EXPORT GUARANTEES BILL

HC Deb 01 July 1948 vol 452 cc2386-409

Order for Second Reading read.

3.59 p.m.

The President of the Board of Trade (Mr. Harold Wilson)

I beg to move, "That the Bill be now read a Second time."

The purpose of this Bill is to extend the amount of liability which the Export Credits Guarantee Department is authorised to assume under the Export Guarantees Acts, 1939 and 1945, in order that the Department can continue to provide to the full the services which it now offers to the British export trade, and which is so much in demand by British exporters. The fact that there is a need for this Bill is evidence of the demand for the services which the Department offers to our export trade. The House, is I think, well aware of what those services are and of the long and successful history of the Department's services in this field for the past quarter of a century. It has represented in fact a most successful incursion on the part of the State into the insurance field. It has undertaken risks which the private insurance companies could never have assumed, and it has represented a most successful but little publicised piece of public enterprise, providing first class service at moderate cost to those who have used it, and at the same time without any loss falling upon the taxpayer.

The guarantees under the Export Guarantees Acts are given subject to the consent of the Treasury and after consultation with an advisory council. There have been arrangements for many years whereby traders can protect themselves against losses in overseas trading by a Government guarantee offered through the services of the Department. Since this Bill raises very substantially the amount of liability which the Department can assume it is right to trace briefly the record of the development of the Department.

As the House knows, the first export credits scheme was introduced in 1919, and took the form of making cash advances for a percentage of the cost of the goods exported. That system continued for two years. It was discontinued in 1921 and a system of guarantees was introduced. That basis is the one in force today, though the scope of the risks which can be covered by the activities of the Department has now been considerably widened. Broadly speaking, the guarantees now given cover an exporter against a high percentage—up to 85 per cent. for insolvency and 90 per cent. for other risks—of any loss he may incur from causes outside his own control or outside the buyer's control which arise from happenings outside the United Kingdom and which are not normally insurable elsewhere.

Before the war the main risks covered by these guarantees were for consumer goods—generally the insolvency of the overseas buyer, sometimes the inability of a solvent buyer to remit sterling owing to foreign exchange restrictions, but guarantees were also given in those days for important contracts for the export of capital equipment—on longer credit terms—to overseas buyers, including foreign Governments. In May, 1945, when I believe my right hon. Friend was in charge of the activities of the Department, the Department's guarantees were again extended in scope to assist British exporters in their endeavours to achieve the maximum volume of exports.

The House should be told briefly what the present services are which are offered by the Department. The standard form of policy for consumer goods, the "contracts" policy, broadly speaking covers an exporter for any risk outside his own or his buyer's control from the time he books an order to the time he receives sterling or some other approved currency due to him in payment for that order. The risks covered include the insolvency of the buyer; the failure of the buyer to pay for delivered goods within 12 months of the due date; exchange restrictions, or a shortage of exchange in the buyer's country preventing the buyer from transmitting sterling to the United Kingdom; the occurrence of war between the buyer's country and the United Kingdom; the occurrence of war, hostilities, civil war, rebellion, revolution, etc., in the buyer's country; the cancellation or non-renewal of an export licence—a very important risk in these days—or the imposition of restrictions on the export of goods not previously subject to licence; the incurring of irrecoverable extra delivery charges due to diversion of voyage; and, more generally, any other cause outside the United Kingdom which is beyond the control of the exporter or the buyer.

The policies on these consumer goods normally cover the whole of an exporter's overseas trade or a reasonable share of it for 12 months ahead. Contracts for capital goods are dealt with individually but the percentage of guarantee and the coverage of the risk are very similar to those applicable to consumer goods. With the development of trade with Eastern Europe as a result of bilateral trade agreements, and with certain other countries where there exist in pretty heavy measure the risks against which the Department can provide cover, the services of the Department are now more than ever in demand.

The recent figures show the development of the use made of the Department's services. The value of policies issued for the three years immediately before the war came to about £43 million a year. Wartime figures amounted to £72 million a year, which was also the figure in the first post-war year of 1945–46. The following year, 1946–47, with the development of the export drive, the value of policies rose to £139 million and last year—1947–48—to £186 million. We are, therefore, very near the limit of liability set in the 1945 Act, which itself extended the limit set in the previous Act. It has, therefore, become necessary to come to the House and ask for an extension of that liability limit.

We are asking that the £200 million over-all liability should now be raised under this Bill to £300 million; that the £5 million for what are called "other matters"—I will explain in a moment what they are—be increased to £15 million; that the £15 million for external trade be increased to £30 million. We are not asking for any increase in the £15 million limit placed on the cover for re-export trade. When my right hon. Friend the Chancellor of the Duchy of Lancaster, then President of the Board of Trade moved the Second Reading of the 1945 Act he then envisaged the possibility that we might at some future time have to come to the House for some extension of the figure. We are now very close to the £200 million, and that is the reason why, as a matter of some urgency, we have had to come and ask for an extension in the limits.

