§ Order for Second Reading read.
§ 3.42 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 House will recall that in the Debates on the Export Guarantees Bill. which became law in the summer, I indicated that the Government were considering the position of the Export Credits Guarantee Department, and that the Bill of last summer—an emergency measure to ensure that the work of the Department should not be restricted, because it was already approaching its legal limits of liability—was without prejudice to the introduction of a further Bill to improve still further the service available to exporters in the post-war world.
The Bill now before the House is the result of our examination. Briefly, its purpose, in addition to raising the overall limit from £300 million to £500 million. is to enable guarantees to be given to encourage all exports, whether visible or invisible, which will help to improve our balance of payments position. Before I outline the principal provisions of the Bill and give the House the reasons for these new proposals, it might be of value if I were to recall to the House the present position of the Export Credits Guarantee Department and the powers it exercises. acting on behalf of the Board of Trade to give export guarantees.
First, under the Export Guarantees Acts of 1939, 1945 and 1948, the Department is empowered to grant commercial guarantees. These commercial guarantees are given after consultation with an Advisory Council, that is where that council considers that there is a reasonable commercial basis for offering the guarantees. The Overseas Trade Guarantees Act, 1939, empowers the Department to give guarantees, without the need for any consultation with the Advisory Council, in respect of transactions which would not normally be accepted by the council as reasonable commercial propositions but which, in the national interest, it is considered desirable to support by the aid of guarantees.
1682 The present financial limits of liability are, for commercial guarantees, an aggregate limit of £300 million, the figure to which the House agreed last Session, and for "special" guarantees in the national interest, limited to a total of £60 million. Within the two main group limits there are subsidiary limits. In the commercial group, there is a limit of £30 million for external trade; £15 million for re-exports, and £15 million for what are called "other matters connected with export trade." Within the group of "special guarantees" there is a subsidiary limit of £6 million for other than "home-produced" goods.
Dealing first with commercial guarantees, the existing Acts contain restrictions both on the powers which may be exercised for giving guarantees and, as I have said, on the total limits of liability which may be undertaken on certain classes of risk. These limitations arise from the fact that the primary object of the earlier Acts was, in the main, to encourage exports from the United Kingdom as one means of guarding against large-scale unemployment after the first world war. The wording of the Acts themselves and the fixing of subsidiary limits were all in tune with this idea, and were not associated with the present-day need for encouraging overseas trade to the maximum in order to close the gap on our "balance of payments."
Clause 1 of the new Bill broadens the whole basis on which the E.C.G.D. works, so as to give it proper scope to encourage all exports, whether visible or invisible. which will help to add to our earnings from abroad. In this respect it differs from existing powers under which guarantees may be given only in connection with the export of goods from the United Kingdom, as the 1939 Act provides, and, as provided by the 1945 Act, with the sale by United Kingdom merchants, of goods produced in one country abroad and sold to another. Under the Bill it will now be possible to give guarantees for any transaction which, in the opinion of the Board of Trade, will encourage trade with, and result in earnings from, places outside the United Kingdom.
Under this new provision, it will be possible for guarantees to be given, for example, for the earning of foreign exchange through technical and consultant services, which is an important 1683 and growing invisible export, as distinct from the sale of goods. Then again—and I need not tell the House how much importance should be attached now to the overseas work of the civil engineering industry—the Department, under this Clause, can provide guarantees in connection with the use, on a rental basis, for instance, of a United Kingdom contractor's own equipment in connection with the execution of engineering works abroad.
To help with the export drive generally, the Department could also give guarantees in connection with the financing of overseas sales agencies or the holding of stocks either abroad or in the United Kingdom in anticipation of sales to desirable countries. I shall in no sense try to disguise from the House the fact that the powers given are pretty wide and give considerable elasticity in operation to the Department, but I know the confidence of both sides of the House in this Department is such that they will be ready to give this elasticity and freedom to it.
Clause 1 (4) of the Bill raises from £300 million to £500 million the maximum aggregate amount of liability which may be undertaken in respect of commercial guarantees. The amount of this liability has been growing rapidly with the increase of business during the last year. At the end of June last, when we were debating the 1948 Bill, the maximum liability outstanding was £172 million and at the end of December, 1948, £224.5 million. When we compare those figures with the amount outstanding at the end of 1947—only 12 months ago—we find it was £123.6 million, and we can see the extent to which traders and exporters are making use of the services of the Export Credits Guarantee Department. If I might put the figures in another way, whereas, pre-war, the average of policies issued was about £43 million and about £72 million for the war-time average, this has gone up in successive years, in 1946–47 to about £149 million, in 1947–48 to £186 million and, in the first nine months of the current financial year to £198 million.
These maximum liability figures are a total of the estimated outstanding commitments in respect of current guarantees, of offers of guarantees awaiting acceptance, of guarantee agreements with foreign 1684 Governments, and of net payments under guarantees already made. This increase in cover is an indication of the growth of our export trade, and the valuable services industry recognises the Department can provide. At the same time, it is a measure of the unsettled state of the world and the risks involved in a fairly extensive proportion of our overseas trading transactions.
In seeking the increase to £500 million of the maximum liability, I am asking the House to agree to make provision for further increases in business. This new limit should suffice for a considerable period ahead. The House will have seen that I do not propose to renew the subsidiary limits I have referred to a few moments ago. The main purpose of the Bill is to encourage the maximum earnings from overseas trade in all the forms it takes, without imposing any limitation in respect of any particular branch of trade. But I can give the House the assurance that the Board of Trade will maintain very close contact with the Export Credits Guarantee Department to make certain especially that transactions in goods of foreign manufacture which might compete with United Kingdom produced goods will not be encouraged. As I have said, the commercial guarantees are given after consultation with the Export Guarantees Advisory Council, set up by the Board of Trade under Section 1 of the Export Guarantees Act, 1939, and including representatives of banking, industry and organised labour.
I wish to say a word about the accounting procedure which has been followed by the Department, because the House would naturally be concerned about this. The Acts of 1939 and 1945, provide that all expenses incurred, including payments under the guarantees and the administrative expenditure, shall be defrayed out of moneys provided by Parliament. In practice, however, the amount which Parliament is asked to vote is normally a token sum of £100. The receipts from premiums brought to account as Appropriations in Aid of the Vote, taking one year with another, have been sufficient to meet the Department's expenditure, both on claims and administration; and over the 28 years since the guarantees were first given no charge has fallen upon the Exchequer.
As I have already suggested to the House, the Department has been a highly 1685 successful organ of public enterprise in a field where private enterprise did not tread and, I think, would not have trodden, in providing a valuable service, at very low rates, and with a small balance of profit for the benefit of the taxpayer. In fact, the Department is in a very satisfactory financial position. The latest annual account issued is that for the year ended 31st March, 1947, but the accounts for the year ended 31st March, 1948, about to be published, show that there was a reserve of over £4 million to meet future liabilities. The reserve at present available to meet future losses stands at about £6 million, or about 3½ per cent. of the Department's liability of about £163 millions on guarantees actually given (that is excluding guarantees offered but not taken up).
§ Mr. William Shepherd (Bucklow)
Is the right hon. Gentleman telling the House that the reserve has increased over that short period of time by nearly £2 million?
§ Mr. Wilson
While I am dealing with the financial procedure, there is one small point which I should perhaps mention to the House. Although Section 7 (1) of the 1939 Act requires the preparation of trading accounts, this provision has been omitted from the new Bill. It is in fact unnecessary because the Treasury have standing powers under Section 5 of the Exchequer and Audit Department Act, 1921, to direct any Department to prepare such accounts.
