and early eighties. It is ironic that innovators, progressive people prepared to take on liabilities, are now paying the highest price in personal terms for decisions they made then, often with encouragement. It should be the function of the State as it was with the original Land Commission to promote innovation and to give smaller farmers an opportunity of a decent living on holdings of a sufficient size. I appeal to the Minister to look with sympathy at these arrears cases and to find some equitable way to release people from the economic tyranny they appear to have been subjected to, in some cases.

The possible consequences of the Common Agricultural Policy reform and the negotiations have been raised and we must view all these developments with concern. If there is an arrears problem at present that problem will worsen and the State must address it.

I agree with Senator Howard that it is intolerable that headage payments and other grants should be withheld from people in arrears with their purchase annuities. If we reflect on the unhappy history of land ownership in Ireland and the consequences of landlordism, we must acknowledge in this respect that the State is a landlord. An enlightened landlord would try to reach some arrangement with his or her tenant to extend or adjust a payment to allow for changing economic circumstances. It would have been easy for someone at the beginning of the eighties when things were buoyant to undertake these payments but farm incomes have diminished considerably since then. The State as landlord in this respect should adopt a more enlightened attitude to these difficulties.

The Wyndham Land Acts of the last century removed land from the landlords and vested it in the people of Ireland. The financial imposition on recipients of land was flexible and never constituted a serious financial burden on those who acquired land from the estates. Now that we have our own Legislature it is incumbent on us to adopt a similarly enlightened attitude.

One could propose certain alternatives as to what might be done. One possibility is to capitalise the amount outstanding, to extend it over a long period and to reduce the annual payments so that they are not a huge burden. I take the point that there are people who have paid these amounts in full at quite a considerable cost over the years and it would be inappropriate if people who were irresponsible about the matter should get off scotfree while those who had honoured their commitments pay a penalty. I am sure that can be overcome. The central point is that it would be preferable for the State to recover a percentage of what is due to it, rather than to recover nothing at all, which may happen if people are forced off the land.

At the moment 11 people a day leave the land. Given what we see happening in Europe, with the Common Agricultural Policy reform and the GATT negotiations, we must be fairly pessimistic about the way that figure will go in the future. I make a direct appeal to the Minister on that point. Where small farmers took an extra land to expand and took the risk, sometimes at the behest of people who were State agents, they should not be penalised. Many of them are honourable people and they wish to reach some arrangement. They wish to pay their debts and they must be afforded that opportunity. The State, in as much as it is a landlord, must be a good landlord to those people.

Section 2 of the Bill makes provision for arrangements in relation to what are known as the unregistered land bonds. When the bonds were redeemed in 1989 some £1.8 million was classified as unregistered. I welcome the provisions in the Bill that relate to this matter. We are just looking at the tip of the iceberg here, because if there were so many bonds unregistered, how much more land is not properly registered and how difficult is it for many people to prove title to the land? The State can do some good in establishing who are the owners of this £1.8 million. Frequently the onus is put on the people to prove the title but the State can assist in some of these matters, expedite them and make life easier for people by reducing administration.

Reference was made to the broader issue of a land policy. I agree with the need for such a policy. Over the years one of the great deficiencies in our agricultural policies has been the absence of a coherent land policy. The way we will use our land in the future will change fundamentally, because of the Common Agricultural Policy and GATT. We also have the matter of environmentally sensitive areas. I welcome the new scheme which has been announced where farmers in certain areas will be rewarded for farming in a so-called environmentally friendly way. We will see frequent developments along those lines, increasing forestry, and the whole question of set-aside. We are moving into a new era where a new policy will be required.

I support the view that share farming is an option which could be looked at in some detail. It is one that has worked very well in other places. The big question is how young innovative farmers are going to have access to the land. It is obviously very much in the national interest that young farmers with energy and enthusiasm should have access to land and they should be assisted by whatever means the State can offer in this regard.

One of the deficiencies in our land tenure system is that we do not have a tenant system. There are very good historic reasons for that, but one of the great advantages of a tenant system is that if the operators of the land have capital that money is released. They can devote it to farming rather than tying it up in land and property. Efforts in this direction to allow young people get into farming would be welcome.

It is unfortunate that the milk quota, to a certain degree, excludes young people from getting into dairying. The quota has become a valuable asset associated with the land and is making it extremely difficult for young farmers to become dairy farmers other than by inheritance. We need some system to allow for some mobility. That is not directly related to this Bill. It is something we could discuss at a latter date, perhaps when we debate the abolition of the Land Commission.

I would say good riddance to the land bonds. Their passing will not be regretted. However we are facing profound changes in our agricultural society and we must meet them. I am happy to support the passage of this Bill.