It is not only a question of the over-all liability which the Department can assume. The individual limits for particular classes of cover also require to be raised. For instance what are called in the Act "other matters" have a limit of £5 million. This figure was defined in the original Act as enabling guarantees to be given in connection with transactions which though not necessarily resulting in exports might be "conducive" to the establishing or encouraging of export trade.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

Would the right hon. Gentleman state the Section of the Act to which his remark applies?

Mr. Wilson

Yes, Section 1 (4) of the 1939 Act. Under this we have now gone as far as £4,500,000 of the £5 million allowed. This form of service rendered by the Department is very much in demand by those who deal in this class of trade. What is covered by it principally is the processing abroad of United Kingdom-owned raw materials, such as raw wool and raw cotton, into the finished article, which has been undertaken on a small scale in the last two or three years. Secondly, there is what might loosely be called the export of brains—technical knowledge—especially in consultant services where a growing use is being made of British consultant firms, such as engineers, and there is some risk of nonpayment for their services. These consultant firms now often come to the Department for some form of cover against the risk involved. A third and quite valuable means of earning foreign currency is the sending abroad of contractors' equipment for use in the construction of plant which they have contracted to erect.

The third thing for which the authority of the House is required is to increase from £15 million to £30 million the amount available for external trade. That is, trade in goods which are bought abroad by a United Kingdom merchant or trader, and sold or shipped direct to a third overseas country. The United Kingdom merchants have made very considerable use of the external trade guarantees given under Section 2 of the 1945 Act, and the transactions are growing month by month. There is about £18 million worth current at the present time. So far the total of the transactions has amounted to over £25,500,000 and the Department has an outstanding maximum liability of about £11 million worth of guarantees, leaving a margin of only £4 million to meet new business. In view of the demand for this class of business, it is necessary to ask the House to agree to a higher limit.

That is all which is covered in the Bill. It is a short and very simple Bill. Read in conjunction with the two previous Acts, it gives all that we require at present for the Export Credit Guarantees Department to function to the fullest possible extent to which the British traders want it to function. I hope the House will agree to give a speedy passage to the Bill. There is one thing I ought to tell the House. This Bill is intended as a stop-gap measure to ensure that the guarantees and the work of the Department should not have to cease or in any way be restricted during the present Session because of the nearness to the limits of liability, but I ought to tell the House that the powers given under the Export Guarantees Act are at present being reviewed, and if it is found necessary the Government will have no hesitation in introducing fresh legislation in a future Session with the object of improving still further the service available to exporters and of encouraging the maximum development of both our visible and invisible export trade.

Mr. Bowles (Nuneaton)

Can my right hon. Friend give any figures about the experience of claims and what has been the experience of Governments or traders in rights of recovery against default in payments from abroad?

Mr. Wilson

No, Sir. I have no figures immediately available on those points, but I am sure that my hon. Friend the Secretary for Overseas Trade will be able to give my hon. Friend any of the information he would like to have, when he replies.

Mr. Edgar Granville (Eye)

The right hon. Gentleman has referred to the possibility of a future scheme. Will the future scheme be—and, for that matter, is the present scheme—on a voluntary basis? Are all the premiums entirely voluntary, or is there any intention to effect an export levy compulsorily on exporters?

Mr. Wilson

The schemes are entirely voluntary. It is a fact that traders are making more and more use of the service of this Department. There are certain fields in which it may be thought that private trade would want to enter, and we are examining that and the possible service which might be provided but which cannot be provided in the absence of future legislation. All I am asking the House to do is to approve the increases in the limits of liability under the previous Acts. I am sure that this is a question which has no party content in it. The Export Credit Guarantees Department has functioned equally successfully under Governments of all political colours, and I am quite sure that the House will agree that it is something which is absolutely essential to our export trade under present conditions and which, with the good will of the House and the passage of this Bill into law, will continue to provide service for the British export trade and to render a good account of itself.

4.16 p.m.

Mr. Oliver Lyttelton (Aldershot)

We shall, of course, give this Bill an unopposed Second Reading. If it had to be opposed, the Opposition would have had to select somebody else to do so because I have been connected with this scheme for a long time and sat on the Committee for many years before the war. The hon. Member for Nuneaton (Mr. Bowles) has asked about the experience. I am not sure that my figure is right but I think that at the end of 1946 the accounts showed a balance on the underwriting reserve account of just over £2 million. As far as I know, that has not been seriously eaten into since.

Mr. Bowles

I am much obliged.

Mr. Lyttelton

I do not know whether that figure is up to date, but I thought it might do currently. I was very glad that the President of the Board of Trade again made public—I hope it will be commented upon widely—the facilities which the scheme offers to the trader. Certainly at times it has suffered from the fact that traders were unaware of the facilities available to them, and it required and still requires some skill, to know exactly how one can insure these credit risks. I have seen the scheme from both sides. The companies with which I am now connected have been large users of it on the export of capital goods. The scheme for the electrification of the suburban system of Rio de Janeiro was insured under this scheme.