Now I come to the special guarantees. Clause 2 continues the powers given by the Overseas Trade Guarantees Act, 1939, for the giving of guarantees in the national interest. These guarantees relate to transactions which are not of a normal commercial character, and consultation with the Advisory Council is therefore not necessary or appropriate. Between 1939 and 1941 the guarantees, in the main, were given in order to make possible the purchase of arms by, and thus strengthen the resistance of, certain European countries against possible German aggression. In all, guarantees given under the Overseas Trade Guarantees Act in those years totalled to about £16 million, of which about £1½ million is at present in default, the countries concerned being Greece, £295,000, and Roumania, £1,242,000. 1686 Amounts owing by other countries, not yet due for repayment, total to a little over £2 million.
Although, in existing conditions, guarantees on transactions of this particular nature may not be required, there is even more need than in the past for special guarantee facilities in order to encourage trade with very many countries, the risks, whether political or otherwise, in connection with which could not be regarded as commercially insurable and could not therefore be accepted under Clause 1 of the Bill. There is a number of types of transaction for which these special guarantees might in future be given, and anyone concerned with trade in present-day conditions will have no difficulty in imagining which they are and realising how important some of them are.
For instance, there are "fixed price contracts for capital goods requiring a very lengthy period of manufacture, for which the United Kingdom exporter desires cover against possible substantial increases in the price of materials and cost of labour between the time of signing a contract and the delivery of the finished goods to the overseas purchaser. Then again, there may be special transactions, perhaps unorthodox in character, which might lead to increased exports to most desirable countries such as, for example, Canada and the United States. In view of the clearly accepted need to meet our dollar balance of payments, there may prove to be here a valuable adjunct to the efforts of our exporters to increase their sales in this most essential, but in many ways difficult, set of markets.
I need not stress the possibility of possible credits to countries, for example Europe, to facilitate the conclusion of trading arrangements for which the risks might not be considered commercially acceptable to the E.C.G.D. or its Advisory Council. An example of this type of credit, which was given in 1946 under the Overseas Trade Guarantees Act, was that for £1½million to enable Austria to purchase wool from the United Kingdom and other Commonwealth sources.
Clause 2 (2) provides for an increase from £60 million to £100 million in the maximum liability which may be assumed for these special guarantees. In the present difficult world conditions, and in view of the imperative need of encouraging 1687 by all possibe means trade with hard currency countries and also with certain countries capable of supplying this country with food and other essential goods where the risk may not necessarily be a commercial one, it is necessary to have latitude to give guarantees which enable the exporter to take risks which may not be commercially insurable, but which normally ought to be taken in the general interests of the United Kingdom. I am sure the House will agree that not less than £100 million should be earmarked for this purpose.
Owing to the purely political character of the transactions which Parliament had in mind when the Overseas Trade Guarantees Act, 1939, was passed, trading accounts would have served no useful purpose. But with a possible change in the character of the guarantees, however, it may be considered desirable to have trading accounts, in which event the Treasury would be able, under their standing powers, to direct their preparation.
I do not think I need take the time of the House in dealing with Clauses 3 and 5, which deal with the powers already held by the Board of Trade to acquire and dispose of securities. and with the publication of returns. But perhaps I should say a word about Clause 6 which sets out clearly the position of the Department in relation to the Board of Trade, about which there has been some misunderstanding. The Export Credits Guarantee Department was first set up as part of the Board of Trade in 1919, but following a report by an expert committee under Sir Otto Niemeyer in 1928 it became a separate Department under the Secretary for Overseas Trade in April, 1930. Matters of general financial policy concerning the scope of E.C.G.D. guarantees continue to be controlled by the Treasury, while on questions relating to export policy the closest collaboration is maintained with the Board of Trade.
After that brief exposition, which can be supplemented by the Economic Secretary to the Treasury if any hon. Members wish to put questions, I hope that the House will agree to give a Second Reading to this Bill. I do not think that anyone today is under any illusions about the difficulties and risks that our exporters 1688 and traders are meeting in trade with many parts of the world. I have already referred to the trade with the Western Hemisphere and the measures which it might be possible to take under this Bill to assist there. Equally, I know that those who have experience or knowledge of trade with Eastern Europe at present realise how valuable the Export Credits Guarantee Department has been, and how much more valuable it might be under this new Bill, in helping trade with that part of the world.
For instance, guarantees have already been given on capital goods for export to Russia to an amount equal to £14 million, and there are further offers in negotiation amounting to about £2½ million. In the recent trade agreement with Poland, the original £1½ million wool acceptance credit which was fully repaid at the end of last year has been renewed for £2½ million, and the original £6 million advance scheme to make possible purchases of £15 million worth of capital goods is to be extended to cover further purchases up to £20 million, subject to not more than £6 million being outstanding in respect of export credits guarantees at any one time. The Department have already undertaken commitments amounting to £4 million covering exports to Finland and has some further offers outstanding in relation to that country. With the signing of the recent trade agreement with Yugoslavia transactions on normal short-term credit are now being covered by guarantees.
From that brief review of certain European countries, the House will appreciate the kind of transaction the Export Credits Guarantee Department is now able to facilitate. I know that the operation of this Department over a period of nearly 30 years and under successive Governments has been at all times highly successful, and that all parties and all sections of the business community have equally recognised the great value of the services which it can offer. As I have said frankly, we are proposing under this Bill a considerable widening of the powers and an increase in the freedom of the Department to operate. I hope that this House will have no reservation whatever in giving assent to this Bill and enabling the Department to extend even further the services which it is now able to operate.
§ 4.3 p.m.
§ Mr. Oliver Lyttelton (Aldershot)
Export credits are recognised as a well established piece of machinery which has certainly helped exporters over these long years. As the right hon. Gentleman remarked, I think the Department was first established in its present form, in 1919. Its powers have been altered and widened by successive Governments and, personally, I am not sorry to see further extensions proposed today. I have a keen interest in the subject, for in the more respectable part of my life, before I became a politician, I sat on the Advisory Council for a great number of years and, as a Minister, I have also seen the Department working from inside. I was glad that the President of the Board of Trade devoted some time to an account of the experiences which the insurers had over this long time. I was interested to notice what he said about recent experiences which would seem to show that it is possible for a public Department to write risks which cannot be written otherwise and nevertheless come out with a reasonable profit to the taxpayer. I think that has been the experience.
I have had two or three letters complaining that the Minister has come back to Parliament for still further sums of money a very short time after he introduced the temporary Measure which, I think, was in July of last year. He will get no criticism from me on that score. I much prefer Ministers to come back to Parliament frequently for these sums and to give us an opportunity of debating the objects for which they are to be used, rather than to go into the painful over frequent process of taking powers and getting sums voted which are sufficient in all contingencies and in all circumstances. As far as export credits are concerned, I applaud the Minister's proceeding by gentle stages and giving us an opportunity of hearing how the scheme is working from time to time rather than taking something which will keep him well covered for any conceivable life of any conceivable Government. I do not criticise in any way the extension of these sums so soon after the matter has been reviewed by the House. However, I should like to try to supplement some of the remarks he made.
I was very glad that he remarked that the increase in the sum is partly an evidence of the extremely confused conditions 1690 in which exports have to be made. The increased sum is also an evidence of the general rise in prices which has taken place in sterling exports. Therefore, if last year we approved £300 million, there is nothing very surprising in our being asked to raise the sum to £500 million now, taking into account the hoped for expansion in our exports, the rise in price of sterling manufactured goods largely covered by these credits, and also the increased use which, in a confused world, is likely to be made of these facilities by exporters. I do not know if it would be worth asking whether His Majesty's Government find greater difficulties, or learn of greater difficulties, in placing our exports at this moment than they did when these matters were reviewed last July. The Economic Secretary might like to refer to that subject. I only wish to say that I was glad that the President pointed out that the extension of these sums is evidence of three things—first, the confused conditions; second, the rise in prices; and third, increasing demands from exporters.
