HL Deb 24 March 1975 vol 358 cc971-5
The Earl of KINNOULL

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows

To ask Her Majesty's Government whether they consider the current lending policy of the Agricultural Mortgage Corporation is in accordance with the duty laid down under the Agricultural Credits Act 1928; why their present interest rates are far above those of other financial institutions; and whether they will encourage the Corporation to have a more flexible approach in their future leanding policy in the interests of the fanning community and food production.


My Lords, Her Majesty's Government are satisfied that the lending policy of the Agricultural Mortgage Corporation fully meets the requirements of the Agricultural Credits Act 1928 to lend on terms most favourable to borrowers. The Corporation's current lending rates reflect the cost of their borrowings from the market and bear favourable comparison with lending rates generally. In recent years the Corporation have extended their facilities and now offer a range of loan options and of repayment terms.

The Earl of KINNOULL

My Lords, I thank the Minister for that reply. Is he aware that the present bank lending rate is far below the Agricultural Mortgage Corporation's rate, and that therefore it is difficult to understand how he can say it is in comparison with other financial institutions? May I further ask the Government what communication they had with the Agricultural Mortgage Corporation, and what responsibility the Ministry of Agriculture, Fisheries and Food has as well with regard to the lending policy of the Corporation; and whether they take this into account in their Price Review?


My Lords, on the first matter raised by the noble Earl, if he were to go to one of the clearing banks for a loan of up to 30 years, he would be unlikely to get that money, either for that period of time, or at the short-term lending rate of the banks. There is a difference here, as the noble Earl would recognise. With regard to the connection with the Department—I think I understood the noble Earl correctly when he asked about this, although there was some conversation taking place and I did not quite hear— there is a close understanding. Indeed, I understand that some three or four years ago a Working Party was established to reconsider the lending policy of the AMC, and it came to the conclusion that the policy was correct in the circumstances. As to the situation regarding the Price Review, the kind of business which the AMC are doing—namely, the purchasing of land at long-term lending rates—is not something which one would take immediately into account in fixing current prices.


My Lords, could my noble friend tell us what is the usual lending rate charged by the Agricultural Mortgage Corporation?


Yes, my Lords ; the rate is 14¾ per cent. on long term loans and 14½ per cent. on certain variable loans.

The Earl of KINNOULL

My Lords, would the Minister accept that a lower mortgage interest rate to farmers would be conducive to encourage them towards extra food production, which the whole country requires, and would help offset in some way the massive production costs that farmers faced in the past 12 months?


My Lords, I have no doubt that it would, but the question is: where is the money to come from? It is, as I have said, raised in the open market and because of the Government guarantee, the money is raised as cheaply as possible, and is consequently lent as cheaply as possible. That does not mean that this is necessarily the best way of helping the farmer, and there are other ways in which the Department, the Government, and previous Governments have helped the farmer, by, for example, various capital grants.


My Lords, would not the noble Lord agree that we might well take the example of France, where the French Government arranges very cheap loans for farmers? I believe the rate is something in the region of 4½ per cent. or 5 per cent. Would not the Minister further agree that the agricultural industry is the most highly capitalised industry per worker in the country, and that therefore farmers must have the capital to buy modern machinery which, of course, is now very expensive?


My Lords, I doubt whether the British farmer would do better if we had the system which appertains in France. It is true that there is a subsidised lending rate there, but the farmers do not get the capital grants for land drainage, farm buildings and the provision of equipment, for example, which successive Governments in this country think is a better way of helping them.


My Lords, did I understand the Minister to say that the price of money and the cost of borrowing were not taken into account in the Price Review?


My Lords, I said that the long-term purchase of land, the long-term purchase of a farm, is not necessarily the sort of factor which is taken into account year by year when fixing the current price of products.


My Lords, would not my noble friend agree that it is somewhat incongruous that Her Majesty's Government provide loans free of interest for several foreign countries and yet charge the farmers through the Agricultural Mortgage Corporation, I think he said 14⅓ per cent? Is that not an obstacle to anything in the nature of prosperity for the fanning community?


My Lords, if my noble friend is saying that 14¾ per cent. is a modern version of usury I accept that; it is too high. But of course it is related to the current rate in the market. I think everyone would like to get that rate down.

The Earl of KINNOULL

My Lords, could the Minister explain to the House why it is that if a building society lends on long-term interest on a house mortgage at, I think, now 11 per cent. to 11½ per cent., the AMC have to lend on long-term interest at 14¾ per cent.?


My Lords, personally I think that is a very relevant question, but I have to give the answer which I gave earlier, that there are various ways of helping the fanner, one of which is by subsidising the money lent to the farmer; the other is by various schemes—capital grant schemes of one kind or another— which have been held to be very useful and effective. There is a certain amount of money available and it is a question of how we use it. The Government's view is that the present method is the better way.


My Lords, would the noble Lord agree that the Agricultural Mortgage Corporation on the whole in its independence serves the farming world well, and that the system of financing itself is to go to the market from time to time to raise this money, and therefore it has to pay the interest according to the cost at which it raises this money? There is a certain historical element here—that the independence it gains from this method on the whole has served the agricultural world well.


My Lords, I am very grateful to the noble Lord, who has put my case much better than I could have put it myself. All I have to add to what he said is that it is of course a non-profit-making establishment. I agree with him that it has served the farming community very well.


My Lords, we have had 27 minutes for four Questions. I hope the House will consider that to be long enough and that we may now move to the next Business.