§ Order for Second Reading read.
§ 4.8 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."
This is a minor Bill designed to clarify the powers of the Export Credits Guarantee Department. It cannot be regarded as playing any part in the series of major Bills which have marked the development of the E.C.G.D. to the important role it fulfils in our export trade today. The House will be familiar, and the right 902 hon. Member for Southport (Mr. R. S. Hudson) in particular will be familiar with that series leading up to the Overseas Trade Act 1929, the Export Guarantees Act 1937, the Export Guarantees Act, 1939, and the Overseas Trade Guarantees Act, 1939 with which I think the right hon. Gentleman was intimately connected, and also the Export Guarantees Acts 1945, 1948 and 1949. These have successively set forth and extended the powers of the Department.
This Bill now before the House confirms powers which we had thought were given in the 1939 and the 1949 Acts, but about which there seems room for considerable doubt. I very much regret to have to trouble the House by asking for these powers, the more so as in the Bill it is necessary to ask for retrospective confirmation of actions already taken by the Department, something to which I think no Minister likes asking the House to agree and which the House itself is always somewhat doubtful about.
I also have to apologise and draw the attention of the House to a clerical error which occurred in the first paragraph of the Explanatory and Financial Memorandum. The words which appear there are:… the Board of Trade, acting on behalf of the Export Credits Guarantee Department …They should read:… the Board of Trade through the Export Credits Guarantee Department …I think it is recognised by the House that the Export Credits Guarantee Department is the agent of the Board and not the Board the agent of the Department.
What the Bill is designed to do is to make it clear that the E.C.G.D. can provide cover for transactions by an overseas subsidiary of a parent company in the United Kingdom. Under the Bill this cover can be given in either of two ways —by means of guarantees given to the parent company in the United Kingdom in respect of losses incurred by its overseas subsidiary; or by means of guarantees given direct to the overseas subsidiary.
It was assumed, after the Act of 1939 was superseded by the Act of 1949, that the far wider powers conferred by the later Act would cover both of these types of guarantees to which I have just referred. Indeed, since the 1949 Bill 903 became law, the Department has in fact given them. I now have to tell the House that the Government are advised that the 1949 Act does not in fact give these powers, and, indeed, that guarantees given after 1939 to cover the United Kingdom parent companies against losses by overseas subsidiaries were not in fact covered by the 1939 Act, as I think was at that time supposed. The need for these guarantees in connection with dollar export trade in particular—although, of course, the need is not confined to dollar export trade—will be obvious to the House. It certainly is obvious to the very large number of exporters and traders who make use of it.
As the House knows, at a critical time in the development of the dollar export drive the Department announced new forms of assistance to the dollar exporter in the assumption of a major part of the risks to which dollar export trade is particularly prone. These included in particular guarantees in connection with the building of stocks—an essential measure for many types of exports to North America—and guarantees in connection with promotional or representational expenditure in the dollar areas. In many cases this has to be done, or at any rate can best be done, by overseas subsidiaries.
But, as I have said, we have now been advised that since as a matter of law a holding company has no insurable interest in the earnings of its subsidiaries, these transactions cannot be said to be a guarantee or a contract of indemnity within the meaning of the Act. Therefore, Clause 1 (1) of this new Bill puts this matter right. The House will have noticed that in this subsection there is reference to any deficit on an account relating to activities of both companies. This has been included so that guarantees can be given under the new Joint Venture protection which is available for exports to dollar markets.
Subsection (2) of Clause 1 deals with the guarantees given direct to the subsidiary company, and the advice that we have received makes it clear that guarantees direct to the subsidiary cannot be considered as being for the benefit of the parent company under Section 1 (1) of the 1949 Act. Here again subsection (2) of Clause 1 puts this matter right. As I have made clear, guarantees of both kinds 904 have, in fact, been made since the passing of the 1949 Act, and therefore subsection (3) of Clause 1 provides the necessary retrospective statutory recognition. I hope the House will give its warm approval to this small but essential Bill.
In previous debates on the Export Credits Guarantee Department there has been a lively appreciation in all parts of the House of the great work that the Department is doing. I should be going very wide of the Bill if I were to give any survey of the Department's work, but it might help to put this Bill in its true perspective if I were to tell the House that the numbers of exporters with commercial guarantees current at the end of 1950—that is, guarantees under Section 1 of the 1949 Act—was just over 3,000. That number has doubled over the last three or four years and is still steadily rising.
The total value of business guaranteed under the commercial section of the Act at the end of 1950 was just over £320 million compared with just over £240 million at the end of 1949—an increase of £80 million, or 33 per cent. in a single year. In addition to the commercial guarantees, at the end of 1950 the Department had assumed liability in respect of the special guarantees covered in Section 2 of the 1949 Act amounting to some £34 million, and these in particular include a considerable number of special guarantees designed to facilitate exports to North America.
