Wednesday, 23 March 1988
Dáil Eireann Debate
Mr. J. Bruton: This section allows the ACC to have 20 per cent of their business in the form of lending as defined in subsection (1) to the non-agricultural sector. Why is the volume of business to be transacted with the non-agricultural sector expressed as a percentage of the total business instead of in terms of an absolute  sum? For example, if the Agricultural Credit Corporation are doing particularly well in their non-agricultural business and are close to the limit of 20 per cent, they are obliged to enter into four times as much agricultural business in order to allow themselves to increase by a given amount their non-agricultural business because it is one of the limits expressed in the case of the non-agricultural business as a percentage of the whole. One accepts that there should be a limit in that this is a State guaranteed operation but it might be more sensible to express the limit as a sum of money which could in practice be 20 per cent of the existing total business or, to be more flexible, 30 per cent of the existing total business. It should be expressed as a figure in cash, not as a percentage.
In regard to its non-agricultural business, can the Minister tell us what will be the extent of the State guarantee, if any, on the operations of the ACC in so far as they extend into new areas of business? Will it be acting as a bank in the non-agricultural sector with the benefit of a State guarantee or will the State guarantee which it currently enjoys be confined to its existing business? If it is going to extend into new areas with the benefit of a State guarantee can the Minister explain the necessity for a State guarantee in that regard? Presumably it will be only going into these new areas on the basis that it will be commercially viable for it to do so and not for any social or broader economic considerations. If it is a commercial arrangement why would it need a State guarantee, if it is getting one?
Minister for Finance (Mr. MacSharry): We will deal with the the section which deals with that aspect. The ACC has had a State guarantee since its inception and this change would not interfere in any way with that. The State guarantee would still cover all lending by the ACC. I have to confess that I do not know exactly how the figure of 20 per cent was arrived at but perhaps the Deputy may be able to help us in that. I compliment him for introducing this idea  in the first instance and for preparing this section of the legislation. It was drafted during his time in the Department.
Mr. MacSharry: Section 2 will allow the ACC to lend 20 per cent of its moneys to non-agricultural borrowers. That 20 per cent would amount to approximately £90 million. Therefore, there is plenty of leeway and it will be some time before that figure is reached. We were careful to ensure that there would be sufficient resources available for lending for agricultural purposes. That is what is being fully protected in this section. That is why there is a difference, and a guarded difference by law, between the 80 per cent and the 20 per cent.
Mr. Enright: I welcome this Bill in so far as it goes. The ACC in the past could have been described as a single sector bank in that it was confined to lending to the agricultural, horticultural and fisheries sector. At a time when farmers found it difficult to obtain finance to  develop their farms the ACC made this finance available. As a result of being a one sector bank the ACC ran into considerable difficulties in obtaining repayments when agriculture started going through a difficult period. Other financial institutions, such as the associated banks, also suffered losses in agricultural sector lending during that time.
I presume that the ratio can be altered in the future. I do not know whether the Minister could at a later date alter it by way of regulation or whether it would be necessary to bring forward another Bill into this House to do so but as the Minister for Finance has some control over the corporate lending of semi-State bodies I suggest that the Minister, where possible, should ask our semi-State bodies to conduct their business through the Agricultural Credit Corporation. I think that this Bill is very much along the lines of that thinking and I am anxious that our semi-State bodies, where possible, should consider seeking investment and conducting their business through the ACC. The ACC is a semi-State body and if they can do this it would be to the benefit of everybody.
The ACC has suffered some losses and faces some difficulties in the future. It will have to make efforts to reduce its losses and in fairness it has already made some efforts to reduce costs. There have been a number of lay-offs and office closures. It will be necessary for us to give them some assistance and this Bill is one way of doing so. I think it will take between five and eight years to bring the ACC back into profitability, given the nature of their problems. In my view, this Bill and this particular section of it are very welcome.
Mr. MacSharry: The points made by Deputy Enright are worth considering. To change the 20 per cent, further legislation would be required. The main reason for having the 20 per cent fixed was to protect agriculture which was the main reason for having the ACC there at all. I take the point the Deputy has made as to the efforts of the ACC management  and board to reduce costings and administration throughout the country and at HQ and that their efforts are having the desired results.
Mr. J. Bruton: I was involved in the original drafting of this legislation and agreed to the 20 per cent limit because I felt that getting the ACC out of agriculture solely was in itself an advance. I must confess that I have some reservations as to whether there should be a limit as low as 20 per cent. It seems that the benefits to agriculture of having the ACC exclusively or even 80 per cent confined to agriculture are, to say the least, intangible given that most of the farmers do their business with banks other than the ACC, and given that banking of its nature is something that should be conducted on fairly tight margins. I am not convinced that there is really a need to have a separate bank dedicated to agriculture.
Will the Minister outline for the House the specific benefits of having an agricultural bank owned by the State? I know endeavours were made some time ago by the then President of the ICOS, now a member of the European Parliament, Mr. T.J. Maher, to bring Rabobank in here from The Netherlands to set up a co-operative agricultural bank. I would prefer that sort of approach if there is a need for an agricultural bank. It should be co-operative run rather than Government run. It would be better in the long run for the future of the ACC, if the ACC were to be encouraged to go beyond 20 per cent in their non-agricultural business and as they develop profitably in that business they should reach a point where their balance sheet is such that the ACC could be sold. There is no great advantage in retaining the ACC in the public sector, but obviously that is something that one would not suddenly do.