I also greatly applaud the Government's discovery of the invisible export market. This may be nothing new to the President of the Board of Trade, but it has been the custom of Socialists particularly to denigrate considerably the parasitic functions—those are the sort of words they use—of those who only buy and sell. The merchant interests, the middlemen and so on, have always been the object of attacks by Soclialists especially when the critics are far removed from the business world. Now we have a Socialist President of the Board of Trade saying quite openly, and I think sensibly, that the export credits facilities can be used by British nationals by merchants who are buying materials—they may be raw materials or semifinished products—in one part of the world and selling them in another.
I have quoted to the House before, some of the curious ways in which invisible exports work. One of the most surprising to the layman is the London arbitration clause. All over the commercial world the integrity of London as an arbitration centre has always been recognised. These London arbitration terms are frequently written into international contracts, and trade—sometimes in insurance, sometimes in banking, and sometimes even in shipping—follows. But 1691 it does not affront me that it should be possible for the Exports Credits Department to enable trade to take place between two countries neither of which is the United Kingdom provided I understood from the President that these facilities are only available to United Kingdom nationals who are carrying on this trade—
§ Mr. Lyttelton
Persons carrying on business in the United Kingdom, although the nature of the trade is entirely between foreign shores. We on this side of the House will therefore not divide against the Second Reading. I think I ought to say that our attitude at present is one of general approval, though we should appreciate any more information which can be given upon the points I have mentioned.
There is one other thing I should like to say. In the past, it was rather disheartening to see the reserves accumulated as a result of successful insurance business disappearing into the consolidated accounts and having to be begun all over again. That, unfortunately, is inevitable under the Government's system of accounting, but I wonder if the President would make a practice of rather more frequent references to the experience which the Department is having and to the profits which it is making. I think it encourages those who have this difficult job to do if publicity is given to the successful results of their insurance. On the whole, we think that this extension of these powers, both in the sums of money involved and in the powers themselves, will be of much use to exporters in a very confused world.
§ 4.12 p.m.
§ Mr. Walter Fletcher (Bury)
I should like to add to what has been said by my right hon. Friend and to give unqualified approval to this Measure. There is no doubt that this instrument is the most potent for what the Chancellor of the Exchequer the other day called the "multilateralisation" of trade. There is no doubt that this is one of the best means of promoting it. I wish to refer to a form of trade which has shown the greatest increase recently—the off-shore trade; the trade which starts in a country outside the United Kingdom and finishes 1692 there. I should like to give an instance of what I mean.
A great many hon. Gentlemen opposite are only just beginning to realise what invisible exports are, and an instance of the kind of trade in which I have been engaged may help them. It concerned the purchase of coal, when not available in the United Kingdom, in an Eastern European country, to be sent to Germany, processed there and made into cement, shipped from there, with a credit opened by a Swiss firm in dollars, by a Belgian firm which had the right organisation, and ending up in South America. The end product of that transaction is a very large increase in dollars, and, therefore, as the Economic Secretary will know, it has the backing of the Treasury.
That is the sort of business which seems to hon. Gentlemen opposite to be something fantastic, but why should it not be done, because, in such cases we are exporting, with the help of the organisation which I mentioned, one of the few things in this country which has no rival outside—not a manufacturing process, because there are rivals to that throughout the world. There are very few rivals to our exports of the brains, knowledge and confidence which we can give in carrying out such business. Why do the people in other countries come to any firm in this country with such business? It is because they know that the contracts will be carried out properly, and that knowledge, brains, experience and integrity are available. That is the reason why I take this opportunity to express support of this Bill and to ask hon. Gentlemen opposite to cease the campaign of denigration and crying down the merchant efforts of this country. They may not understand these efforts, but that is no reason why they should speak against them or scoff at middlemen, or try to make out, as they often do, that things which they do not understand, are a mysterious form of crookery.
The increased figures which have been given by the President in his speech today, are proof of the success of the transactions which are being carried on through London, probably more than anywhere else, in far and away the best manner and with the greatest possible confidence from the rest of the world. There may be a few exceptions, but the main business carried on by these firms in insurance and banking, in many cases 1693 under contracts with the organisation I mentioned, is an immense source of revenue, without absorbing manual labour which is already heavily called upon. That is why I regret the grudging tribute which the Chancellor has paid to our invisible exports.
There is another side to the matter which must be emphasised. In a world in which currencies no longer have the support they had before, the greater the amount of commerce and business that comes here from the rest of the world, the greater is the support that is given to sterling, and it is vitally important that sterling should remain, as far as possible, at a stable point. It is recovering, but it has a long way to go, and the more transactions from overseas that can be brought to this country through the instrumentality of this Department, properly used by the original impulse which comes from the commercial community, the greater the support that will be given to sterling in the rest of the world.
I agree with my right hon. Friend about the need to publicise it. It is very difficult to make transactions of this sort, or even the workings of the Department, clear and plain to the general public here and elsewhere, and it cannot be done by means of the easy terms of average Government advertising. However, I think that in the trade journals that go overseas, something could possibly be done to show how smoothly this machinery actually works. A tribute should be paid to the work of this Department, because, when one goes there, one finds something very refreshing. I do not say that it is excluded from all other Government Departments, but in this Department there is a positive attitude adopted to any proposition that is put forward. That is really the best tribute that one could pay.
It is no longer a case of saying, "How can I find a reason for not doing this?" but, instead, "How can I find a way of doing it?" With the great knowledge and skill which these officials and advisers possess, we find that, when a merchant goes to see them, he is nearly always told, "It is perhaps not quite feasible to do this in thé way you suggest, but we advise you that a possible variation, of which we had experience in another case, may possibly fit this one." It is even possible that they may say: "We will do it, even if we establish a precedent." It 1694 is that positive attack and the genuine desire to help which marks the way in which this Department is carrying on the tradition of over 30 years in which it has operated, and which is so very refreshing. It is because of this, that the Department has been so successful, and I hope that the example will not be lost on other Departments.
In the transactions to which I have referred, the number of firms from different countries who were concerned and the synchronisation of the delivery of the coal to the cement works with the time when the cement from the last transaction is collected and sent overseas—all this presents difficulties which are perfectly enormous. But the merchants can undertake such business with skill, patience and a real desire to earn dollars. I hope that we shall hear no more slurs about private interests of this sort, when they are imbued with a positive outlook and when their efforts can be still further extended with benefit to the country. I should not be at all worried if, after six months or a year's time, the Government came back to the House to report further progress in this direction and ask for the amount to be doubled. That would be a fine proof of the worth of these merchants—and the title of merchant is a proud one—who are carrying on with a genuine desire to help the Government and succeeding in increasing measure, and with less misunderstanding and more support from the rank and file and from the country in general.
§ 4.20 p.m.
§ Mr. Benson (Chesterfield)
I should not have taken part in this Debate had it not been for the rather superior attitude adopted by the hon. Member for Bury (Mr. W. Fletcher). I strongly resent the suggestion that we on this side of the House are blatantly ignorant of economics and that wisdom resides alone on the other side of the House.
§ Mr. W. Fletcher
The hon. Gentleman knows quite well that I did not say that, I said that there were certain exceptions, but that, on the whole, there were a great many hon. Members opposite—probably those who are absent from the not very full benches opposite—who do not share with the hon. Gentleman the knowledge which I know he has.
§ Mr. Benson
I am not speaking for myself. I can take care of myself in 1695 Debates in the House; but this assumption of wisdom on the other side of the House is not entirely justifiable. I certainly do not accept the views of my hon. Friends on this side of the House on a large number of things; but is the hon. Member for Bury prepared to accept the views of his colleagues on everything? There may be misunderstanding on this side of the House on many subjects. There is no absence of misunderstanding on the opposite side on a very large number of things. In this matter of export guarantees the hon. Gentleman is an expert and he is listened to with very great respect on this side as well as on his own side of the House, but I do not think that entitles him to the rather superior attitude which he has shown and which I must say I resent.