Mr. Farrell

Fáilte roimh an Aire Stait go dtí an Teach. I agree entirely with the Minister for Finance when he says this Bill will tidy up the existing situation. All of us who were in the auctioneering business when the Land Commission was buying land found the system difficult. While it was very good in some ways, as Senator Dardis said, it was highway robbery in others. I was a witness many times in the Four Courts trying to prove that the Land Commission did not give a fair price for land, and I was successful in many cases. People hated land bonds. They would get money if they sold the land direct but they never regarded the land bonds as money. It would be absolutely foolish to put money into a bond for which there is no need now and have the Exchequer pay to service the account. I am pleased this system is going to be changed.

I disagree with those who say there are fewer people in rural Ireland now. Anyone who grew up in the fifties, as I did, knows that there was dereliction in rural Ireland then. When you look at rural Ireland today you see very good houses particularly in the west. There are many group water schemes and regional water schemes. Houses in rural areas have the same facilities as those in the cities. Talk about depopulation and so on it is not always right and it creates a very bad image. The standard of living and services in rural Ireland is miles ahead of what you will get anywhere.

The one change I would like to see to bring more people into rural Ireland, is a liberalisation of the planning laws. Recently I heard of a man whose son wanted to build a house on his land. He was not allowed to build the house on a nice dry hill because it would spoil the scene. We put through a section 4 motion in Sligo County Council unanimously and what do you think happened? To use a phrase of the late George Colley, the "well-heeled articulate" group, An Taisce, and their friends, who are all in good jobs earning good money, objected. The man cannot build a house for his son on his own farm land. This is what we should be taking about. That is where injustices lie.

Mr. Howard

That is why we needed section 4.

Mr. Farrell

I agree but, unfortunately, section 4 is now being ruled by An Taisce. They now decide who will and will not build and develop in rural Ireland. This is what we should be attacking, not the quality of life in rural Ireland. We have good housing, and efficient water schemes. The rural electrification scheme was the start of civilised living in rural Ireland.

Acting Chairman (Mr. McKenna)

I ask the Senator to come back to the Bill.

Mr. Farrell

This has already been referred to by other speakers. I want to put on record the other side of the coin.

I welcome the Bill because there is no sense in money lying dormant in a "redundant" fund — to use the new eighties word. This fund is now redundant, there is no use for it, there is no point having it. When the Land Commission Bill comes before this House much of what has been said by other speakers will have to be said again. This is a very simple Bill to wind up an account that is no longer of any use.

I welcome the Bill.

Mr. McDonald

I am glad of the opportunity to make a few simple points on this Bill. My first introduction to land bonds was to hear my late mother talk about the 5 per cent land bonds that were issued after the then Department, in 1937 or 1938, compulsorily acquired a portion of the family farm. Payment was made, just as the family were coming out of the effects of the economic war, with 5 per cent land bond stock. Even the solicitors and the people defending the case would not accept the bonds as payment. At best, one issue went as high as 16 per cent. As far as the farming community to whom these bonds were paid, were concerned, they were never acceptable. I am glad to see the end of them. They have certainly outlived their usefulness.

From the beginning the bonds had a very bad name. They were non-negotiable in the thirties and the forties. They contributed significantly to the low esteem in which the general public held the Land Commission and every Department involved in that work since the foundation of the State. In the early seventies, in particular after 1974-75, when expectations for agriculture soared and agricultural land reached £3,000 per acre, many small farmers were offered portions of land at exorbitant prices. Granted, the Land Commission paid fairly high prices for that land but, in my own constituency many people were able to look ahead and ask how they could repay £150, £160 or £170 per acre in annuities. Even at that time they realised that was not possible. When the inspectors offered someone a parcel of land which would make a big difference to the economic viability of a holding, it was a temptation that thousands of small farmers succumbed to. Now they are unable to meet the annuities. We are back almost to a Clanrickard situation.

The State is the landlord. While they do not literally use a battering ram, they wield an illegal economic battering ram. They are depriving these small farmers of EC headage payments because if the annuities are not paid these small farmers will no longer benefit from the guarantees enjoyed since we joined the European Community. Ministers must be ashamed of themselves because they are rolling back the clock 100 years. The sorry mess of land agitation started in the 1880s and 1890s and history is repeating itself. We get Irish solutions to Irish problems. Now, because small farmers on marginal incomes, with ten, 25 or 30 acres, who would otherwise qualify for the farmers' dole have not been able to repay the annuities, they are disqualified even from those benefits. Even in Russia that kind of dictatorial system has collapsed. Yet our Government can seemingly smile and have no compassion or understanding for anyone's future but their own.