§ Mr. R. S. Hudson (Southport)
The right hon. Gentleman has given some interesting figures relating to the values, which have risen. Could he tell us anything about the volume?
§ Mr. Wilson
It would be impossible to provide any index of volume of work done by the Department. Certainly if I were comparing 1950 figures with 1938, when the right hon. Gentleman was concerned with this, the great increase which has occurred since then would have to be discounted considerably by the rise in prices; but with respect to the figures which I was quoting for the end of 1950 compared with 1949, although there has been some increase in price—perhaps 5, 6 or 7 per cent.; I have not the exact figure in my head—the increase in value is a fair if slightly overstated indication of the growth in the Department's business.
905 In comparison with these impressive total figures—I am sure the House will agree they are impressive; in fact, I think the right hon. Gentleman has just said they were—of the Export Credits Guarantee Department's business, the value of the guarantees which the Department is likely to issue under this Bill will, I think, be comparatively small. The amounts at present guaranteed in this way add up to some £6 million. But the importance of these guarantees cannot be measured in purely statistical terms. They represent an addition to the flexibility of the Department's operations and to the effectiveness of the service which the Department can offer, particularly in the shape of these highly important dollar export policies. To judge from the interest shown by the trading and exporting community in these special dollar export facilities, the indications are that as we go forward into 1951 we shall see a considerable increase in volume above the figure which I have just quoted.
After the recent speeches of my right hon. Friends the Prime Minister and the Chancellor of the Exchequer I know that I do riot need to stress the importance of maintaining and, indeed, expanding the volume and value of our export trade, and in particular the high priority of our trade with dollar areas. I am confident that with the great trust and confidence which the House has in the Export Credits Guarantee Department, its highly efficient staff and the great service rendered by the Advisory Council, the House will be prepared to give to the Department these powers which it can so fruitfully use.
§ 4.17 p.m.
§ Mr. Leather (Somerset, North)
In rising to welcome this Bill, I must declare to the President of the Board of Trade a very special and personal interest in it. I have probably done more than anyone to cause the trouble which has brought about this Bill, because I believe I am the right hon. Gentleman's best customer. I am a member of a firm, Credit Insurance Association Limited. They are, I believe, the only specialist brokers in the country, and I think the Minister's advisers would probably tell him that we are certainly their No. 1 headache and I believe, their largest customer.
The Minister has given us the opportunity, as he said, to go a bit wide and 906 make a survey of this Department. Therefore, I should like to make one or two points which are perhaps outside the scope of the Bill but which are vitally important to the Department and to their clients who hold these guarantees. Before doing so, however, I should like to make one other small point. In previous debates on this subject a matter has been raised which has never been answered. I am sure the right hon. Gentleman knows the answer, but it has never been given in this House.
§ Mr. H. Wilson
I should not like the hon. Member to misquote even a very minor part of what I said. I said that I did not propose to go wide of the Bill, and therefore I could not enter into any general treatment of the work of the Export Credits Guarantee Department. Therefore, if the hon. Gentleman's remarks, which I am sure would be very helpful to the Department, are going to be in any sense critical of the Department, I should like to make it clear that there is a lot I could have said about the general work of the Department which I did not think it right to say this afternoon.
§ Mr. Leather
I can assure the right hon. Gentleman that any criticism I may offer will be constructive, because the last thing I should dare to do would be to offend his advisers. They could easily put me out of business.
It has been said in the House on previous occasions when debating this subject that this is something which the insurance companies would not do. The question which was asked was, "Why do not the insurance industry give this cover?" And the reasoning from that was that it was not profitable for them to do so and that the responsibility was thrown upon the Government. I should like to emphasise that that is not true, and I am sure the President would agree with me. It would be physically impossible, for the insurance companies to give this kind of cover because it is a type of cover where you have all your eggs in one basket. I am told, for instance, that at the outbreak of the 1939 war, the Department paid out in claims more than the whole of its reserves. Obviously, any insurance company which did business on that basis would be taking money from all its other policy-holders on false pretences.
907 The President gave the figures of the business done. I believe I am correct in saying that since the Act of 1939 the amount of the Department's business has multiplied by something like 1,000 to 1,200 per cent. The point I want to make is that that business is still being handled—and there is no proposition in the Bill to alter it—by nothing larger than the administrative staff which dealt with it before the war. I do not know whether this problem requires legislation or whether the Minister has power to put it right; probably he could deal with it administratively. In any event, the result is that we are now causing the most serious bottleneck, and the criticisms of the Department which I wish to make are based entirely on that one fact.