On the other hand, I will thank the hon. Gentleman for the very high compliment that he has paid to the Export Credit Guarantees Scheme. As he has pointed out, it has carried on with immense advantage to the country and with very great help to the trading classes, a type of insurance which private enterprise would not touch. Not only has it done that over a period of 30 years: it has done it successfully at a profit, and has had in the meantime to carry not merely commercial risks but risks which were deliberately incurred for national interests outside the scope of mere commercial calculations.
The President of the Board of Trade mentioned that there was something like £1,500,000 outstanding with regard to Roumania. Our experience of insuring trade with Roumania has not been happy. I think in the very inception of the scheme we ran into very bad weather with Roumania. So far as I know, the only country that has ever landed us in serious losses has been Roumania. I do not know what will be the future course of insurance with Roumania, but if I were dealing with it I should be very careful of any insurance with that country.
§ Mr. Benson
I should require notice of that question.
The Bill is limited to residents in this country. I am not sure, but I think it 1696 might be possible for us to extend these activities more widely. I see no reason why we should not earn invisible exports. Why should not we, with the consent of the Dominions, cover risks of Dominion traders? There is no reason why we should not do what every insurance company in this country does, namely, carry foreign risks. At any rate, it is a point which requires exploring.
The President of the Board of Trade said that trading accounts would be published. As a member of the Public Accounts Committee, since 1929, it has been my job to look at the trading accounts as they are published, and I must say that I am very sceptical of the value of the publication of those accounts. When it comes to the trading accounts of export credits, I have never yet been able to understand them, and I do not think any other member of the Committee has been able to understand them. We have been told by the Comptroller and Auditor-General that they are cast in the form which the best advice obtainable recommended, but they still remind me very much of hieroglyphics. However, let the accounts be published by all means. Every kind of information is possibly valuable, even if one cannot understand it, but I do not attach much importance to this concession.
§ 4.26 p.m.
§ Mr. Erroll (Altrincham and Sale)
This Bill affords us a valuable opportunity for a review of the work of the Export Credits Guarantee Fund. The last Bill of this description which was passed by this House a few months ago, was in the nature of an interim Measure to raise the ceiling within which the Department could work, but this Bill which, as I read it, is something of a consolidating Bill as well, extends the powers of the Department in a number of directions. I should like to join with the previous speakers who have paid tribute to the work of the Department. Admittedly, it is a striking example of public enterprise, but let us realise that only a public department could have undertaken the insurance and the guarantees which this Department has carried out, because only a public department could have access to that Governmental and political knowledge without which any sure basis of guarantee would have been quite impossible.
1697 I am interested to notice that in Clause 6 the Department is to come under the Secretary for Overseas Trade. Before we go any further, I should like to say that it is a great pity that the Secretary for Overseas Trade is not here this afternoon to participate in the Debate. Neither has the President of the Board of Trade consented to remain with us during the discussion of his speech, nor has the new Parliamentary Secretary. Their absence does not make it quite so easy to comment on the remarks of the President of the Board of Trade, but doubtless they will be passed on to him.
I think we must divide the guarantees into two forms. There are the political guarantees against political risks, and the commercial guarantees against commercial risks. Dealing first with the political risks, it is obvious that only a Government Department with all its special knowledge could possibly make a proper assessment of the political risks involved in an overseas commercial transaction. It has been euphemistically described by the President of the Board of Trade as the confused world in which we live. There is much more than mere confusion in the world today. There is a worldwide tendency for governments to regard themselves as trading units, and for governments to trade with each other, to negotiate directly with each other, and to use all the bargaining power at their command, to secure better terms than their nationals might otherwise separately achieve.
At the moment we witness the behaviour of the Argentine Government in their relations with this country over the supply of meat. I have noticed similar hold-ups of payments or deliveries on the part of other governments in an effort to extort a more favourable trade agreement with this country. Certain European countries have resorted to that method. Only a public department, having excess to the Foreign Office and the advisers of the Board of Trade, can properly recommend how much risk can be run in guaranteeing the ultimate payment in a commercial transaction taking place under the shadows of such a political risk.
Then there are the commercial risks. I must say I was surprised to see the way in which the Department is prepared to underwrite what I should have regarded as normal commercial risks. There may 1698 be good reasons for it, but I should have thought the facilities of banks and other institutions would have been able to take care of a number of the normal commercial risks which it is apparently the policy of the Department to guarantee. The Minister referred, for example, to financing stocks overseas and to financing sales offices, particularly in the western hemisphere. Surely there is no need to have a Government guarantee behind an ordinary commercial venture in the United States of America? That is surely the one country where normal commercial principles still apply.
It is a proper commercial risk for a firm wishing to export to the United States of America to assess the chances of success, to build up the sales offices, to ship the stock and to trade as best it can. If it fails, surely the full cost should fall upon the private individual or the company trading in that way. If it succeeds, correspondingly the reward of success should belong to the individual or company. I appreciate that the question is complicated by the shortage of dollars, but I should have thought that Government intervention in such cases even although asked for should have been limited to satisfying itself as to the reasonable prospects of the success of the venture and to supplying the dollars for that purpose. I cannot believe there is any case for the intervention of a public Department to underwrite a normal commercial risk in a country known to have trading principles so similar to our own best trading practices.
The President referred to guaranteeing possible changes in the cost of labour and raw materials. Here again I should have thought that was a commercial risk which should have been taken into account either by some form of price variation or by an escalator clause or clauses designed to enable the changing prices of material or labour to be passed on to the customer or the person concerned. I understand, however, that the Department is prepared to guarantee such changes. It was not made clear whether the Department is to guarantee these changes when they take place in this country or when they take place in the country of destination. In the latter case, of course, one has in mind large public works taking place in undeveloped countries were labour is liable to fluctuate. It would be interesting to know how the guarantee is to be based and how the risk is to be calculated.
1699 There is also the problem of raw materials brought from overseas for processing in this country before being shipped to a third country. If the guarantee is to cover changes in prices of raw materials, can such changes in fact be guaranteed by the Department? I throw these out as one or two examples on which we on this side of the House would like further information. I think it is most dangerous if we go too far in the direction of a public Department underwriting what are normal commercial risks, which in the case of many countries in the world could reasonably be negotiated as commercial risks and which do not require Government underwriting in any shape or form.
I turn now to what I consider to be the rather more controversial Clause. That is Clause 2, which offers economic assistance to countries outside the United Kingdom. I thought the President was far from reassuring in his remarks on this Clause. He skated over it all too briefly. As I see it, this Clause more or less gives the Government carte blanche, up to the maximum figures permitted, to underwrite anything they like, under the vague justification that it is "expedient in the national interest." That might cover almost anything. Many of the arguments which take place in this House are over differences of opinion as to what constitutes the national interest.
Then, if you please, the President volunteered an example which struck me as singularly inappropriate. He quoted the case of guaranteeing a purchase of wool by the Austrian Government in 1946. I may not have heard him fully, but I do not think the President made it clear whether the wool was being purchased from stocks held in Britain or from stocks held outside Britain. In either case, I feel it is hardly correct for British funds to be used to guarantee a transaction of that sort, because if the wool were held in Britain, surely the operation of ordinary commercial banks could ensure that there was no irretrievable loss of the wool until the Austrians had actually paid cash into this country. If the Austrian Government were to buy the wool from Australia, surely that would be a matter between the Austrian Government and the Australian Government unless we are to extend the 1700 functions of this Department so as to underwrite the risks which foreign Governments and ex-enemy Governments may be taking now and may take in the future. As the Clause stands, I consider it is very elastic in its construction. We have not had nearly enough explanation of its true importance or its true intention.