I regret the Minister for Agriculture and Food is not taking this debate because this subject comes within the realm of agriculture. How can the Minister feel comfortable with the title of "Minister feel Agriculture and Food" when at least 12,000 farmers across the country are finding extreme difficulty surviving and providing for their families under this present system which has outlived its usefulness, which must be looked at and for which a solution must be found? It is common knowledge that between 2,000 and 5,000 people are in severe difficulties and are deprived of what is left of State aid to agriculture. At the same time there are very few buyers for the finished cattle on offer at marts today. This spring, one would need to have a four leaf clover to get one's cattle into a factory.

Acting Chairman

I am allowing the Senator latitude but I would ask him to come back to the Bill.

Mr. McDonald

I am talking about the effect this Bill is having on the economic lives of the people. How can the Minister ignore 2,000 farmers who have been refused benefits and 4,000 whose benefits are in the balance? From figures supplied it is estimated that another 5,000 or 6,000 farmers will be in this situation before long. The Minister has the power to do something about these lands bonds. If the Government can take up now where the landlords of the last century left off, surely they can halve the annuities again as was done at least twice in the past century?

I am glad to see the end of land bonds. They represented hardship, uncertainty and distrust to practically every person who was paid with them. It was an unfortunate way to compensate farmers for land acquired compulsorily or even by agreement. The farming community have never been fairly treated. Bord na Móna compulsorily acquired hundreds of thousands of acres of boglands for as little as a half-a-crown — 2s. 6d — an acre and they now want to sell it back to farmers at the market value. It is a queer country.

Farmers have been very slow to defend themselves. They have always allowed themselves to be browbeaten out of a misguided respect for authority and for Departments and Governments of the day. Now is the time to cry halt. I make a strong appeal to the Minister to look at the effect annuities are having on the relatively small number of farm families involved — only 5,000 to 6,000 — and see if anything can be done for them. Conacre this year is averaging between £50 and £75 an acre for top class land for tillage purposes. How can this Government expect the poorest farmers to find £180 an acre if there is not an economic return on land? The problem is exacerbated by the fact that there is no sale for certain categories of cattle — fat cattle — this spring.

Mr. R. Kiely

I welcome the Minister although Senator McDonald said he would prefer to see another Minister here. I know he represents a city constituency but he has a rural background and I am sure he knows as much about land bonds as any Member of this House.

Land bonds are Government stocks which were used by the Land Commission to acquire land. A fixed rate of interest was paid annually on the bonds until redemption; there were no fixed redemption dates for land bonds. Instead redemption was effected by means of an annual draw. Previous Ministers have spoken about these land bonds and no one will be sorry that they have gone.

Senator Dardis said he remembered getting some dividend every month, and that the stamp cost more than the dividend. Senator McDonald said land was acquired from his mother. I own a bit of modest land in County Limerick, but it was not good enough for the Land Commission to bother with it.

Everyone agrees with this legislation and that the land bond system was unsatisfactory. Questions were raised as to how such land was acquired and distributed. It was suggested that there might have been political interference, and probably there was, but there might have been other influences too, which I would not like to mention. However, I have grave suspicion about what influenced the acquisition and distribution of such land.

In the seventies and eighties the Land Commission acquired land at a high cost, and these holdings were eventually allocated to farmers in need of additional land. Naturally the annuity to be paid had to reflect the price the Land Commission paid. People who acquired land at the time find themselves today in an impossible position. We are all too well aware of declining incomes from agriculture. It is difficult for any farmer to survive, without having to meet the repayments of loans from lending institutions.

The ability of farmers to meet these high land annuities has been eroded because of a decline in farm incomes in recent years. Many farmers are so far in arrears it is impossible for them to meet their commitments, given the present economic situation in farming. Facing such difficulties are small farmers who received land from the Land Commission to extend their holdings and to improve their viability. If a serious effort is not made to resolve land annuity problems many small farmers will have little option but to dispose of land to meet their commitments, which would have the effect of further eroding their viability and, ultimately, of forcing such families off the land.

I know farmers who acquired land from the Land Commission and have paid their annuities in full but others, because of difficulties, are not able to pay their land annuities. There are also farmers who do not make any effort to pay land annuities and they are acting irresponsibly. I do not think it is fair to the farmers who make the effort that those who are irresponsible in this respect should get away with it. This Government should be ashamed of themselves for the way they are treating small farmers. Previous Fianna Fáil Governments kept small farmers in business. I say "Fianna Fáil Governments" because this is the first time Fianna Fáil have been involved in an arrangement with another party to form a Government. Those small farmers voted Fianna Fáil into office year after year in the constituencies of Clare, Carlow, Laois-Offaly and in my constituency of West Limerick.