It is important that there should be a measure of long term thinking as to where we are going with the ACC. The Minister should outline what he expects the Agricultural Credit Corporation to be doing in ten years time and who he expects to own it ten years from now. Does the  Minister envisage minority or majority shareholding in the ACC being sold to outsiders whether they be agricultural or non-agricultural interests, Irish or foreign interests? I recognise that if we were to put the ACC on the market with its present limitation of 20 per cent of its business only being capable of being transacted outside of agriculture one might not get the full potential long term value that one would wish. If one were to contemplate having a figure larger than 20 per cent one could envisage the possibility of being able to sell shares in the ACC and this bank could then become a competitor with the associated banks.
I know from bitter experience that when a subsidiary of one of the two large banks got into difficulty it was a matter that tended to touch almost the solvency of the financial system of the country. That is an unnatural situation. It should not be the case that any one bank could be so dominant that anything touching its affairs adversely should have such wide implications for the State's financial position as was the case with the ICI-AIB affair. Clearly it is desirable from the point of view of the management of the banking system that the Minister should be trying to introduce more banks and more diversity into the banking system.
I would favour a situation in which the Agricultural Credit Corporation and the Industrial Credit Company, either separately or together, would become full banks in full competition with the existing associated banks. I am also in favour of allowing the building societies to become increasingly involved in the same area as the banks and vice versa with the purpose of getting away from the situation where banking is dominated by two large groups. If we get diversity and if we get away from the oligopoly that exists in that market currently, and closer to a situation of perfect competition in the banking system, that would be desirable. We could in this House take a substantial step in that direction today by changing one single word in this section, and that is the word “lesser” in line 21, on page 3. If we were to allow the Minister to set such larger amount as the Minister may  from time to time determine, then he would have the freedom to allow the Agricultural Credit Corporation to move more freely and fully into banking.
Mr. J. Bruton: I mean no disrespect to the ACC, but many people whom I know in the same business do not feel that they must deal with the ACC. In practice they deal with one of the banks. If one looks at the notices as to who is doing most of the seizures of farms at the moment, it is generally speaking, the banks. That is evidence in itself. The Minister should be more ambitious in trying to use this Bill as a method of restructuring and rendering more competitive the banking sector. Having made that general point——
An Leas-Cheann Comhairle: The point is rather general. I was going to remind the House that as the Chair would see it, what we are dealing with here are three rather specific divisions. I could understand that a passing reference would be made to the raison d'être for the ACC——
An Leas-Cheann Comhairle: ——but I would remind the House that especially on Committee Stage, the House is required to home in on what is provided in the specific section, and that points that are made must appear to be entirely relevant to that.
Mr. J. Bruton: I will relate everything I have said to the imposition of the limit of 20 per cent. I question whether it is wise to have a limit of 20 per cent or to have a limit at all. I question whether we need to have a specifically agricultural bank in State ownership which is at the heart of this section. We will not have an opportunity of changing that on any other section or for a number of years because there will not be another Agricultural Credit Bill for a number of years.
Mr. J. Bruton: We will not say who will do that. I am aware and I think the Minister is aware that substantial recommendations are made for the amendment of the Principal Act which is referred to in section 1. In the Killanin Commission report, which recommended that there should be a register of bloodstock mortgages, there was a problem because of the provisions of the 1978 Act in getting credit on the security of bloodstock. The Killanin Commission and the Irish Thoroughbred Breeders Association have made recommendations for changes in the Dáil. I have put down an amendment which has been ruled out of order and I do not wish to discuss it but I would merely mention——
Mr. J. Bruton: If the Leas-Cheann Comhairle will allow me to make my point I will not make a meal of it. There is a problem and an opportunity is being lost to redress that problem in this Bill. The Killanin Commission have recommended a change. I have put down an amendment which the Irish Bloodstock Breeders Association have looked at and told me, “These amendments appear ideal to satisfy the requirements of the Killanin Commission on horse breeding.” That is the amendment Deputy Noonan and I have tabled. I ask the Minister if he will consider — he may though I may not — introducing an amendment along the lines of my amendment on Report Stage so that we do not lose this opportunity because of any dilatoriness in another Department, not his, in dealing with this.
Mr. Enright: The main objective of the ACC is to lend money in advance. Their problem is in regard to share capital and they depend on the State for finance. One of the problems they have to face is that they have to pay a very high rate of interest for investors and they have paid quite generous interest to investors over the years. That has proved wise in that they have obtained investments from different and diverse citizens of our country who invested with them, first, because of their high interest rate, second, they were State guaranteed. The ACC have not the same multiplicity of offices around the country as have building societies, the commerical banks and An Post. People will not travel long distances to invest money; they like to go to the nearest location for that purpose. I have  spoken about the problem of a multiplicity of offices which cost a great deal of money to maintain, pay staff and so on. I ask the Minister to consider favourably some type of provision for the ACC, as they are a semi-State body, on terms somewhat equivalent to those of An Post. In other words, moneys could be invested for a fixed time with some attractions or incentives to maintain the strength of the ACC.
I accept Deputy Bruton's point that many farmers invest with other financial institutions such as the commercial banks. A large staff are engaged in the ACC, many of them agricultural graduates and some have worked in agriculture. The emphasis varies, but the ACC have been sympathetic to farmers, and I would like farmers to have some scope to meet people who are familiar with their problems. Agriculture is at present going through enormous difficulties. The number of farmers who face major problems is large. The point made by Deputy Bruton in regard to amendments is important.
