AGRICULTURAL MORTGAGE CORPORATION BILL (Hansard, 24 April 1956)

§ LORD CHESHAM
My Lords, I do not think I need speak for long in moving the Second Reading of this short but important Bill, because I feel there will be general agreement that it is an essential measure in assisting the good work of the Agricultural Mortgage Corporation. Clause 1 deals with the legal aspect of the Bill and is concerned with making valid the status of two issues of debenture stock made by the Corporation in 1951 and 1952. This invalidation is only a technical one because of a fault in the Corporation's Memorandum of Association, but I think your Lordships would wish me to give, as briefly as I can, the basic details of the matter.
The Corporation's Memorandum of Association provides for a limit on the amount of the Corporation's debenture stock which may be issued and outstanding at any time. This limit is arrived at by a formula which provides that the total amount of such stock shall never be 1183 more than ten times the sum of the Corporation's share capital, its reserves and the amount advanced by the Government to the Corporation's guarantee fund under the provisions of the Agricultural Credits Act, 1928. Thus the Government's advance to the guarantee fund has a direct bearing on the amount of debentures which may be issued.
In 1944, it was thought there would be considerable demand and requirement for capital for agricultural investment in the post-war period and an Act was then passed raising the Government's limit of advance from the original £750,000 to a new limit of £2½million. The Corporation was then able to expand its business considerably and various debenture issues were made, culminating in those of 1951 and 1952. Last year it was decided to make a further issue, but it was found that the Corporation could not do so because it had exceeded the limit set by the formula I have mentioned, for the reason that the original limit to the advance it might obtain from the Government had not been correspondingly brought up to date in the Corporation's Memorandum of Association. In other words, although on the legislative side the £2½million was perfectly proper and perfectly authorised, the relevant Article in the Memorandum of Association was not brought up to date so as to read £2½million instead of £750,000. That meant that not only could the Corporation not make any fresh debenture issue last year, but also that the issues of 1951 and 1952 were, technically, invalid for the same reason, although, of course, they were perfectly sound financially. The object, therefore, of Clause 1 is to validate this position and to enable the Corporation to make further debenture issues in order to be able to carry on its work.
I come now to Clause 2, which deals with the financial aspect of the Bill. It makes a further increase in the maximum amount of the advance which the Government may make to the guarantee fund. The present Bill will raise the limit to £3-million—that is a further £750,000 over the figure at which it stands at present—and this will have the effect of allowing the Corporation, as and when it finds it necessary, to increase its debenture issues by some £20 million. It is perfectly true that, as things are at present, the Corporation would, in due course, be able to increase its issues by 1184 about £12½million; but it has been thought right to take this opportunity, while the matter is being dealt with, to increase the potential to £20 million, which is a sum thought to be entirely adequate to meet the Corporation's requirements until 1960, which is as far as we need look ahead at the present time. I hope that I have said enough to indicate that the small size of this Bill is hardly relative to its importance in furthering the provision of the valuable facilities provided by the Corporation. I beg to move that the Bill be now read a second time.

§ THE EARL OF LISTOWEL
My Lords, I rise only to support this Bill and to thank the noble Lord for a speech deserving credit, both for its brevity and for its clarity. Perhaps the only qualification I would care to make about my agreement with the noble Lord's speech is with regard to his use of the word "important". We support this measure, but we do not regard it as more than a very minor contribution to the finances of agriculture.
There is, I think, this point of substance in connection with the Bill. It provides the Agricultural Mortgage Corporation with another £750,000 for its guarantee fund, and this will clearly be of advantage to those who wish to borrow from the Corporation. But, at the same time, of course, it will make only a very small addition indeed to the amount of capital that will be available for investment in agriculture—and most of us regard capital investment in agriculture as lamentably low and one of the chief handicaps in obtaining increased production from the land. The other factor that must be remembered is that this money will be on loan at a very high rate of interest, which again will be a deterrent from the standpoint of the borrower. However, this Bill certainly will be of assistance to the Agricultural Mortgage Corporation in the valuable work it is doing for agriculture, and for that reason we welcome it.

§ LORD CHESHAM
My Lords, I should like to thank the noble Earl for his kind reception of this Bill. I have 1185 no more to say except to refer, very briefly, to two of the points which he made. I should not like there to be any confusion in the mind of any of your Lordships on the subject of this figure of £750,000 which we are asking to he authorised to-day. That is not the sum which is to be available to the Agricultural Mortgage Corporation to lend to people—if it were, it would be quite insignificant. It is a sum which merely can be called upon to go into the guarantee fund against a rainy day. Having that sum available will, as I tried to show, enable the Corporation to obtain far more money by debenture issue, as it will wish from time to time to do.
As regards the high rate of interest, I do not feel quite so pessimistic as the noble Earl opposite about the effect of the money available to the industry, because the present rate—which he knows as well as I do is 5½ per cent. —has obtained since August 4 last year, and the returns for the financial year just ended show that the amount of money—just under £3½million—was definitely 1186 greater than in the previous financial year, when the total was approximately £2,820,000. So the rate of interest does not seem, so far, to have been a great deterrent.