As the President of the Board of Trade said, the outstanding total now amounts to £186 million, which carries us very near the limit allowed by Parliament. We endorse his view that the Bill should pass through all its stages as quickly as possible in order that there shall be no interruption in the facilities which the Department is able to offer to the trader. One of the reasons for requiring this increase, which the President of the Board of Trade did not mention, is the increase in prices generally which has occurred. That has to be added also to the effort which the country is making to increase exports. The Department ought to be congratulated on this occasion, upon a record of having provided a very useful service to the trading community and at the same time—if I may use such a vulgar term—having made a profit for the taxpayer up to 1946 of over £2 million. It is not intended to be primarily a profit-making affair, but the experience of the Department in underwriting these risks has been favourable. The skill with which the officials have conducted the business is a matter for congratulation. If I had not been connected with it myself, I should also have said that there was a contribution from the skill of the business men who advised them on it, but that must take a secondary place. We welcome the increase in the limits in all the classes which the President of the Board of Trade has announced today.

4.19 p.m.

Mr. Charles Williams (Torquay)

Just now the Minister was pointing out that the original Act was brought in in 1919 and readjusted in 1921. Very few Parliaments have been subjected to more abuse than the Parliament of those days, and it was curious that the Minister was compelled to draw the attention of the House to the fact that this sound business-like administration was brought in by that Parliament of which you, Mr. Speaker, the hon. Member for Abingdon (Sir R. Glyn) and myself are the only Members present at this minute. The scheme was confirmed by that very much abused Parliament of 1939. In other words, both of those Parliaments were using their strength and power to help British trade and industry, and to protect it where possible, and the fact that the Government were backing these exports made payment abroad more certain. That moral backing has been of immense value in trade during all those years.

I am glad to be able to congratulate the Minister on paying tribute to something done by two Governments about which, I am quite sure, if he looks back at his own speeches he will find he said that they had never done any good at all. [HON. MEMBERS: "Oh."] At some period I am sure he said something near that and, if he has not, he will have a lot to do to convert all the speeches of his colleagues in that respect. There is no harm in pointing out today that he has been strictly accurate in the tributes he has paid to the good work of past Parliaments.

I should like to emphasise one fact which the Minister mentioned, that a considerable sum of money has been used already for the encouragement of trade, finance and work by our traders with foreign countries. I am particularly glad that is being encouraged because that form of enterprise is much more valuable today, and it is much more important to encourage that, than some of the things which Ministers and others in the Government have done, such as killing the Liverpool Cotton Exchange. It would have been just as sensible to my mind not to have done what they are doing here, as it was to do what they did on that other occasion.

I should like to mention one point which neither the Minister nor my right hon. Friend has mentioned, namely, that it is not only the increased price of goods but the immense depreciation of sterling that has made it compulsory to have this increased sum available for distribution amongst these trades. That point should be brought forward in the House today as a justification for the higher sum of money which we are guaranteeing. Finally, may I say that owing to the skill with which the original Act was drawn, the Government have been able to administer it in such a way that, even with the present Minister, it has been run at a profit. That Act was drawn during the administration of my right hon. Friend the Member for Aldershot (Mr. Lyttelton) who is so often abused by the Government for what has been done in the past. It just shows that if anything is to be run by the State, Conservative Ministers are needed to build up and run the scheme. I hope I have been able to say a few things which may cheer the Minister, because of the fact that he has at last done something good, by following the administration of Conservatives who went before him in office.

4.24 p.m.

Mr. Wingfield Digby (Dorset, Western)

I am not surprised that the Minister has had to come to the House for these extensions of export guarantees. Indeed, the only thing which surprises me is that it has not been necessary to extend the cover earlier. When a considerable Debate took place on the Second Reading of the 1945 Act it was anticipated, as he said, not only by the Chancellor of the Duchy of Lancaster but by many others, that it would be necessary to raise this cover. It is perhaps a little disappointing that it has not been necessary to do so before, because, since that time, there is no doubt that the importance of exports has become all the more evident, and the importance of doing anything we can to assist them is much clearer.

I do not think there is anything controversial about the Measure before us, but I hope that, before we close this Second Reading Debate whoever replies will take the opportunity of giving us a little more information about how this process is working, although we have just heard from the President of the Board of Trade that the matter is under review. It follows from the fact that exports are more important than ever, that we can afford bad debts abroad less than ever. We can afford bad debts even less than was envisaged in 1945, and I am wondering whether, when the Department is fixing premiums, they take this into account, and whether they have any policy for fixing a higher premium where they think there is likely to be a bad debt, which would be against the interests of this country in the present delicate position of the balance of payments. My second point is with regard to the direction of exports. When the 1945 Act received its Second Reading, an undertaking was given that premiums should not be used in any way to try to effect a direction of exports, and I should be glad to know whether that still holds good.