An Leas-Cheann Comhairle: Deputy Enright can indulge in delightful presentations of agricultural problems or anything else. On Second Stage the Deputy was free to indicate what might be in the Bill but on Committee Stage the Deputy, unfortunately for him and for Deputy Bruton, is confined to what is proposed in the Bill and romanticising, theorising or philosophising about other things that cannot be in it does not appear to be a very gainful exercise apart from the fact that it is not appropriate.
Mr. Enright: Deputy Bruton made the point about bloodstock and he read from the Killanin report, which I have not read for quite a while. With the greatest of respect, let me say that both Deputy Bruton as a former Minister for Finance and the present Minister will be aware that the ACC have been engaging in allowing credit facilities for farmers to  invest in bloodstock. That is going on for 15 to 20 years.
Mr. Enright: I put to the Minister seriously that in the US there is a register which shows who owns a particular horse. There is also a register which shows the break-up of shares in a horse or of a syndicate owning shares in a horse. It is possible for banks to register encumbrances or charges against a horse. It allows the person who is borrowing the money——
Mr. Enright: The ACC are granting loans on the security of a farm or property rather than on the quality of the animal in question. The Minister understands what I am saying. The point I am making is that we should set up a register of who owns what animal and how shares are broken down so that encumbrances or charges can be registered against an animal. I do not think I can pursue it further and thank the Chair for allowing me to explain it to the Minister. I would ask the Minister to see what can be done. The Department may not have the final say in the legislation but it is worth looking at.
Mr. MacSharry: The points made by Deputy Bruton were partly answered by Deputy Enright. He asked about the necessity for an agricultural bank. It is there and we have to deal with it. We are dealing with it in this way to permit it to lend outside agriculture. Deputy Enright made the point about an increase in competition for investments; that is a normal commercial activity that has to be undertaken in this business. The fact that ACC will now be lending outside the agricultural area will in itself begin to attract further increased deposits from areas outside agriculture.
Since there was an amendment down I would like to say a few words about the points that have been made by both Deputies in relation to the Killanin report. The recommendations in it relating to the use of bloodstock as security for loans raises complex legal and administrative issues which both Deputies have referred to. Deputy Enright in particular went into great detail about it. Among these issues is who would be responsible in the event of error in the register which would record ownership and charges against that ownership. In view of the  high values of bloodstock this is a significant issue. Another issue is how to establish a watertight system of identification of horses on the register. The suitability of the existing passport system used by the turf club for the purpose of the register would have to be established and the need to give that system legal status would have to be clarified.
Yet another issue is what arrangements should be made at bloodstock auctions to avoid the sale of an animal that is subject to charges. These and other issues are being examined inter-departmentally. When this examination is completed the Government will consider it sympathetically, bringing forward any necessary legislative amendments, even though it is not particularly relevant to this section. Perhaps in the long term it will be. As the Deputies will know, many of the issues in the Killanin Commission report are being examined in the Department of Agriculture and Food and some in the Department of Finance and, we hope, there will be some acceptable solutions.
Mr. J. Bruton: I thank the Minister for his reference to this. The official response he has given will be studied carefully by the people in the industry and I am sure they will be coming back to him. I have achieved the purpose of my amendments which was to get an official response which can now be taken further.
The only issue I would wish to press slightly with the Minister is as to whether he would be prepared to say he will, if necessary, bring forward special legislation to deal with this matter if he is satisfied it is justifiable.
Mr. J. Bruton: When does the Minister anticipate the corporation will be amending their memorandum and articles of association in accordance with the provisions of section 3?. Are they precluded from acting on the powers given to them in section 2 until such time as they have actually amended the memorandum and articles of association?
Mr. J. Bruton: Could I have a little more information on why we need to extend the share capital of the corporation? There have been references here in the House to the problems faced by the corporation in regard to their accounts and in regard to their general position. It may be that extending the share capital of the corporation is the wise thing to do from the point of view of the Exchequer, in the sense that one is giving a breathing space within which any problems there can be solved. On  the other hand, it is not a small matter to have an extension of the share capital of this size in the circumstances of the corporation and I think it behoves the Minister to give a full explanation as to why he needs this.
It is important to say that sections 1, 2 and 3 of this Bill stand perfectly logically on their own. There is no need for section 4 in order to achieve the purposes of sections 1, 2 and 3. This is a separate matter dealt with in the same Bill, but there is no connection to what we have just been discussing. It is clearly a separate issue whether this extension should occur in the share capital of the company. I would ask the Minister to explain in some detail the current financial position of the company, the position in regard to their accounts and the auditing thereof and the justification, from the point of view of the Exchequer, of this extension of the share capital of the corporation.
Mr. MacSharry: While the Deputy may be correct in saying that section 4 has nothing to do with sections 1, 2 and 3, the fact is that the Deputy is long enough around here to know that whenever such legislation pertaining to any particular organisation is being discussed, if the situation warrants it the opportunity is taken to extend share capital or guarantees. That has been done consistently in my time here. Section 4 provides for an increase in the authorised share capital of the ACC from £20 million to £35 million. The limit is being increased because the existing ceiling has been reached. It is desirable that the State should have the power to increase its investment in the corporation should it find itself in need of additional equity.