I am sure we are all glad that the field of invisible exports is at last to be included. It marks a notable step forward in the progress of a Labour Government that they should so far recognise the trade of British merchants as being so valuable to our economy as to justify a Government guarantee where necessary. There is one type of transaction which it is not clear from the terms of the Bill is covered, and that is the case of British-owned foreign patents. Quite often, British patents are taken up abroad and foreign firms allowed to use them on a royalty basis, under the terms of a privately negotiated agreement by which the foreign interest pays to this country a royalty based on production, on the number of units used or on some other basis. It is an export of British brains which surely deserves to be underwritten by the Export Credit Department like any other commercial transaction.
I had cause to write to the Department some months ago on a matter of this sort and they replied to the effect that under the terms then existing, they could only guarantee transactions which involved the physical movement of goods. It struck me as a narrow-minded conception of our export trade that unless there was an actual movement of goods there could be no guarantee. I want to know whether the Bill will guarantee such "exports," these royalty payments due under privately negotiated commercial agreements, designed to exploit British-owned patents in foreign countries for the benefit of this country.
Although this is an excellent Bill and is welcome in these troublous times, I regret that such a Bill should be necessary. I think it is deplorable that the normal commercial relationships of the 19th century and the earliest part of the 20th century should no longer be practicable or possible, except to a limited extent, without the intervention of Governments who underwrite what are largely political risks. The Bill itself and the Department which operates it 1701 show our British ability to adapt ourselves to changing world conditions, but they are changing conditions which I deplore, although I welcome the excellence of the Bill itself.
§ 4.40 p.m.
Mr. Scott-Elliot (Accrington)
Like my hon. Friend the Member for Chesterfield (Mr. Benson) I am a little disappointed by certain of the remarks made by the hon. Member for Bury (Mr. W. Fletcher). We on this side of the House understand fully the way in which we earn very large invisible exports by means of our shipping, our banking, our insurance, by means even of those technical services to which my right hon. Friend alluded during his speech. I am convinced we do understand these things, and I am very sorry that the hon. Gentleman who normally speaks in careful, measured terms. should have said what he did say.
I have only two points to put to my hon. Friend the Economic Secretary to the Treasury, with which, I hope, he will be able to deal. I think he will agree with me in saying that the sum total of our exports, particularly to the United States of America and Canada, to which exports are so vital, can be made up only if we bring into play every single firm that can export. That includes the small firms. Now, the small firms are a very difficult proposition. Small firms are generally not used to exporting. The idea at one time was that the small firms, particularly in the engineering industry, were more suited to sub-contracting. I think they probably are. However, many small firms in textiles, and many small firms of all kinds, can contribute to the total of our exports in markets overseas.
I am not at all sure how far it will be possible for the small firms ever to find suitable outlets in the United States and in Canada unless some medium is provided—not necessarily a governmental one. It may be that something new is needed in addition to existing organisations, such as B.E.T.R.O., some agency which has actual establishments in the Middle West of the United States, and which will be able to guide those firms in telling them the kinds of goods which are wanted. The point I want to put to my hon. Friend is this. Will these small firms, having obtained export orders, know about what is available to them in exports credits guarantees? Will there 1702 be the fullest possible publicity on this matter? Will they be satisfied that the premium which they will be required to pay will be consistent with what they are able to afford?
The second point I want to put to my hon. Friend is this. I think he will agree with me on the importance of stimulating exports to the United States and Canada and the dollar areas generally from the rest of the sterling area. How far has the rest of the sterling area some assistance such as this Bill provides for anyone who is trading within the United Kingdom? I hope my hon. Friend will be able to deal with those two points when he comes to wind up, because I think they may be of general interest.
§ 4.44 p.m.
§ Sir Patrick Hannon (Birmingham, Moseley)
I should like very much to join with my right hon. Friend in welcoming this Bill. Let me say at once, in support of the hon. Member for Accrington (Mr. Scott-Elliot), that I, too, hope that the Department engaged in the exports credits guarantees will give full publicity throughout the whole trading community of the country. I am particularly interested in the smaller traders, and one of the objects of the organisation with which I am associated is the combination of small traders in groups so that they can take advantage of exports credits guarantees under the provisions of this Bill. I welcome the Bill very warmly; I think it reflects great credit on the trading community of this country that it has successfully made efforts to export and to maintain its position in markets abroad. In that it has been supported by the Board of Trade. It was an admirable record of proceedings that was presented today to the House, and it is a great tribute to the integrity, honour and honesty of the mass of the trading community of this country.
I happen to have been familiar with the proceedings of the Exports Credits Guarantee Department almost since its inception, and I am bound to express to the House my appreciation of the skill and efficiency with which this Department has been conducted all the time during which I have been in contact with it in connection with several projects submitted to it for its consideration. Sir Frank Nixon really laid the foundations of the efficiency of this Department within 1703 the Board of Trade. The projects made to him from time to time on the part of organisations and on the part of firms in this country with which I was in one way or another associated were always received with courtesy, with consideration, and with that type of practical sympathy which enabled the business to be completed in the shortest possible time. I agree with my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) that there are certain aspects of risks to be taken which ought, perhaps, to be borne by the private insurance corporations and not by the State, but, taking it all in all, the work of the Exports Credits Guarantee Department since its inception has been admirable in the interests of the trade of this country. I am particularly glad that the entrepôt trade is to be included in the ambit of the Bill.
I hope very much that the Bill will be passed with the sympathy of the whole House, and that the extended facilities for the development of our export trade will be taken advantage of by the trading community. I am glad to think that, now and then, Measures are introduced here which are really commendable from every point of view, and which can be welcomed by hon. Members on this side of the House. This Measure is of that quality. We cannot say that with a clear conscience of all Measures which the Government introduce, and I am glad that on such occasions as this we can say, "Well done, Board of Trade," and so make up somewhat for our criticisms at other times.
I am sure that hon. Members on the other side of the, House, concerned as they must be with continuity of employment amongst our people, must also be as interested in the passing of this Bill as we are on this side of the House who are concerned with finance and trading transactions. I have pleasure in supporting the Measure, and hope very much that it will have all the consequences in the way of practical help for the trading community of this country, anticipated by the President of the Board of Trade.
§ 4.48 p.m.
§ Mr. Edgar Granville (Eye)
I agree with the hon. Member for Altrincham and Sale (Mr. Erroll) who has left the Chamber, that it is a pity that the President 1704 of the Board of Trade was not able to stay on after making his speech to listen to the right hon. Member for Aldershot (Mr. Lyttelton).
§ Mr. Lyttelton
I think that, in fairness to the President of the Board of Trade, I ought to say that he wrote me a letter to say that he could not be here owing to some other appointment of great importance. I hope the hon. Member will excuse my interrupting him, but I think I ought to mention that.
§ Mr. Granville
I appreciate that; but we have not all had the opportunity of receiving such a letter. However, it is a pity that the President was unable to stay, if only to receive the bouquets tendered from every part of the House on this extremely important Bill, which is an uncontroversial Bill. Perhaps, too, the right hon. Gentleman might have enjoyed listening to some of the arguments on invisible exports. The right hon. Member for Aldershot said we welcomed this Bill on all sides of the House. It is important. It is on account of rising sterling prices that this Bill is necessary. Maybe we shall have to consider, not Measures of this particular kind, but others of a similar character, as we enter the acute competitive stage in the world's markets, particularly because of the hybrid economy we have in this country, which has not yet had to face the post-war competition foreshadowed from Japan, Germany and the United States of America.