There has been some complaint about the time taken in certain cases where application has been made for a guarantee, and in view of the importance of speeding up our exports as much as possible, I should be glad to hear something about what steps have been taken to try to obviate these delays. The President of the Board of Trade made some reference to the amount by which consumer goods were helped under these Measures in the past, and I hope we shall be given some figure showing how far they are being used today for the purposes of consumer goods and how far they are being used for capital goods. In 1945 the proportion was something like six or ten to one in favour of consumer goods.

How far are the smaller firms coming in on this? Again, there has been a criticism that it has helped the larger firms rather too much and the smaller firms rather too little. I hope the Minister will be able to tell us how far he has been able to extend these services to the smaller firms which often require them more. I am sure we shall all welcome the assurance that this machinery is under review, and I hope the opportunity will be taken to clear up some defects in the machinery which have manifested themselves.

4.29 p.m.

Mr. Rhodes (Ashton-under-Lyne)

I should like to congratulate the Minister on this efficient Department of which I have had some experience in recent weeks. I think it is true to say, that it is the smaller firms which require encouragement in the export drive today because generally the bigger firms are already contributing to exports as much as they are able. According to a report issued by the Chief Inspector of Factories, I believe last year, there were 129,000 factories in the country employing too or less, and only 11,000 employing over too. These figures serve as a guide to the importance of the small to medium firms. These firms are loosely knit into associations or federations or have no connection with either. Talks given to such associations on the advantage of export facilities often escape the notice of the small to medium manufacturers.

Therefore, the Department's representatives must go right down to the individual manufacturers to sell their insurance. They go, either on their own two feet, or by bus, car, or train, or by motorcar provided by the nearest Government car pool. If the provincial office of the Department is in a city with a car pool, fairly satisfactory arrangements can be made; but where a car pool does not exist in the same city, or where a large territory is covered by one man, the car pool is of little use. The result is that highly trained men, through no fault of their own, are wasting many hours each week. In many cases their calls could be doubled if they had cars of their own or if cars were provided for the use of the Department. Private firms do not provide cars for the salesman for nothing and I suggest that it would be good business policy to provide the cars where they are badly needed.

I should like to know if it would be possible to issue a yearly report on the progress of the Department. Such a report might show the amount of cover provided during the year, the amount outstanding, classification of policies by time, and destinations of exports. I think that this type of information is already prepared for the Advisory Council, so it should not be too onerous for the Department or the Minister to make it available to the House. The President referred to certain transactions taking place with Eastern Europe. Do those transactions come under the special guarantees? They are referred to in the Estimates but no special reference is made to them in the trading accounts and balance sheets. I shall be glad to have a reply to this question and to know also the balance held at the end of March of this year.

4.33 p.m.

Mr. Edgar Granville (Eye)

As the President of the Board of Trade said when introducing this Measure, all parties in some way or another have subscribed to this idea, and the right hon. Member for Aldershot (Mr. Lyttelton) was responsible for introducing it in 1945. There can be no question, therefore, regarding the Bill's speedy passage through the House today. I am glad that the President made it clear, in reply to my question, that it is a voluntary scheme. I have heard it suggested in certain quarters that it was the thin end of the wedge, the prelude to a future scheme which would impose a compulsory premium on all exporters, and was in effect, the Government's method of controlling export policy. I am pleased that the right hon. Gentleman has dispelled any fears in that direction. Only yesterday he said: British exports are passing into the phase where they are no longer limited by production, but by selling methods and the extent to which overseas markets are open to our goods. This year is a testing year for our export drive. We need more surveys in every market. I am glad to see that what some of us have been trying to say for two years to the Board of Trade is now realised. That fact alone would be a justification for this increase today from £200 million to £300 million. The right hon. Gentleman referred to the increasing risk in licensing in the importing countries and the right hon. Member for Aldershot referred to increased prices. These two things alone mean that we shall require more money to carry out this scheme.

I want to raise one point which affects the most important aspect—our exports to the hard currency or dollar markets from which we are importing food and raw materials. One of the difficulties there is the time lag in delivery. Importers are complaining at the length of time between the taking of the order and the delivery of the goods. I think that the right hon. Gentleman knows that some exporters have been trying a new and very important scheme to deal with this problem. If it is successful I hope it will be extended. The question arises whether this Export Guarantee Scheme is the proper way to deal with the criticisms that there is too great a time lag, that prices change and so on, before the goods are delivered.

To deal with this question some manufacturers have been exporting to warehouses abroad rather than to a customer. Through their salesman in a particular country to which they are exporting they learn of the trend of requirements and export in bulk to a warehouse in that particular hard currency area. The salesman there sells direct from the warehouse. He takes his sample and tells his customer that he can deliver the goods within a week. The Minister has heard of this scheme before and I believe several of our large exporting firms have tried it out.