Prices in general have increased by over two and half times during the last ten years. This would justify an increase in the equity limit to abot £50 million. Accordingly the limit of £35 million cannot be regarded as excessive. Whether the new equity limit provided for in this section or indeed the new limit on loan guarantees provided for in section 5 will be used in the future will  depend, among other things, on ACC's future financial results. As stated in the Second Stage debate, the 1987 results are not yet available. It is only when the audited accounts become available at the end of April that the results for 1987 will be known. The outcome for 1987 depends on the level of bad debt provisions but preliminary indications suggest that insufficient profits will be earned by the corporation to absorb these in full. ACC's experience in this area is not unique; indeed it is the norm. Banks both in Ireland and abroad have reported in recent years substantial additional provisions against their farmer loan books. Having regard to the experience of other financial institutions, it is perhaps not surprising that the ACC may experience a loss in 1987, bearing in mind the farm income situation, the adverse weather of 1985 and 1986 and the fact that up to now it has been a single sector bank.
Mr. Enright: I appreciate that. Is the Minister in a position to outline to the House an approximate figure or an estimate of what he expects the losses to be as this information might be of benefit to the House? I accept that there are problems and that is why I welcome this Bill. One of the main problems is that the corporation are like any bank dealing specifically with one sector — there is a higher risk than if the business was spread across different areas. I accept that there have been major losses over 1984, 1985 and 1986. In spite of what has been said this year about profits in agriculture, many of the farmers whom I have met have not seen the rate of increased profits that has been spoken about by the Minister for Agriculture. I doubt if the estimated increase in profits that was stated by the Minister is accurate. However that is only a personal viewpoint and I am only going by what I have been told by  farmers. I know a number of farmers who are in considerable difficulties, not farmers specialising in milk but in dry stock. Problems also arise for people who have exceeded their quota of milk.
The ACC have been making efforts to try to reduce costs. Is the Minister in a position to state what progress has been made by the ACC in this regard? The Minister has mentioned losses. I would ask him what progress has been made to try to recover bad debts. Is the Minister satisfied with the policy of the ACC in regard to negotiations with farmers who are in difficulties? My reason for asking that question is that the commercial banks in each region have groups of people who are designated to visit different banks, arrange meetings with farmers and discuss the problems faced by farmers regarding their bad debts. These people are able to make decisions without the individual case having to go to a board of directors. In other words, a manager or an assistant manager of a regional office of a bank is able to make a decision if a farmer decides to sell land or if a business person decides to sell a business or a particualar asset to try to meet a liability. The commercial bank is prepared to offer a discount on interest on its own initiative in the region office area.
In dealing with my constituents I find that the ACC seem to have a problem in that when a farmer is faced with problems of repayments it appears as if the local area office has to go to ACC headquarters in Dublin and a board decision has to be made as regards how that individual farmer's problems are solved and whether they will grant a discount. It would be better policy if the ACC had people who could make decisions earlier and in that way they might be able to obtain money at an earlier stage. It would be better to resolve the problem earlier rather than later. Perhaps the Minister will comment on these points.
Mr. McDowell: This is a proposal to increase by a significant proportion the amount of capital of the ACC. It is a proposal which the Minister is characterising as a relatively routine matter and  perhaps it would be if it was taken in the context of any other corporation but in relation to the ACC I am not satisfied that in the present circumstances we should view it as a routine operation. I do not think it is a routine operation. It is true that every depositer with the ACC has a State guarantee and therefore any issues as to their profitability or the significance of the losses they are likely to make in any given year are not matters of huge concern to the individual depositer. To us, in our capacity as shareholders and owners of this company, their profit and loss situation is a matter of grave significance. The Minister is an accomplished and suave advocate of the measure he is proposing.
Mr. McDowell: Surely this is a step with which we should take some degree of care. The Minister is asking this House to give him and his colleagues in Government the right to put an extra £15 million into the ACC. That is not just a theoretical proposition because at present we are told by the Minister that all of the existing authorisation to capitalise this company has been exhausted.
What are the circumstances in which the Agricultural Credit Corporation will require further share capital? If it were a profitable company it would not need further share capital unless it could show that it was going to give a return on that capital. Companies go along with authorised share capital of different proportions to their profits, turnover and nature of their businesses. On this  occasion the Minister is asking us effectively to nearly double the authorised capital of the ACC. He says that this is a routine transaction. The Minister says that he is not aware of any particular circumstances, save the exhaustion of the existing authorisation, which would require this step to be taken. That is just not good enough.
I reiterate what I said on Second Stage in this respect in relation to this section, that is, that I believe that this corporation is under-performing very badly. On the trends available from their pre-existing annual reports and from what one has heard since I believe this corporation are doing very badly financially at present, that they will make a significant loss. There may be good reasons because of seasonal factors, agricultural cycles and the like that the ACC now find themselves in this position. Also looking through the reports and, at the very least applying my knowledge to them, there are good reasons to suspect that some huge strategic errors were made in the manner in which the ACC was operated.
In 1980 the Joint Committee on Commercial State-Sponsored Bodies was told that the ACC were at the crossroads. The chief executive of the corporation informed that committee — when dispensing with the suggestion of Mr. Tom Maher, the President of the ICOS, that perhaps a totally different approach should be adopted to credit in agriculture — that they intended to become the dominant force in agricultural lending. Their chief executive told the committee so at that time. They set out on a programme of intensification of their activities. They took to themselves new premises and saw themselves as expanding their role. It seems that that was a fairly substantial strategic error.
During the period that followed — when the extent of their difficulties was beginning to become apparent — their chairman in his annual report, which was laid before this House, as it has to be, indicated that he wanted this power, referred to in the first section, to diversify.  Our question now in relation to this section is whether we give the Government a right to subscribe additional share capital to the ACC.