The President of the Board of Trade referred to the part which the extension of this Measure would play in the hard currency areas. I hope that some attention will be given to the scheme which has, I believe, been started with some success whereby these facilities can be given to certain exports from this country to the hard currency areas, and export sales made from the warehouse. This will be increasingly important in the future largely because this country is finding that not only price and quality but the time of delivery in the hard currency areas is becoming increasingly important. By the time a salesman has gone from this country and sold goods in America or Canada, or wherever the hard currency area may be, and the order has been received here, a letter of credit taken out, etc., six, seven, eight or nine months may have elapsed, 1705 and in the meantime the customer has said, "Cancel the order and the letter of credit." The question of narrowing down that gap will be increasingly important. I believe that an interesting experiment has been begun of exporting regular lines in bulk to warehouses in the hard currency areas, with the salesmen selling from warehouse to customer, thus giving immediate delivery. This scheme has been referred to by the Secretary for Overseas Trade in a recent speech. I am sorry that he also is not here this afternoon.
§ The Economic Secretary to the Treasury (Mr. Douglas Jay)
May I explain that my hon. Friend is at this moment preparing to leave the country very shortly and that has unavoidably prevented him from being here?
§ Mr. Granville
I am sure that these Ministers are extremely busy and also that the Economic Secretary to the Treasury will be able to give us an adequate reply on behalf of the Government. The Government are often too slow in giving support to changes in trade, and I hope that the Secretary for Overseas Trade will look at this interesting experiment which is taking place, and which may enable us considerably to increase our exports to the hard currency areas. I say that because over and over again, when Measures of this kind have been before the House, the Minister has stressed the vital importance of the hard currency areas. It is there that we shall meet strong competition in the future.
§ Mr. W. Fletcher
Has the hon. Member borne in mind the considerable danger which exists of creating a stock of unsold goods in a warehouse in America? Experience shows that the final out-turn of the crop of dollars might be very much less than it would be by the other method.
§ Mr. Granville
I agree that this experiment has to be watched very carefully and that we should see how it progresses. There have also been considerable losses to this country in the case of export orders which have had to wait for a long time for shipment, with the result that the orders have been cancelled and the goods left on the dockside here. The experiment will have to be confined to those regular lines which are known to be good and ready sellers, such as cotton goods in the case of the textile market.
1706 A reference has been made to the small producer. Many of the new ideas in design, texture and production in this country are coming, and will always come, from small, efficient production units, many of which know little about export trade. Numerous tributes have been paid to the Export Credits Guarantee Department, and I join in complimenting them. They always give the little man the best advice they can. There is a general feeling among these small exporters that they are not big enough or strong enough to tackle an important hard currency market, or indeed the export market at all. It may be that some provisions can be worked out within the terms of this Bill for some group arrangements for established well-known products which would encourage the small men to arrange a group credits scheme.
Reverting to the question of the time lag in export orders, which will be so important in the case of our exports to certain markets, I would refer to the growing tendency to export by air freight, thereby shortening the time taken by the ordinary methods of shipping goods. It may be that this extra risk might well be looked at under this Bill. We all welcome the Measure, which is probably the first of the extraordinary Measures which will have to be taken to meet the full blast of competition in the world markets.
§ 4.56 p.m.
§ Mr. Eccles (Chippenham)
This is an important Bill. We are asked for £200 million more on the commercial account and a £100 million blank cheque in the other class of guarantees. The House is entitled to put questions, and while I have confidence in the Economic Secretary to the Treasury, I wish we had someone here from the Department concerned, although I understand the reasons why there is no one from that Department here.
The system of export credits is a marriage between the Government and private enterprise of which we all approve. The Government do not find the foreign buyer or make the contract, but they create conditions in which private individuals can trade more securely and widely than they otherwise could. That is a most desirable thing. The system was first introduced by Lord Swinton 25 years ago, when he was President of the Board of Trade, and it has gone on growing ever since. I wish that the 1707 President of the Board of Trade had said a little more about the importance of the amount of our exports which are covered by these policies relative to the whole.
I have extracted some figures, and, so far as I can see, the total value of policies in 1945–46 was 12.8 per cent. of our exports, in 1946–47 their value was 13.5 per cent. and in 1947–48 it was 14.3 per cent. These are interesting figures. They show that while the value of our exports has doubled, the proportion of exports covered by these policies has slowly increased all the time. If one examines these figures it is obvious that the crop of bilateral agreements at the end of 1947 caused a big jump in the number of policies written by the Export Credits Guarantee Department. But we do not expect, or the Government tell us not to expect, our exports to go on increasing at the rate at which they have increased over the last two years. Therefore, unless the proportion of the total which is to be covered by these policies is rapidly to increase we do not need this additional £200 million.
It is up to the Government to prove to us that the proportion of our total exports in the future to be covered by the policies is to be something very different from what has been the case in the past. I wonder if that will be so? In a little handbook put out by the Department called "Government Guarantees for Exporters," it is stated on page 10:The service is of special value at a time like the present when exporters may be seeking business in countries where they have little or no exports.Elsewhere it says something to the effect that firms who are new to the export trade will naturally avail themselves of this service. I think that is true, but I wonder how many firms are likely to go into the export trade in the next year compared with the newcomers in the last two years. I may know the Government's answer as I happen to be sitting on the Standing Committee which is considering the Coal Industry Bill. There we have been told by the Parliamentary Secretary to the Ministry of Fuel and Power that the National Coal Board are to go into the export trade in a large way. It may well be therefore that this £200 million is to cover the National Coal Board in their bunkering, sales of mining machinery and the products of their 1708 ancillary businesses. The National Coal Board know nothing about the export trade. They are newcomers indeed. That may be the reason for requiring this sum. Perhaps the Economic Secretary to the Treasury will tell us.
It may also be, as several other hon. Members have said, that the scheme could be more widely known. I am not sure that it gets the publicity that it deserves. I am not sure that all firms who would be well-advised to take up these policies are in fact doing so. I believe, if I recollect correctly, that in the Debate of last July, the President of the Board of Trade said that the Department were going to open branch offices in the provinces. We should like to know what has been done about these branch offices.
I should also like to ask whether the Department exchanges information with the banks and merchant firms because it must be the case that, by this time, a unique volume of information about the status of foreign powers and other matters relating to export markets has been collected in the E.C.G.D. When the Department wants to get a report upon some aspect of the export business from one of the British banks or one of the merchant firms that report is always given. In that direction the information flows automatically. Does it flow in the other direction? Is the Department also open to be asked by those people, especially the people guaranteeing credit, for information, and does it give this information away—is it a two-way street?
How are we going to improve the system of guarantees? We want something rather more flexible. When the Department started off, it began rather simply and on rather narrow lines, but today there are at least two directions in which the service could be improved. Hon. Members will know that in the majority of commercial transactions, if not in all, the exporter must underwrite with the Department all the risks. He has to take out a comprehensive policy covering the solvency of his debtor, the risk of war, the risk that a foreign country may put on exchange control, the risk that there may be some change in the import policy. All the risks must be insured against together.
The time has come for the Department to allow the insurer to select his risk. For instance, anyone exporting to South America today—say to the Argentine— 1709 would obviously want to insure against a sudden shutting down of the transfer of Argentine money into sterling. On the other hand, the buyer in the Argentine may be a man whose solvency is not in question at all. Why should the trader have to take out a policy which covers a risk which does not interest him? Supposing he is exporting to Malaya, he may say, "I want to cover the risk of some Communist bandit destroying the goods on arrival." That may be the only risk he wants to insure when exporting to Malaya. Would it not assist British trade and the whole purpose of the system of guarantees to refine a little on this aspect of the business and allow the exporter a wider choice in selecting the risk which he wishes to cover?