The question arises whether or not it is too heavy a financial risk for our exporters to take in exporting to warehouses abroad and then selling from bulk stock to the customer, and whether they are able to take that risk as an ordinary commercial transaction. I should like the President to say whether this scheme has met with success, and if so, whether it could be extended in a general way to exporters under the present scheme.

The President referred to capital goods. We all know that the emphasis in the future will be on the coming switch from consumer to capital goods. The Chancellor the other day referred to some dislocation, and dislocation there must be. Much as we hate controls, much as some hon. Members may not like this type of planning, we must look ahead and face this problem in its early stages so that we shall not be subject to too severe dislocation later. I hope the right hon. Gentleman will not hesitate to use this scheme to the full if the tremendous change-over from the export of consumer goods to capital goods has to be made.

4.39 p.m.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

I must join in congratulating the Government on this Measure. In my case, however, there are a number of questions which I want to ask the Secretary for Overseas Trade who, I understand, will be replying. I must admit that I am very disappointed in the allocation made to the re-export trade. If the Parliamentary Secretary will refer to the figures he will see that when this guarantee was first introduced in 1939 £7½ million was allotted. That sum in the years which have since gone by has been increased to only £15 million. On the other hand, for processing goods abroad in 1939 £2½ million was allocated and that has gone up to £15 million. It is obvious that the emphasis has been put rather on processing abroad than on re-exporting goods. It is appreciated throughout the House how much the industrial welfare of this country has depended on accepting raw materials, or even half finished goods, and then completing their manufacture and re-exporting them, and I therefore feel rather worried that this Bill only doubles the amount for re-exports, but allocates something like six or seven times the amount originally laid aside for processing abroad.

Under Section 4 of the 1939 Act, £10 million was laid aside by the Government, for any purposes of establishing any trade or any branch of trade between the United Kingdom and any country. Later in 1939, under the Overseas Trade Guarantee Act, that £10 million was increased to £60 million, so that there is a large sum of £50 million over and above whatever we may be discussing this afternoon. I should like to know how that sum is being used. I should also like to know whether it overlaps the other two guarantees—in respect of processing abroad and for the re-export trade. If it does not overlap, can the Parliamentary Secretary say for what that credit is being used?

If the Parliamentary Secretary looks at the excellent pamphlet produced by his Department entitled "Government Guarantees for Exporters," he will see a paragraph devoted to the risks not covered. Amongst these are the following: (iii) The risk that loss may result from causes which are within the control of the exporter or the buyer. It seems very odd that this Department will not cover anything which is within the control of the buyer at the other end. Surely the main purpose should be to protect the British exporter against what may happen through no fault of his own if the buyer the other end defaults. As I read it, that paragraph means that if the buyer for any reason defaults the Export Guarantees Department will not cover the loss.

The document goes on to say: (iv) the risk that because of a slump in prices or other unfavourable factor a solvent buyer may refuse to take delivery of goods he has ordered. I understood from the President of the Board of Trade that that is just the type of case envisaged in the 1945 Act and for which he was asking additional powers this afternoon. I should like to have that point cleared up. There is also the risk that fluctuations in exchange may cause loss of sales made in foreign currency. That seems a great pity. The right hon. Gentleman knows that there are no forward exchange markets at the moment and similar arbitrage cannot go on. It seems most important that these risks on loss by foreign exchange and fluctuations in the rate of exchange should be covered. It is particularly important in view of what the President says about introducing fresh legislation that he should give an undertaking to reconsider that point.

This Exports Guarantee Department asks for premiums which range from a quarter to two per cent., and in the handbook it says that the range of premiums rightly depends on the country to which the exporter wishes to send his goods. Those rates seem very high indeed. That is borne out by the fact that a sum of £2 million now stands to the credit of this account. I hope the Parliamentary Secretary will be able to give some indication of whether the Government are going to reduce those rates. It seems quite unnecessary to have rates so high. They provide an unnecessary surplus in an organisation which is a non-profit making organisation.

Will the Parliamentary Secretary also review the percentage of cover which the Department gives? At the moment they will not give more than 85 per cent., or 90 per cent. of the risk. They lay down that it is right for a particular exporter to carry a portion of the risk. From the point of view of the service given to the community they should be willing—I should think only too willing—to take the whole risk.

Finally, I think the President would be the first to admit that before leaving this Debate we should stress the services which can be given by the Export Guarantees Department in the way of information. They have something like 50,000 reports on firms in all parts of the world. The President would agree that we should stress the amount of information available to anyone considering exporting to any part of the world. This is a service which any industrialist has only to sample in order to know its worth. With those criticisms, I add my support to the Bill.

4.44 p.m.