Mr. McDowell: ——because he has representatives on the board. The Minister is being very suave but is not being as diligent in this matter as he ought to be. If he has representatives on that board, they are there because he is a shareholder in that company. They are there because their function is to report to him on the state of their operations. The Minister cannot put himself in a position of benign ignorance in this matter and say, “I hear no evil and see no evil, I do not know what is the position in relation to this company and I will not tell the public what is the position in relation to this company until audited accounts are available”. What should that be the case?
Mr. McDowell: The reality is that the Minister's nominees on the board know precisely whether it is any good of a credit institution. They will have known precisely from 15 January onwards what last year's figures would be. They are well aware of their general trading position.
The outstanding feature is the treatment of bad debts and the policy issues in relation thereto. Bad debts and their treatment in accounts, of course, is a variable thing, an art of sorts. I accept all that but I want to know — shorn of all  the decisions as to how they should be treated in terms of accounting — what is the substance of this corporation's financial position at present. I think that information is available to the Minister and that he is reluctant to reveal to the House what information is available to him. If it is not available to him, it ought to be because he has members nominated on that board. If he is not aware of the contending different accounting policies in relation to provision for bad debts, which may or may not show different results depending on how the auditors apply their independent judgment to the matter, he ought to be aware of those things because he has nominees on the board. I do not accept for one moment that it is good enough for the Minister to come in here and say, “this is a routine matter, give me authority to capitalise this company further; I do not know anything until the audited accounts of this corporation are made available; I cannot tell you anything about their present financial state”. The Minister is doing something different. He is coming to this House seeking additional capital authorisation which means he is effectively seeking to float additional shares in a corporation. It is this House, as opposed to the general public, which will decide whether such authorisation should be given. I reiterate that it is wrong to ask any Legislature — no matter how modest that country's means may be, no matter how humble the Members of that Legislature may feel about themselves — to authorise additional capitalisation of a company when they do not know how solvent or insolvent that company is, when they do not know in what respects the company's accounts give rise to any legitimate, rational hope that the company will ever be profitable.
I appeal to other parties in this House to make this point to the Minister at the end of March following the year end for which accounts are being prepared, when the substance of those accounts must be available. It is not good enough for a Minister to come to this House seeking further capital authorisation at a time when the real picture — shorn of how it  will be dressed up by its auditors — is clearly available to somebody, to the board members, the people who report to the Minister.
I suggest that the Minister does know the real position of this company. He ought to know. I would be very surprised if somebody of his calibre was unaware of the real position of this company. I think he has chosen not to reveal to this House the real position of this company because he is using the non-availability of audited accounts as an excuse for avoiding dealing with its real position. He owes this House a duty — when he comes for authority seeking to invest further capital in a company — not to give 18 month-old information as to how the capital in a company — not to give 18-mation. Nobody would float shares in any stock market on the basis of what a company might have been doing 18 months ago when all the financial correspondents were saying that, in the meantime, it had hit very choppy waters. Nobody would do that. If we are ever to bring commercial reality to anything we do with money I do not see why this House should make the same mistake as has been made before, and, doubtless, will be made in relation to other State companies.
I want to make it clear that we should not vote any authority to the State to put further capital into this company unless we are satisfied that they need further capitalisation and that there is some strategy, as Deputy Bruton mentioned, as to where this company will be in five years time. Do we want an agricultural bank? I suggest we should not have a bank solely designed to deal with agriculture. Do we want them to be wholly owned by the State? I suggest we do not. Do we want to be in the position in five years time of having another Minister standing up with a begging bowl of capitalisation in front of him demanding that we give him authority to prop up this institution by putting taxpayers' money into it yet again?
If they are facing into losses — and it seems from the Minister's statement he is at least now conceding the ACC are heading into significant losses, whatever  they are, — and if all of their authorised capital has been paid up, it is clear that this £15 million will be used effectively to pay funds into a loss-making company in order keep them solvent or going. I want to know if it is worthwhile keeping them going. I have heard no argument that has been addressed to that proposition by the people who have the responsibility of convincing this House that it is worthwhile keeping them going. Is it worthwhile keeping going a company without any long-term strategic view as to where they are going and, say, in the context of the Single European Act, as to whether they have any future?
I did not contribute on the last section because I did not think it was worth while going into what the ACC do with their money but I want to remark that it is naïve to believe that a company who cannot make a fist of one thing and have no expertise in another area are going to rescue themselves by diversifying into areas where they have no proven track record. That is naïve. I do not see here any strategy for recovery of the ACC and, therefore, we should not, in the present circumstances, give them any further moneys.
I am not talking at present about the extent of the guarantees because that is a separate issue and it will come up in the next section but I do say that no argument has been made for the further capitalisation of this company. I mean this seriously, when I say the Minister is failing in his duty to this House to tell us now in clear and unequivocal terms the real position of this company. It is wrong that I am being told to wait for the audited accounts. That is wrong. It should not affect the Minister's attitude to the issue and it should not affect my attitude if the Minister has to come to me and other Members of this House for co-operation on this issue.
I want to know what the position of this company is now and what their trading position is now, not 18 months ago when they were deteriorating but now before I decide how to exercise my vote on this issue. I am indicating to the Minister that  unless he indicates in fairly substantial terms the financial position of the ACC we will oppose this section and the next section so as to get across the proposition that there should not be capitalisation of companies whose records give rise to considerable cause for doubt. A blank cheque should not be signed and given to the Minister in these circumstances. He has an equivalent and corresponding duty to give us up-to-date information but he is not doing so. This business of talking about the audited accounts is a smokescreen to save that company from the embarrassment of their present position.