Acting Chairman

I ask the Senator to come back to the Bill.

Mr. R. Kiely

I thought it was necessary to say that.

I know farmers who acquired additional land from the Land Commission and then had to sell it not because of their failure to pay the annuities, but because they thought they could invest in large enterprises. They did not respect the land they got. I saw this happening in my own area.

The Bill is winding up legislation. While I welcome it and compliment the Minister, I would like him and the Government to focus on the problem of outstanding arrears and annuities for small farmers, especially the genuine small farmers.

Minister of State at the Department of Health (Mr. Flood)

May I thank all who contributed to the debate. The part of the debate which I had an opportunity to listen to made sense to me, as I come from a small farm of about 30 acres, half of it on the side of a hill. However we were not successful in getting land from the Land Commission to make our farm a viable unit. I have some sympathy for the points made by Senators.

The issue of farmers in difficulties, who are unable to pay the land purchase annuities, has been raised by a number of Senators and acknowledgment of this problem was made by the Minister, in the Dáil, during the debate on the Bill on 10 December 1991, when he confirmed that a committee in the Department of Agriculture and Food were looking at the issue of arrears of land purchase annuities. I acknowledge that some farmers are having severe problems in relation to payment of annuities, but both sides of the issue will have to be addressed.

Senator O'Keeffe mentioned that if the income due to the Exchequer from the annuities as a contribution to the servicing of borrowing which was incurred in order to redeem the land bonds is reduced, then the deficiency has to be made up from general taxation. That would be generally understood. This makes the problem much more difficult to resolve and it is something that we have to take account of.

Annuities — the annual payments of interest and principle — are paid to the Land Commission for lands they allocated to individuals. The rate of annuity and the period over which it is payable were determined by reference to the particular series of land bonds used to buy the land in the first instance. As interest rates on the land bonds varied from zero per cent to 18.25 per cent, reflecting the prevailing level of interest rates generally, so did the corresponding annuity rates. Thus, there were two sides to the coin of Land Commission transactions, the acquisition of land for which the commission usually paid in land bonds and, subsequently, the sale of that land for which payment was made to the commission by annuities.

Until now the annuities have been paid into the land bond fund, the vehicle for servicing land bonds. On the dissolution of the land bond fund, as provided for in section 5 of the Bill, the annuities will be paid to the Exchequer. The Exchequer will use these annuities towards the servicing costs of the £76 million in general borrowing that was used to redeem all land bonds in 1989. In calculating the savings that would arise from that redemption, a critical assumption made was that annuities would continue to flow to the Exchequer in future years.

Farming organisations have raised the issue of land purchase annuities on a number of occasions recently. Their claim is that annuities are too high and should be reduced. In addressing this contention the following points are relevant. First, the amount involved on an annual basis is substantial. Apart from annuity arrears of some £5.4 million at 1 January 1990, the amount due during 1990 was approximately £4.9 million or £10.3 million in total. In the event, approximately £4.4 million out of this total was collected in 1990. Second, the redemption by the Exchequer of some £76 million in land bonds in 1989 was financed by means of alternative Exchequer borrowing. This borrowing has to be serviced and the annuities collectable each year form an important part — more than half — of such servicing. Third, farmers may at any time redeem their annuities, just as one might decide to repay an outstanding loan which has become relatively expensive, and replace it with a cheaper one. This route has been taken by some farmers in the past. Fourth, it is recognised that a number of farmers have difficulties with arrears of land annuities. In hardship cases every effort is made to come to a reasonable arrangement with the farmer. Once lands are vested, that is, finally conveyed to the farmer, there is no legislative authority to reduce or restructure annuities. Before that stage is reached the Land Commission could, and sometimes did, decide to reduce the price of the land to the allottee, thereby reducing the annuity. However, only some 6 per cent of farmers in arrears with annuities are on rates as high as 18 per cent which is the top rate, the bulk, about 67 per cent, being in the 10 to 15 per cent category. Current interest on bank borrowings on a term loan is about 15 per cent. Fifth, because of geographical location many farmers have benefited from a Government subsidy which entailed a reduction of 50 per cent on all or part of their annuity repayments. Sixth, no penalty charges are attached to arrears of annuities, unlike a normal commercial operation, and great difficulty is experienced in collecting annuities from farmers. However, this is not a reason for their abolition but rather an argument for better and more effective collection. A significant proportion of arrears — £1.7 million out of about £5.4 million — is owed by a relatively small number of individuals, 176 in all, or £10,000 from each.