Mr. E. P. Smith (Ashford)

There is a question I wish to ask in all simplicity, ignorance and sincerity. Is this scheme available to those traders who export in place of capital or consumer goods the produce of their brains? I do not know whether they are counted as capital or consumer goods; but I assume they are capital. I am thinking, not unnaturally, of the author, who may very easily find that his foreign purchaser defaults and that his accumulated royalties are not forthcoming when they are due. This has happened over and over again. Authors' royalties and his sale or hire of his copyright are not an unimportant item of our invisible exports. I should be glad to know if authors can cover themselves under this scheme against the risk of such default.

4.45 p.m.

Mr. William Shepherd (Bucklow)

The President of the Board of Trade has had a very comfortable innings; in fact, no Minister in this Administration has had such an easy time since he has taken office as the President of the Board of Trade. That is largely because there is a clash between the President of the Board of Trade and the Government. On the one hand, the Government are trying to pull the industries of the country to pieces, while on the other hand the President is doing a rather weak and methodical best to pull them together. There are very few things on which we have to speak harshly to him because we feel that, in a Government opposed to the main means by which the country earns its livelihood, he is doing his best.

I wonder whether the Bill has had the approval of all the Ministers in the Government? It will be interesting if the Parliamentary Secretary can tell us, for example, what the Minister of Health has said about this Bill. In 1945 the Minister of Health wrote a little book about which I am sure the Parliamentary Secretary has heard. Appropriately, it had a yellow back, and in the book the Minister said: By some twist of the Tory mind it is said that it is good trade to persuade someone in a remote part of the world to buy our goods. We are told by some people who ought to know better that we shall need to increase our exports after the war by 50 per cent. That was the view held by the Minister of Health. I wonder what are his views today on exports and on this Bill. The present Secretary of State for War was just as emphatic, for he said in 1945: Increased exports are demanded. There was never a greater fallacy uttered in this or any other assembly."—[OFFICIAL REPORT, 22nd June, 1944; Vol. 401, C. 398.] I hope that the Secretary for Overseas Trade will be able to tell us that he has been in touch with his right hon. Friends, and that, having renounced the heresies of 1945, they now take a view more in accordance with the line so long advocated on this side of the House.

The President of the Board of Trade, when he introduced this Bill in a commendably short speech, was guilty of a slight harshness towards private enterprise, because he said that this was a risk undertaken by a Government Department which was not undertaken by private enterprise. That is an unreasonable statement to make, because the Board of Trade have not allowed a selection of risk. We cannot go as we could to the ordinary insurance company and select a risk. One of the major defects of this Bill, so far as the traders are concerned, is that one must insure the whole of one's export trade and one cannot take risks against which one wishes to insure. In those circumstances it is quite easy to say that it is better than private enterprise can do, but, in fact, it falls very far short of what insurance companies will do in terms of risk.

The President was also unfair when he said that this is something entirely outside private enterprise. He has the experts of the Advisory Council, which is composed of wicked individuals like bankers and industrialists. It is true that each of these applications is, in fact, vetted by this Council so that even this Department at once admits the immense good it receives from the assistance which private enterprise gives to it. The President of the Board of Trade opened his speech by stating that the present Chancellor of the Duchy of Lancaster had anticipated an increase in the sum to be covered by the Bill. The President did not tell the House that the Chancellor of the Duchy also said that he felt that export prices would decline from 1945. Certainly that has not turned out to be a fact, and we have one more example of how unreliable is the present Chancellor of the Duchy as a prophet, or in anything connected with finance.

My right hon. Friend the Member for Aldershot (Mr. Lyttelton) was also brief in his comments on this Bill, and I felt that he had the impression that he was so much connected with it that it would be immodest for him to pour praise upon it; but we feel that this is a Bill of great value and that the scheme has been running so long with so little complaint that the Bill is something we can take without any risk. My hon. Friend the Member for Torquay (Mr. C. Williams) stressed an exceptionally interesting point, in which he was supported by my hon. and gallant Friend the Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre), when he said that this Bill ought to give some cover for our invisible exports. It is very vital that we should do all we can to stimulate invisible exports, because they are the exports we can achieve without importing anything. Therefore, they are, in effect, a greater gain to us in terms of real exports than any other form of activity. We hope to hear how under this Bill steps are being taken by the Government to stimulate invisible exports. In the old days before 1945, the man who was a capitalist was wicked, but the most wicked of all capitalists was the capitalist who invested his money overseas. That is a tale with which hon. Members opposite will no doubt be familiar.

Today we are bewailing the fact that there are not sufficient people with money invested overseas, and we are seeing a most serious decline in the net revenue from overseas investments. In fact, we pay so much money out, including the interest on blocked sterling balances, that I believe our net return from investments is hardly of any value at all. That is something to which the attention of the Government ought to be directed, and we are rather sorry that the provision for catering for trade other than that which has originated from this country, is as small as it is. It indicates that the Government have no plans for any substantial expansion of our essential, invisible export trade.