Following on what the hon. Member for Altrincham and Sale (Mr. Errol) said, I would add that nobody forces the exporter to take one of these policies. If he thinks that he can get the risk underwritten better by a private insurance company he goes to the company. E.C.G.D. is there to underwrite risks that the exporter finds he cannot get covered somewhere else. However the argument that the insurance would be better left to private firms may turn upon splitting up these various types of risk. So long as E.C.G.D. insists on underwriting all or none of these risks the exporter concerned may have to take out a comprehensive policy in order to insure against civil riots, which is a risk beyond the insurance company's purview, and, at the same time, insure against other risks which could be underwritten privately.
The second improvement is this: In the past the Department has advised, if not insisted upon, an exporter covering with them the whole of his business in a certain market. Supposing that a man is exporting to Egypt and he goes to the Department. They say, "You must cover all your Egyptian business." I wonder whether there should not be a certain amount of relaxation in that respect. The exporter should be allowed to take out policies in respect of certain parts of his transactions—those which he considers peculiarly risky—and if there are some he does not consider so risky, it might be reasonable if he did not have to spend money to insure them.
I see the point of view of E.C.G.D. They want to spread the risk and insure the largest amount of trade in order that 1710 any bad debts may bear a smaller proportion to the whole. As time goes on, their experience is built up, they know more about these markets, and more flexibility in this respect would be both safe and desirable.
§ Mr. Eccles
I think that there is more flexibility now, but I should like to see it go further than it does. Turning to this £100 million—this blank cheque—for these special guarantees, the President said quite rightly, that in this case the Advisory Committee is not brought in. There is no safeguard of business experience. When that committee says that a risk is not a good commercial risk the President of the Board of Trade steps in and writes the risk on his own. It is a serious thing to give a blank cheque for £100 million to do anything which a Minister may think to be conducive to the national interest, and I want the Economic Secretary to tell us concerning the £60 million, which was the previous limit for this kind of guarantee, how much of that sum is in use today, because if it were the case that nothing like the full £60 million is being used, the House ought not to increase that limit to £100 million. The Government must show us that there is a real need for the additional £40 million which we are giving them as a blank cheque.
I was interested in several suggestions made by hon. Members, and by the hon. Member for Chesterfield (Mr. Benson) in particular, about expanding the use of this kind of guarantee to trade passing outside this Kingdom. I want to ask whether this form of increasing the transferability of sterling—because that is what is amounts to—has been linked up with the Marshall plan and O.E.E.C. This might be a very fruitful development and it might well assist to increase trade between the different Marshall countries if, when the principal of the business is British, a guarantee of this kind could he effected. I think that it can be under the Bill, but I am asking the Economic Secretary: Is it the policy of the Government that it should be?
My hon. Friend the Member or Altrincham and Sale mentioned the movement of raw materials froth one country to another, processing in the second, and the sale of the finished product 1711 to a third, and I wish to ask a specific question about the manufacture of newsprint and paper. At the present time there is a large amount of pulp rotting in Scandinavia which if brought here could be made into paper, and the export of the finished material to Australia and South Africa is certain; they want the finished paper. Now if something is not done to assist the movement of that raw material to this country what will happen is that the Australians will buy their finished newsprint in Scandinavia and by-pass this country altogether. That cannot be in the interests of the United Kingdom. I do not know whether under this Bill an advance of sterling could be made to these countries, but is it the policy of the Government to use these guarantees to assist the movement of raw materials to the manufacturing capacity in that sort of way?
I have been approached by some people who want the Department to extend its business in one direction relative to imports, which I think is very interesting. It appears that bilateral trade agreements made by His Majesty's Government often contain promises of, let us say, a large quantity of timber from some Eastern European country. Then those who actually have to do the cutting and shipping of the timber come to the merchant in the United Kingdom who is to buy the timber and say, "We should like an advance while we are preparing this material for export to the United Kingdom." The importer here replies, "There are many political risks. I do not understand the situation in Poland"—or the Baltic, or wherever it may be—"I cannot give you an advance against this timber," which is written into the trade agreement, "unless I can get that money guaranteed, in case the Government of the shipping country turn sour or quarrel with His Majesty's Government and cut the trade off." It would be reasonable under this £100 million special guarantee for the Department to give that sort of help, and I hope that the Economic Secretary will examine that aspect.
I turn now to a further extension of the activities of the Department. If we are to encourage the specialised production in Europe of products which take the place of what we now have to buy 1712 from the dollar area, a considerable amount of capital construction and new development will have to take place. The Americans, recognising that one cannot easily persuade people to put their money into a country whose currency is fluctuating and may depreciate, have set up under the Economic Co-operation Administrator a guarantee fund for American capital, so that the rate of exchange is guaranteed to them when they put their money into one of these Western European countries.
His Majesty's Government will have to contemplate the same sort of guarantee for British capital. If we want to set up a factory in France today, who is going to pay for it, not knowing what the francs which he gets for his £ when he is starting the business tomorrow will be worth in five years' time. That is a risk of the same kind that the E.C.G.D. have been undertaking hitherto; it is a risk which the Americans have already covered; and I suggest that we should do the same.
I am sorry to keep the House so long, but I now come to my final point, which is about the accounts. The hon. Member for Chesterfield knows more about National Accounts than I do; but I must say that any kind of accounts we can have relative to this £100 million would be better than no accounts.
§ Mr. Eccles
Let us have the best accounts we can get, because we must not allow such large sums of money to disappear without knowing what has happened to them.
§ Mr. Benson
I said that I highly approved of accounts. I merely commented that I could not understand them.
§ Mr. Eccles
I have a word to say about the actual accounts of the E.C.G.D. as we find them today. In the, I think it is called, "Trade, Accounts and Balances" is found an under-writing account of the operations of the E.C.G.D., at the bottom of which is a note which says that the number of policies outstanding is so much, and that the contingent liability on 31st March last was so much. That is merely a note on that balance sheet. When one turns to the Finance Accounts of the United Kingdom—in which there is a section setting out all the contingent liabilities of His Majesty's Government; their contingent 1713 liability in respect of war damage payments, and all that sort of thing—there is no record at all of the contingent liability in respect of the E.C.G.D. policies. That is bad. Somewhere amongst the other contingent liabilities of the Government we ought to see the sum which is assured by these policies, and I ask the Economic Secretary to look into that.
This is a good scheme. It is well worth refining and making still better. To those who claim it as a great example of public enterprise I would say that the real point is this: Government interference has created certain risks which private people cannot insure, and therefore the Government have had to come along and provide a means for dealing with the disturbances they and other Governments have themselves created. Well, that is all right; that is the way the world goes; and with all the policies that are brought under the £500 million, and are supervised by the Advisory Committee we have no quarrel. With regard to the £100 million, we want some more information; we particularly want to know whether the £60 million is used to date or not, and if not why the Government have asked for any more.
§ 5.18 p.m.
§ The Economic Secretary to the Treasury (Mr. Douglas Jay)
We are very grateful for the variety of practical suggestions made this evening, and we shall take careful note of them. We have also been very pleased to notice the almost enthusiastic, and indeed unanimous support which the Opposition have today given to what has been called a successful example of public enterprise, whose activities we are seeking to expand by this Bill. Last week in the general economic Debate I was able to congratulate the Opposition on their conversion to the policy of general economic planning. Today I can congratulate them further on their conversion to support of public enterprise, at any rate in some of its forms. For of course the Export Credits Guarantee Department is entirely a Government Department; it is not even a commercially organised corporation like some of the public corporations; it is actually part of a Government Department.
§ Mr. Lyttelton
I am sure that the hon. Gentleman does not want to be unfair, but I think his phrase about the export credits was a little unfortunate, in that 1714 he said that this party had been converted to the idea. The sort of assumption he asks people to make is that this is a Socialist experiment, whereas of course quite the reverse is the case.