The Minister could very easily say that at the end of 1987 their position was this, that if you take one view of the bad debt provision their losses could be so many million pounds and if you take a more stringent view the losses could be so many more million pounds. He could tell us that is the nature of the company he is asking the House to put further capital into, that that is how he sees that company recovering. We have had none of that: in fact, we have had the precise opposite. We have had obfuscation, with the greatest of respect. This is not a routine matter in terms of the timing of the measure. I suggest that the Minister must come clean on this issue and now tell us everything he knows about the up-to-date financial position of this company.
Mr. J. Bruton: I have a slight difference of emphasis from Deputy McDowell in the sense that I do not think it is possible for the Minister or the Agricultural Credit corporation to conduct long-term business strategy in this House. The Agricultural Credit Corporation need to diversify their lending and deposit-taking operations and get into conjunction with another financial institution, preferably from outside the State, with a view to using the expertise of that financial institution plus the contacts of the Agricultural Credit Corporation throughout the country, to develop a banking business that is more soundly and broadly based than the existing one.
If the Agricultural Credit Corporation  were, for instance, in discussion with another bank, I can appreciate that the Minister would not wish in a debate such as this, to disclose that fact here. I would like to know — and this is where Deputy McDowell is absolutely right — if there is any long-term strategy at all for the Agricultural Credit Corporation other than a bandage approach, of applying £15 million worth of a bandage today and maybe coming back in two years time to do the same and two years after that to do the same again. I do not necessarily believe if a patient is in poor health that the only cure is to shoot him or ask him to drink four gallons of ice cold water. Sometimes that could have precisely the opposite effect to the one desired. If I have a reservation about Deputy McDowell's approach it is that it is somewhat along those lines in the sense that if we deny them this bandage of £15 million the consequences of that could be simply to create a bigger problem for the Exchequer — which is my concern and I am sure Deputy McDowell's as well — than might occur if the corporation were encouraged to trade their way out of their difficulties. The corporation are not going to trade their way out of their difficulties if no strategy is devised for getting them into a position where they are sufficiently diversified and have the international associations and expertise to do so. I should like to hear from the Minister the plans, if any, the corporation have in this regard. What are the Minister's plans in this regard? I acknowledge that in the first instance it is for the corporation, and not for the Minister to come up with proposals of this kind. It is not a matter for the Minister for Finance, who has plenty of other responsibilities to fulfil, to devise corporate strategies for the Agricultural Credit Corporation. It is not for him to tell them whom they should associate with in order to diversify, to become stronger in their expertise and become a more balanced banking business. It is clearly a matter for the corporation to do so and I should like to know what the corporation and board are doing in that regard.
It is suspicious that this legislation is  going through the House almost exactly 12 months after the end of a year in respect of which the accounts have not been presented. Why not wait for another month until those accounts are ready and present the legislation then? If that was done the Minister would not have to answer any of the awkward questions Deputy McDowell and Deputy Enright posed. Conversely, why not say to the Agricultural Credit Corporation “I have got this legislation coming up and I must have the accounts. Please let me have them before I go into the House”. Why did that not happen? Why is this legislation being put through before the accounts have been presented? Is there any reason the accounts are 12 months late?
I have to say that accounts being late is nothing unique in the public sector. In companies with no difficulties I have known accounts to be four or five years late. For instance, I remember a health board did not present their accounts until five years had expired after the date they were to be presented. Practice has improved since then, but accounts being a year late is not exceptional.
In the case of the Agricultural Credit Corporation it was to be anticipated that questions of the kind posed by Deputy McDowell would be posed. Why then present the Bill before the accounts? Why not insist on having the accounts before the Bill is introduced? Why ask us to buy a pig in a poke? I do not go all the way with Deputy McDowell's refusal of the amount sought, but the House must press the Minister for a great deal more information than he has given. It was not impossible for him to answer the question in broad terms as to the extent of the gap between the bad debt provision and the profits of the corporation.
Mr. MacSharry: I hate repeating myself but obviously Deputies were not listening to me earlier when I talked about it being normal practice, not routine, when a Bill is going through the House, to take the opportunity, when a particular ceiling has been reached to  have a matter of this kind included. What may or may not be done with the new authorised share capital or authorised limit remains to be seen.
In so far as the accounts are concerned, I have said very clearly all that I can, and that is, that it is only when the audited accounts become available at the end of April that the results for 1987 will be known. The outcome depends on the bad debt provision and I said I did not think profits would be sufficient to cater for them and that there might be the possibility that the ACC could experience a loss in 1987. What more can one say?
Mr. MacSharry: We are talking about the end of 1987. Normally those accounts are published for the annual general meeting in April-May. This Bill is before the House since last November and therefore the question of whether we are buying a pig in a poke does not arise. We are being very open. These are the same issues which were raised on Second Stage. Deputy McDowell and his party voted against it at that time and he says he will do the same now. That is his right.
Mr. MacSharry: I want to condemn out of hand the disgraceful approach of Deputy McDowell when he tried to undermine confidence in a State bank. Remember, there are thousands of people who have deposited their money in this bank. The Deputy did not think about them when he was making those remarks.