There has been a tremendous spurt in the last two years, as the Minister's figures bear out, and I hope I am in order in saying that we and most of our policy holders, who are his customers—I think that is the correct phrase to use—would like to pay a tribute to the present Comptroller-General and his senior staff. They have done a magnificent job. There is one thing I must say to the Minister, however; his present Comptroller-General began his operations when they threw the dollar drive at him, with the result that other sides of the Department's work have definitely suffered. The concentration of energy has been on the dollar drive, to the detriment of the other and very wide functions of the Department, to which a large part of this Bill refers. The majority of cases affected here are, so far as I know, in connection with Pakistan and India, for fairly obvious reasons—because people judge the risks in those countries today differently from the way they judged them before the war.
I have a list in my hand of quotations outstanding, where we are waiting for the Department, who take five or six or seven weeks to cover them. Policies are taking anything up to six months to go through. The slowest of the insurance companies—and some of them are slow—are not as slow as all that. I can give the Minister these facts and figures if he would like to have them, but what I seek to emphasise is that we believe very strongly that the reason for the delay is that the top officials in the Department 908 are greatly overworked and greatly under-staffed.
I do not know whether it would need a Bill to put that right or whether the Minister can put it right. His Department is not a normal Government Department; it is a commercial organisation which operates on commercial lines. The Minister might well say that this plea sounds very odd coming from these benches—a plea for more and more civil servants with more and more responsibility; but that is precisely the plea I would make in this case, because it is an exceptional case. These men are dealing with a business organisation quite outside the normal functions of any Government Department. They are hampered by great shortages of staff. It is not uncommon for a letter dictated by one of the senior officials to take a week or ten days to be typed.
The question of the delegation of responsibility is even more important because we all find that, instead of being able to go to the next chap along the line with whom we should expect to deal, time and time again we have to go to those at the top. Apart from dealing with these five or six people at the top, it is quite impossible to get a decision at all. Yet the more we bother them, the worse the bottleneck becomes and the further behind the Department becomes in dealing with the requests which we put to them. I have in mind a case of a contract with one of the largest aircraft companies in this country —a contract in South America running to several millions of pounds—which was lost because they did not know the key men in the Department, they did not know which officers to go to, they went to the wrong chap and got the wrong answer, and it took so long to reach a decision that the contract was lost. That sort of thing happens every day of the week.
These are administrative problems which are vital to the exporting industries of this country and I ask the Minister to give us an assurance that he is aware of them and that he is aware of the bottlenecks caused by the fact that his senior officials are overworked and, therefore, are not capable of dealing with the business as they should. That is largely due to shortage of staff and, I believe, to their constitutional inability under the 909 Act to delegate responsibility down the line.
§ 4.27 p.m.
§ Colonel Crosthwaite-Eyre (New Forest)
I want to ask the President one or two questions. He gave some very interesting figures, particularly in regard to the special guarantees. What puzzles me when I look at the amount is the fact that they are always shown in terms of sterling. Is he certain that that sterling is represented by foreign currencies which are at his disposal? It may be that the Treasury gives him sterling and he surrenders the foreign currency, but I should like to be assured that the sterling sums shown are transferable and available to this country.
The right hon. Gentleman said that £6 million is at present guaranteed to subsidiaries which are outside the terms of existing legislation and which he wishes to cover by this Bill. Does he anticipate that £6 million will be the total additional sum which will be required by his Department or does he expect a considerable increase in this type of business? If he does expect a considerable increase, I should be grateful if he would tell us the figure which he anticipates will be needed. During the discussion of previous Bills we have demanded very close estimates from the right hon. Gentleman of the amount of credit he wants and the reasons why he wants it. I should not like to see this Bill become an Act without some similar definite figure having been given. If the right hon. Gentleman cannot give it this afternoon, I hope he can give it on the Committee stage.
My last question is this. The right hon. Gentleman dealt with subsidiaries. Was he contemplating simply wholly-owned subsidiaries, or was he contemplating subsidiaries which are partly owned by a parent company in this country and partly owned abroad? I think he must have been thinking of the latter more than of the former but, if so, perhaps he could tell us a little more about how he intends to insure the risk as far as the Department is concerned. Very often there are special currency regulations for foreign countries to which we want to export. I have in mind the case of Ireland, where the majority of money in the companies has to be Irish held. We can have only a subsidiary interest in such cases.
910 There are, of course, many other similar cases. How does the President intend to ensure that the money he advances will be repaid? If it came to a clash between the interest of the subsidiary and the interest of the holding company, he might often be outvoted. This is a real problem because, if my information is correct, that sort of situation is potential in many cases. I do not say that it is likely to arise, but it is potential, and I should like to feel that we have safeguarded against it in some way or another. I think if those few minor points were dealt with it would add to the clarity of the Bill.
§ 4.30 p.m.
§ Mr. Eric Fletcher (Islington, East)
I should like to welcome this Bill and support it. I should not have thought it necessary to intervene merely in order to say that, but for the remarks of the hon. Member for Somerset, North (Mr. Leather). It is only fair to say that I do not think that the experience described by him and the criticisms that he has made of the running of this Department are by any means general. I have met a number of people who have had experience of dealing with the Export Credits Guarantee Department, and their reaction has been invariably one of pleasure and satisfaction at the way in which the Department is functioning.