§ Mr. Jay
I was saying that this is a successful public enterprise, and we are very glad to have general support for it. It shows from experience that an actual departmental organisation can, in fact, carry on a successful commercial and trading business. We are all agreed that the success of the Department is great, and growing and undisputed. It is operating in a field where private enterprise, for perfectly understandable reasons, had failed to function. It is building up a very large business which is benefiting our export trade, and which has been of great assistance to the more enterprising sections of private business.
In reply to my hon. Friend the Member for Chesterfield (Mr. Benson), may I say that many small firms already know about this Department, because a large proportion of the business done by it is with small firms. I agree that we must do all we can to publicise the Department's activities and to bring them to the notice of small business. This pamphlet, known as "Government Guarantees for Exporters," which has been mentioned by the hon. Member for Chippenham (Mr. Eccles), is part of the policy of making the Department known to small firms. The values of the policies issued have grown on an average from £43 million a year before the war to £72 million in 1945–46, and £198 million in the first nine months of this year. It is, of course, the growth of the Department's business, due partly to higher prices, partly to greater export trade and partly to greater risks, which has necessitated this Bill. It does not supersede or supplant private enterprise in any way. In fact, it supplements the activities of private enterprise.
The Department does not actually make the credits, and therefore, it does not compete with any of the institutions which make the credits. It simply guarantees the repayment of the credit to the seller. The hon. Member for Chippenham gave the answer to one of the questions of the hon. Member for Altrincham and Sale (Mr. Erroll), who inquired whether the Department was not in danger of stepping in and undertaking the guarantee of normal commercial risks, which ought 1715 to be undertaken by ordinary business. There is no need for any firm to ask for these guarantees unless it wishes to; and if it can get insurance or credits in any other way, the question does not arise. Therefore, I do not think that that is a serious danger.
§ Mr. Erroll
I had also in mind the case of credit arrangements with the United States, which was referred to by the President of the Board of Trade, and the setting up of sales offices, which is not a risk which should be underwritten by a Government Department at all.
§ Mr. Jay
All this Department can do is to guarantee for the benefit of a resident in the United Kingdom a credit made for the purposes of earning foreign exchange. If that is the situation, it might have a function to perform; but I do not think it is going to overstep the mark in the way the hon. Gentleman suggested.
All this business, has, of course, been conducted on a growing scale and without any charge falling on the taxpayer. Indeed, up to date over the whole period the income from premiums has exceeded all out payments to such an extent that a surplus of £6 million has been accumulated and invested as a reserve with the Exchequer. The right hon. Member for Aldershot (Mr. Lyttelton) talked about it disappearing into the Exchequer. Of course, it represents a reserve from the point of view of the Department for which it earns interest. We have, therefore, here an example of a public enterprise which has not merely been very successful, but has succeeded in earning an actual surplus for the taxpayer over a period of years.
The hon. Member for Altrincham and Sale asked me various questions about Clause 2. There is nothing sinister about it. It continues the new provision introduced in 1939 for giving guarantees where there are risks of a non-commercial character. A guarantee can only be given for the benefit of persons carrying on business in the United Kingdom, and it can only be done where it appears to the Board of Trade to be in the national interests. These are sufficient safeguards. The hon. Member asked whether the Department could operate in the case of British owned foreign patents. The answer to him is, "Yes, under the revised Bill it would be possible to bring that in."
1716 The hon. Member for Chippenham asked me whether the promised branch offices have now been opened. As a matter of fact, if he looks at the last page of the pamphlet, which he mentioned in his speech, he will see that nine such offices are mentioned. We have succeeded in making some progress there. He also asked me whether information is exchanged with ordinary private banks, and whether the information is a two way traffic and not one way. The answer to that is, "Yes. The Department is in the closest contact with the banks in all relevant matters involving information of that, kind." Thirdly, he asked me how much of the £60 million maximum figure is at present outstanding. As a matter of fact, there is only £8 million outstanding. We are nevertheless raising the total to £100 million because we expect a considerable expansion of business under this head.
Not merely has the Department proved very successful in the past; but it is peculiarly well fitted in the future to contribute to the paramount job of sustaining the export drive. Exporting is not merely a vital business for this country, but it is an exceedingly risky one. That is why we are extending the maximum liability and why we are bringing in invisible exports, which I do not think hon. Members on this side of the House have been in the habit of denigrating or casting aspersions on. I do not think any one from this side of the House has cast aspersions on the Merchant Navy, and I have no intention of denigrating invisible exports.
In reply to the hon. Member for Eye (Mr. Granville), I should like to say that we are proposing to relax the rule previously observed by the Department that its activities were not to be used to steer exports to hard currency countries or to any particular destinations. We have now got to use every weapon we have to direct or steer exports to the dollar countries. If we refrain from planning the direction of our exports in a world of inconvertible currencies—we must work on the assumption that many currencies are going to be incontrovertible for some time—we shall inevitably run into balance of payment difficulties. We did not, in fact, solve this problem of the switch of exports on a large scale to dollar countries in 1948; and probably the major economic task of 1949 is going to be to 1717 carry out such a switch, above all to the North American continent. The Export Credits Guarantee Department will be one of the weapons we shall use for that purpose. We shall not, of course, push this use of the Department for export-steering purposes to the point of endangering its commercial success; but short of that we shall do anything which our national export policy demands.
In the future, therefore, the aim of the Department should be not merely to support our export trade generally, but to stimulate in particular our sales in hard currency markets. For all these reasons, and as a further contribution to our national recovery drive, I commend to the House this Measure for increasing the powers of this highly successful public enterprise.
§ Mr. Benson
Has my hon. Friend anything to say about exploring the possibility of carrying foreign risks which are not related merely to residents in this country, with the idea of earning invisible exports?
§ Mr. Jay
We shall certainly explore that possibility; but the Bill as it stands provides for the services of the Department to be confined to residents in this country. It might have been supposed that the governments of other countries, if they had wished, could have provided similar services for their nationals; but certainly we shall explore the possibility.
§ 5.32 p.m.
§ Mr. Beverley Baxter (Wood Green)
While we realise that the President of the Board of Trade may have important engagements that he should keep, I think there is a growing tendency for Ministers to accept engagements for days on which they are in charge of particular Debates. Attendance at Debates is among their primary duties, and they should be here. I think this was an opportunity for the newly-appointed Parliamentary Secretary to the Board of Trade to be here as well. We could not expect that he would speak with Ministerial authority on the subject, but at least we should have made contact with him in his new capacity. The Minister who is here ought to convey to his colleagues the feeling of resentment which is felt in this House at this growing tendency, although we appreciate very much the way in which the hon. Gentleman has dealt with the Bill himself. [Interruption.] My hon. Friend the Member for 1718 Altrincham and Sale (Mr. Erroll) reminds me that the Secretary for Overseas Trade is also missing.
§ Mr. Baxter
I know, and I am aware that we had that explanation, but this adds to the Ministerial absentees. The subject of Front Bench absenteeism is something which we may have to discuss.
There has been today a very large and almost complete measure of agreement on the Bill, but I do not think it would be wise for the Government party to misunderstand what has happened. We have been discussing the spectacle of the Government using the national credit to facilitate and encourage private enterprise in the export trade. I think we all agree on this side of the House that, under the new, developing system of economics and world trade, the Government must play an increasingly important part in enunciating the philosophy of trade and in creating facilities for trade. It has been a criticism in the past that we have never used our national credit to the extent that we ought to have done. Let us remember that this plan was initiated by the party on this side of the House 25 years ago. Where we part company is when the Government of the day makes the mistake of competing with private enterprise, ceases to assist and facilitate it, and enters into direct trade. That is something with which we can never agree. Today we have a compromise with common sense.
§ Committed to a Committee of the whole House for Monday next.—[Mr. J. Henderson.]