The hon. Member for Ashton-under-Lyne (Mr. Rhodes) was his usual practical self. He was so practical that I cannot understand why he is on that side of the House. He pointed out that small firms did not know much about these schemes, and that the facilities of the Department should be concentrated on bringing to the attention of those small firms the service it can render. I agree and I am sure that more publicity for this scheme would result in a wider use being made of it, particularly by those firms which previously did not engage in the export trade. My hon. and gallant Friend the Member for New Forest and Christchurch raised a number of interesting points which I should have raised myself had he not dealt with them. I am to a great extent indebted to him. The Secretary for Overseas Trade will be doing a service to the House if he will explain to some extent the mechanism of this scheme, because all too few know the principle on which it works.

We on this side of the House welcome the increase in the amount of money which the Bill guarantees. We hope that our export trade will be such in the year to come as will justify this increase. We hope we are going to see no recession in our export trade, and that the Department will do all it can to publicise all its activities so that, more and more, the traders in this country will take advantage of the service. We give a very enthusiastic welcome to this Bill on Second Reading, and we hope that the right hon. Gentleman will continue to bring in Bills of this nature which will assist the trade of this country.

4.58 p.m.

Mr. Bottomley (Secretary for Overseas Trade)

The general tone of the discussion indicates that this is a good Bill. It is rather unfortunate that the hon. Member Bucklow (Mr. Shepherd) and the hon. Member for Torquay (Mr. C. Williams) should upset the harmony, but that is usual and we expect it from both of them. We are not unduly disappointed. I want to pay my tribute to the members of the Advisory Council. As the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) said, they are a group of business men and other interests, including the trade unions, who give of their best, and so enable this guarantees scheme to work properly. We all ought to pay tribute to Sir William Goodenough, who was Chairman for a long time but whose health has now broken down, so that he had had to give up the job. We look to a great stewardship under Mr. Geoffrey Gibbs, who has taken over the job. I should also like to pay a tribute to the Department for the work it does; I have met many business men who get assistance from it, and they all tell me what fine work is being done. I am sure the House likes to hear of such tributes.

With regard to the questions which have been raised, I shall deal with them as best I can, and if I miss any of them I am sure that hon. Members will be quick to tell me which points I have overlooked. Regarding the type of goods covered by the Department, there is at the moment cover for £186 million worth of goods. The value of the policies issued in 1947–48 was, for exports, £170 million, and for external trade, £16 million. Of that export figure, roughly 90 per cent. was for consumer goods and 10 per cent. for capital goods. The £16 million for external trade was wholly in respect of consumer goods—mainly raw materials. The terms of payment ranged from cash against documents to about 90 days credit. In very exceptional circumstances credit can be given for six months. Policies for capital goods are of a different character, because very often they have to be carried over perhaps one, two or three years because of the terms of delivery. Where credit has been necessary, very often the exporter has been able to get 50 or 60 per cent. payment by the time the goods are shipped and credit is therefore given for the balances of 40 or 50 per cent. It might happen that the full percentage guarantee would be given in the case of goods covered for business in the current year.

The premium has been fixed in such a way that it takes into account all the risks. Not only are there commercial risks, but there are political risks. It would be essential in the case of some geographical areas to be a little more careful than in others, and for that reason the individual rates do vary. They vary according to the risks, both commercial and political, and they normally cover the whole of an exporter's overseas business to a reasonable number of countries. Over the business as a whole—and here one has to be careful in quoting figures in case someone says they paid more than that—the average premium is about 15s. on the total turnover.

Mr. E. P. Smith

Per £100?

Mr. Bottomley

Yes, per cent. I was asked what were our losses. Our loss experience arose chiefly from the war. We paid out something like £5 million in claims, and something like £1½ million has been recovered since the end of the war. The hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) asked me about re-exports. In connection with re-exports, the suggestion was that we have not made provision to cover them or to cover the amount that might be needed. I can only say in that connection that the demand has been met and there seems to be no purpose in pushing up the figure higher unless it appears necessary to do so. Where it is a question of goods coming into this country for processing and subsequent export, such goods should be considered as direct exports rather than re-exports.

With regard to the point about the direction of exports, we cannot do that. Our job is to cover risks. The hon. Member for Western Dorset (Mr. Wingfield Digby) asked whether there was a delay in assessing premiums. We are constantly trying to give prompter service and we generally meet requirements within 48 hours, which I think is quite good going. We do not always manage this, but it is our endeavour, and in the main it is being achieved. The hon. and gallant Member for New Forest and Christchurch raised the question of the Overseas Trade Guarantees Act. Of that figure he quoted only £10 million has been used, and during the period since the war, only £2½ million of this figure, so there again it will be seen that we have a fund available to meet trade guarantees.