Deputy Enright asked about savings made in relation to administration. A voluntary redundancy programme reduced staff numbers from a peak of 715 in 1980 to 479 at the beginning of 1986. The Agricultural Credit Corporation then embarked on a compulsory redundancy and overhead reduction programme in 1986 designed to secure savings of £1.2 million a year. In the event, annual savings of £1 million were achieved through a reduction of staff to 407 without resorting to compulsory redundancies and through the closure of five branch offices and a reorganisation of the management structure, including a reduction in the number of regions from five to three. This was completed last year. It was basically through those efforts over the last two years that those results have been achieved.
Mr. MacSharry: Not that I am aware of at the moment. As regards plans, the board are waiting for this legislation to enable them to embark on business in this new area. We hope they will have success.
Mr. Enright: I noted what the Minister said about staff reductions, the closure of branch offices and efforts to economise by the Agricultural Credit Corporation. This corporation is a single sector lending organisation. They have suffered considerable loss — let there be no doubt about that, and nobody in this House could deny it — because their business activities were confined to one area. It has not been fully appreciated, except by people closely associated with the farming community, that many farmers have suffered losses, and they are not out of  the woods yet. This has to be borne in mind.
I have seen many warrants from the sheriff being forwarded to farmers in my constituency asking them for income tax. The farmers find this very alarming because in many cases they are unable to meet their commitments to the Agricultural Credit Corporation and the commercial banks as well as meeting their ordinary living expenses and also meeting these tax demands.
The point I am making is that the major problem of the ACC is that they have been involved in one area only. We all recognise that there must be a competent staff to run any organisation, but the ACC have reduced staff numbers and cut overheads. Deputy Bruton referred to extending their area of activity. I do not know if the Minister will accept this proposal to allow them to diversify, but the ACC were unable to compete with other institutions because their activities were confined to one area. While it is only right that an agricultural bank must place major emphasis on farming, they must be allowed to diversify. In those circumstances the Minister should consider granting an extension of the 20 per cent to farmers who wish to diversify. Such a move would be in the long-term interests of the ACC.
Mr. McDowell: I resent the Minister's tone and approach to my remarks. I made it quite clear that people who invest money have a State guarantee and that their position is utterly irrelevant because of that. I made that clear for the benefit of the Minister and I should like to repeat that I was referring to our position as shareholders of the company. I do not know whether the Minister listened to me but I thought I made that quite clear. I resent the Minister's suggestion and the implication in his remarks that I cannot query whether it is wise to put more money into the company which is going through a bad patch because to do so would in someway shake confidence in a State run credit institution. That is nonsense, and highly defensive nonsense which surprises me. It was wrong of the  Minister to put himself in the position of attempting to lay his body across that of the Agricultural Credit Corporation.
I am perfectly entitled to query the wisdom of any investment. I am entitled to query the financial state of any credit institution of the State. I did not say anything which would suggest that this institution should in any sense be regarded as unsafe or a bad repository for savings. I did not say that and it was wrong of the Minister to suggest that I did. In fact, I said the reverse, that as far as depositors are concerned the ACC is a safe bet but from our point of view, as shareholders, it was manifestly not a safe bet.
The Minister said that it was normal practice under the Companies Act to produce audited accounts and that is true but he went on to try to suggest in a flim flam of nonsense that precludes us, or anybody else, from finding out how a company is doing on an interim basis. That is rubbish. Every publicly quoted company in stock exchanges around the world produce interim results. For some reason three months after the year end at this institution we are not being told what the Minister knows.
The Minister claims not to know the accounting position but that was a specious remark by him. He may not know the exact position but he must have a very clear picture of what it is even to make the concessions he has made to us so far. He must know that there is likely to be a loss. Even to make the further concession that the extent of the loss is likely to be such as to eat up entirely whatever surplus there is in other areas, he must know the ball park figures for the company. He must know what the contending versions of provision for bad debts can or could be. The Minister must be in a position to tell the House what the worst and the best possible position in terms of provision for bad debts in the company is, depending on auditing policies.
I reject as wrong, incorrect and unfounded the suggestion that we must wait for the auditors to decide the issue. Auditors do not decide such issues; they  do not decide what the bad debts of a company are. Auditors decide, to some extent, what a fair account of the bad debts are from the point of view of determining profit and losses for the shareholders of the company and the public at large. All the figures, if they are available to the auditors to permit them to deal with the accounts, are available to the Minister. I resent the Minister trying to bully me on this issue and suggesting that in some sense by querying the wisdom of the investment, because we know that there is something wrong but we do not know how wrong it is, I am knocking confidence in the institution. That is incorrect. I am not doing that but I am demanding that the Minister come clean and give to us on an open basis the position of the company before he asks for our authority to give the company further capital.
In my view the Minister has more information than he has made available to the House and of that there can be no doubt. He is withholding such information because he feels justified in doing so. The Minister is giving as a justification the fact that the audited accounts are not yet ready. In my view that is not sufficient justification.
I will not be bully-bounced or scared off from making remarks about this company or about the wisdom of investing further capital in it by virtue of the fact that it is a credit institution within the ownership of the State. It may be that we should not have any such investments in an agricultural credit corporation but that is a different issue and one which should not be dealt with on Committee Stage. However, I am entitled to call on the Minister, before he asks us to give him authority to invest another £15 million in a corporation, to tell us what the up-to-date financial position of that body is. It is wrong and without any justification for a Minister to say to the House that he cannot do that until he gets the audited accounts.