The abolition of small land purchase annuities which took place in 1989 was a once-off exercise designed to streamline arrangements for collecting land annuities by eliminating those small annuities the collection of which had become uneconomic. Under this arrangement all annuities under £10 per annum were written off and were, therefore, no longer payable by the farmers concerned. The number of annuities involved was about 70,000 but they represented only about 5 per cent of the value of all annual collectable annuities. The reduction in the value of collectable annuities was offset by staff and administrative savings.

The two types of annuity had nothing in common except they were both collectable by the Land Commission. The write-off of the cottage purchase annuities will cost only £25,000 and will result in administrative savings, whereas the write-off of the redemption value of all outstanding land purchase annuities will cost about £80 million. As has already been indicated, a committee has been formed by the Department of Agriculture and Food to consider the matter of arrears of land purchase annuities. This, however, cannot be interpreted as a signal that concessions are on the way and so lead to a further increase in arrears. It must be emphasised that the committee at all times will have to take account of the effect on the Exchequer of their proposals. The write-off of the redemption value of all outstanding land purchase annuities would cost £80 million.

The matter of proving land title in relation to unregistered bonds was raised during the debate. When the Land Commission acquired a holding for which the price was payable in land bonds, the bonds were credited to an account in the Land Commission. Dividends on the bonds were also credited to that account. When, in due course, the Judicial Commissioner or the Examiner of Titles, both officials appointed by the Land Commission, directed payments of bonds and accrued interest to the relevant claimants, the land bonds would then be registered in the claimants' names. Prior to this registration the land bonds in question were classified as unregistered, that is, bonds allocated to sellers of land by the Land Commission but which were not yet registered in the sellers' names, pending clearance of title to the land. The Attorney General advised, when considering the question of redemption of all land bonds, that it was in order to redeem unregistered land bonds as well as registered ones, at par and replace them with cash, such moneys to be kept in trust for the claimants until such time as the matter of land title was settled.

Accordingly, when redemption of all land bonds took place on 3 April 1989, the redemption proceeds of the unregistered bonds — some £1.8 million in total — and the accrued interest on those bonds were placed in an interest earning deposit account in the Central Bank. Thus, the unregistered land bonds were replaced by cash, awaiting distribution. Section 2 of the Bill provides for this procedure. The phrase "purchase money advanced by means of land bonds" in section 2 (1) (a) refers to unregistered land bonds. Most of the land purchase money has been awaiting distribution for a considerable time, some since the 1920s and 1930s.

Locating the descendants, relatives, beneficiaries or the owner-occupiers of land acquired by the Land Commission can present great difficulties. Documents relating to claims, wills and death certificates can form part of the evidence required to establish entitlement to the purchase money. Power of distribution of land purchase moneys, formerly in the form of land bonds but now in cash, is vested in the Judicial Commissioner of the Land Commission who is a High Court Judge. Much of the investigative work is carried out by an Examiner of Titles who, in addition to investigating titles to properties acquired by the Land Commission, must examine claims and entitlements to the purchase money before directing payment. The funds awaiting payment belong to the vendors of the land. They are held in trust by the State until it discharges its duties in distributing them to the persons entitled to same.

The balance of land purchase money, which at 31 December 1990 had yet to be paid, was almost £4 million, involving approximately 2,000 estate accounts. This figure comprises the redemption proceeds of the unregistered land bonds already referred to, £1.8 million plus the interest which had accrued on this amount at the date of redemption and interest on the amounts earned on deposit in the Central Bank since that date. The total amount paid during 1990 was almost £238,000 involving 62 estate accounts.

Some 70 years ago it would not have been possible for our young State to fund out of current taxation the land redistribution programme which was such an integral part of our struggle for independence. Land bonds were the means employed to spread over many years the cost of such a massive programme. In fact, the first series of bonds — the 4.5 per cent old bonds — carried a British Government guarantee as to redemption up to 18 December 2004. It is now a matter of history that this guarantee is no longer necessary and the passing of this Bill seals and confirms our financial independence in that regard.

I thank the House for the attention it has given to this technical Bill and Senators for their contributions. I should have said earlier that annuity rates varied from 3 per cent, and not 0 per cent as I may already have said, to about 18 per cent. The Bill effectively brings to an end an historic period in the life of the State when the unique mechanism of land bonds was used as a means of promoting redistribution of land and in the interests of public policy.

Again, I thank all Senators who contributed to the speedy passage of this tidying-up legislation.

Question put and agreed to.

Agreed to take remaining Stages today.

Seanad Éireann díospóireacht - Wednesday, 11 Mar 1992