Colonel Crosthwaite-Eyre

My point really was that I could not see how this guarantee differs from those given under the Export Guarantees Act and why these funds were not used by the Government for the purpose of the Export Guarantees Act, leaving this one aside.

Mr. Bottomley

I think the answer is that there are different kinds of risks involved and for that reason different funds are necessary.

Colonel Crosthwaite-Eyre

Can the hon. Gentleman tell me what the difference is? That is the question I asked him.

Mr. Bottomley

No, Sir. I cannot tell the hon. and gallant Gentleman what the difference is, but if he will give me the opportunity of sending the information to him, I will do so with pleasure.

The point was raised as to how many policies had been taken out, or how many are out at the present time. I cannot give the precise figure, but it is somewhere in the neighbourhood of 2,000. As I have said already they are taken out within a very short time.

The hon. Member for Ashford (Mr. E. P. Smith) raised the point about the export of brains. We certainly do encourage that. Before the war we did not have a lot of business in that direction. That is not to say that we did not have the brains to export, but we found that we had many overseas invisible exports which helped us to pay our way. Because we have lost many of these invisible exports, the need today is to encourage the export of brains and to get as many people to go overseas as possible and sell their "know-how." The more we can get to go, the better business it is for us. Supposing that a particular job is to be done, e.g., the building of a tunnel, then people with "know-how" go along from different countries and offer their services. A certain sum of money is given to each of them as expenses for having incurred the trouble to go and give their advice and for tenders. The successful man who comes, we hope, from the United Kingdom, does not get his pay until the contract has been completed, or even the whole job finished. Therefore, it is not fair to ask him to take the whole of that risk, bearing in mind that because of commercial or political changes the job may not be completed. The Department covers the contingency that he might give his expert knowledge and receive nothing in return. In this way the export of brains is encouraged.

Mr. E. P. Smith

It has been an excellent and more informing dissertation to which the hon. Gentleman has treated us, but I did ask specifically about the accumulated royalties of an author in foreign countries, supposing those royalties were defaulted upon. The sum may be unknown. It may be large or small. But has the author a chance of insuring under this scheme on the principle of a floating policy?

Mr. Bottomley

We would like to look at that from the point of taking a risk. If the author is prepared to pay a premium on the basis that in the future he may have a potential income of so much, the Department will have a look at it. What we cannot do is, after there has been a default, to accept that liability. That, of course, would be bad business. I think I have answered the points that were put, and I might end by saying that we have a reserve. One right hon. Gentleman did ask whether we should have it. I would say, yes. The reserve today is a very reasonable sum. It is £4¼ million, a little more than just before the war. The figures that were mentioned earlier are low, compared with the actual figures. The Department's liability for guarantees before the war was about £30 million. Today, the liability is £130 million. Therefore, the hon. Gentleman will see that unsettled conditions abroad and other difficulties that we encounter today entitle us to say that a reserve of about 3 per cent. on outstanding liability is not to be considered excessive and should in no way be taken to indicate that the existing premium rates are too high.

Colonel Crosthwaite-Eyre

If the hon. Gentleman looks at the figures from 1943 to 1946, he will see that the losses were about £5,000 a year. How can he, therefore, justify a reserve fund of £500,000?

Mr. Bottomley

I mentioned a reserve fund, but in fact the whole of the money goes to the Exchequer. What they have now is a loss. They have to take the whole of the risk which, during the last year, was indeed great. If the hon. and gallant Gentleman feels that we cannot justify that risk in present world conditions, I am bound to say that I disagree with him. We cannot take unnecessary risks, and the three per cent. on all outstanding debts is not excessive.

Mr. Rhodes

The hon. Gentleman has answered the questions put by Members opposite, but he has ignored mine entirely. I asked him to consult with his opposite number in the Treasury about the use of cars for people who had to get the work. What about the annual report? I mentioned that. Another question was about the balance at 31st March this year. It was £2,400,000 at the end of March, 1946. I was interested to hear that 2,000 firms had insured under this guarantee and that 600 of them live in Yorkshire. It is certain that 600 Yorkshiremen cannot be wrong, and they ask the rest of the country to follow suit quickly.

Mr. Bottomley

I have not answered the points put by my hon. Friend. I agree with what has been said about him already, that he is practical-minded. I assure him that the observations he made are noted. We shall consult with the Treasury about cars. I have already mentioned the reserve figure—which answers his second question. I am in complete agreement on his third point. There is no need to answer points unless they call for comment. I hope the House is now ready to give the Bill a Second Reading.

Mr. Digby

I hope that the hon. Gentleman will say something about the extent to which small firms are using this scheme. It has been referred to by an hon. Member opposite as well as by myself and is a most important matter for our exports.

Mr. Bottomley

Every endeavour is being made to get small firms to use these facilities. Every potential exporter who comes for advice about export guarantees is encouraged, and the Department do all they can to assist him.