It is not correct for a Minister to suggest that the views of an auditor on whether or not sufficient provision has  been made for bad debts are the only views we are entitled to hear about. The Minister is entitled to form views as are his members of the board. We are entitled to best case and worst case scenario figures; we are entitled to know the accounting policies, to be allowed evaluate whether they are justifiable and whether the accounting policies are generous or not to the company. We are entitled to know whether they are liberal or conservative accounting policies but, above all, it is untrue to indicate by suggestion to the House that the Minister does not know the financial status of the company within global ballpark terms. He is aware of that status but is not telling us and at the same time he is asking us to give him authority to spend £15 million more, if needed, by way of capital to the company. That, as far as I am concerned, is not a responsible thing to do. Far from me being irresponsible it is the Minister who is being irresponsible with taxpayers' money. He is asking the House to be irresponsible by giving him authority to recapitalise the company to a significant extent without getting the facts or being made aware of the state of the company.
I completely reject the Minister's attempt to coerce me into remaining silent on this issue. I reject his suggestion that we must wait for the audited accounts before we can be told anything about the financial state of the company. I reject the suggestion that the Minister should keep his cards close to his chest and not tell us as much as he knows about the position of the company when asking us for further capitalisation. If he finds that embarrassing or thinks that in some sense it will undermine confidence in this institution all he has to do is postpone consideration of the Bill. It is the Minister who is pushing the Bill through. Many measures could be dealt with instead of this Bill. We are being asked to deal with this matter on the blind without seeing the audited accounts. We are told that they should be available soon and I would like the Minister to agree either not to seek further capitalisation at this stage or tell the House what he knows about the financial position of the ACC.
Mr. J. Bruton: We are not prepared to go along with the idea of not giving an increase in the share capital, for a reason which I think is sensible. We believe that the company have certain difficulties but they must be encouraged to trade their way out of those difficulties. The Minister has indicated that they have reached their existing equity limit and that they need an injection to provide a base for their share capital but to be based on lending. If we were to deny that to them we would, essentially, by that act, fold up the corporation. I do not think that would be financially prudent from the point of view of the State or the Exchequer. The aim must be that such difficulties as the corporation have should be traded out of. I hope the Minister will give some indication of an intention to ensure that the corporation make arrangements to engage themselves in consultations with others in the banking sector to develop their expertise and extend their capital base in order to get into the position of not needing any more share capital from the State. Any further share capital which is needed for the natural extension of this corporation should be obtained by other means.
I hope the Minister can give an indication to the House before we pass from this section that he will be asking the board of the corporation to present him with a strategic plan for the corporation which would see them using the facilities under this legislation to extend their range of business into a more balanced shape and also to act in conjunction with other banking institutions. Thus they will get the expertise they lack at the moment to engage in non-agricultural lending and thereby trade out of any difficulties they now have.
Mr. MacSharry: A plan is in preparation at present for this year and for the next five years. I should like to confirm again — and most exprienced personnel here will know — that before any increase in share capital is given by the Minister for Finance to any company it must be fully justified by that company and in the context, as Deputy Bruton said  rightly, of a corporate plan, a programme for a year or five years. That is being prepared at the moment.
Mr. MacSharry: I do not know if that arises. I think they have sufficient expertise there. There have been difficulties and Deputy Enright has put his finger on it, as has Deputy Bruton, that it is a one sector bank. That causes difficulties. What we are doing here will help out in that respect. From here on I hope for further progress.
Mr. Enright: Deputy Bruton's remarks make common sense. I had hoped the House would not divide on this issue. That would not be of any benefit. The ACC have been making considerable efforts even in regard to staff reductions, reductions of branch offices and so forth. Agriculture has gone through a difficult period. The Minister's tax amnesty has been very warmly welcomed and I consider it a good measure. Again, there is a problem, as the Minister is probably aware. To avail of the tax amnesty with regard to repayments — and this does not apply just to the farming community but across the board — a considerable number of people who are in debt and are availing of this tax amnesty for one reason or another are withholding repayments to banks, corporations and so on. The ACC form part of this problem.
I made a number of suggestions to the Minister. I shall go along with Deputy Bruton's point that the corporation should produce a plan. I would urge also that the Minister agree to some of my suggestions, first to increase the ratio above 20 per cent in different spheres of business activity; secondly, to encourage other semi-State bodies to transact business with the ACC in regard to borrowing, lending and different types of business activities; thirdly, to allow the ACC to take in investments at least on the same level as other bodies such as An Post. That is an area into which they  should be allowed to extend. To prevent the ACC from extending their share capital would cause major problems for everybody. It would not be in the interests of the ACC, the farming community, or the country. It would not be  in anybody's interest just now. It is essential, as Deputy Bruton very concisely put it, to allow the ACC to trade out of their existing difficulties. That is putting it in a nutshell.
Coughlan, Mary T.
de Valera, Síle.
Gallagher, Pat the Cope.
Haughey, Charles J.
Higgins, Michael D.
Hilliard, Colm Michael.
Kitt, Michael P.
O'Dea, William Gerard.
Wilson, John P.
Gibbons, Martin Patrick.
McCoy, John S.
O'Malley, Desmond J.
Tellers: Tá, Deputies V. Brady and Browne; Níl, Deputies Harney and McDowell.
 Question declared carried.
Sections 5 and 6 agreed to.
Title agreed to.
Bill reported without amendment.
An Ceann Comhairle: When is it proposed to take Report Stage?
Mr. MacSharry: Now.
Agreed to take Report Stage today.
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