Admittedly, it is a Department which has a great many difficulties, and requires a great deal of specialist knowledge about trading conditions in all parts of the world. It requires a great deal of knowledge about risks in various parts of the world—risks which are always changing, and changing from month to month and week to week, and even from day to day. I think it would be true to say that the trading community, and, of course, particularly the exporting community, has been well served by the facilities given by the parent Measure and by the very sympathetic and understanding way in which the Department has dealt with their problems.
My information has always been that this Department dealing with the commercial community has avoided some of the normal failings of a bureaucracy, and has attempted to deal with immediate trading, commercial problems as they have arisen, in an understanding and sympathetic spirit, and very much as an insurance company, privately owned and 911 privately run, would have done. Therefore, as we have been invited on the Second Reading of this Bill to go a little wider than the scope of the Clauses, I think it would be right, in view of the speech of the hon. Member for Somerset, North, to put the other point of view, and to take this opportunity of paying a tribute—
§ Mr. Fletcher
—of recognition and appreciation of the very considerable services which, as he said, this not overstaffed Department has given in this very specialised field.
I am very glad that the ambit of the work of the Department is being extended to enable it to deal with the particular conditions where a subsidiary company is either an exporter or importer or a go-between, because I quite agree that it is a very necessary extension. My only surprise is that the necessity for filling up this loophole did not become apparent before. I have no doubt that full use will be made of these provisions in the future, and I am very glad to welcome and support the Bill.
§ 4.34 p.m.
§ Mr. Shackleton (Preston, South)
I also should like to take this opportunity of supporting the Second Reading of This Bill, and of giving praise to the Export Credits Guarantee Department. I am sure that the hon. Member for Somerset, North (Mr. Leather), with his wide experience, and because of the tribute which he did pay to the Department, will agree with me that this Department has been doing an invaluable job of work for the country.
I should, however, like to make one point. He did comment on the delays that occurred, and contrasted them with commercial insurance operations. I am not quite sure what sort of case he had in mind, for it does seem inherent in the type of proposition that is sometimes put up to the Department that there must inevitably be some delay. Very complex proposals are put forward, and sometimes, as the work develops, the range of the type of assistance the Department is called upon to give is continually extended. I have heard of particular propositions that have been put up to the 912 Department which have sometimes involved a good deal of consideration, taking into account the market risks, and so on.
Generally speaking, I would strongly endorse the hon. Gentleman's commendation of the Export Credits Guarantee Department. Indeed, I go as far as to say that I think that the Export Credits Guarantee Department should be the exemplar of other Government Departments. It is in a fortunate position, I believe, in that it has continually found itself showing a handsome profit to the Treasury, and it is, therefore, less actively controlled and limited in its activities by the Treasury, and the type of Departmental freedom it has succeeded in achieving has added to its proficiency. Indeed, it has solved to a larger extent than other Departments, the problem of adapting Civil Service method and Civil Service outlook—and I am not using the terms in any condemnatory sense at all—to ordinary commercial activities. It has succeeded to a much greater extent than other Government Departments in adapting itself to giving a ready response to and a ready understanding of the problems of business men. I personally suggest that it would repay the Government to examine the way in which this Department works to see if they cannot learn a lesson for application in certain other fields.
The hon. and gallant Member for the New Forest (Colonel Crosthwaite-Eyre) came in with his usual sniping. I should like to know what particular type of research department he has to provide him with the involved questions he thinks up on these occasions. I cannot entirely follow his reference to the sterling earnings of the Department. It seems to me that they are merely concerned—I may have misunderstood the hon. and gallant Gentleman, but I realise he was making only a brief reference to this matter—they are merely concerned in the end, in being paid in sterling. Their concern is balancing their account in this country. They are not concerned with foreign currencies; so long as they do get payment in sterling, that is all they are or should be concerned with.
I support the Second Reading, and I am sure that my right hon. Friend will see that the Department is informed of the 913 high opinion this House has of its activities.
§ Mr. Leather
Before the hon. Gentleman sits down, I should like to assure him, with reference to the question about delays and the reasons for them, that there is one commercial organisation which is exactly comparable, and I have had figures got out that show that the average delay in the case of the Department last year was six weeks, and that in the case of the one comparable commercial organisation it was five days. The reason for that, in our view, is entirely administrative and a shortage of staff.
§ 4.39 p.m.
§ Mr. R. S. Hudson (Southport)
I am sure that the officials of the Department will be very pleased at the praise which has been poured on them today from all sides of the House. Personally, I am bound to say that I have heard it with very great pleasure, having been responsible many years ago for helping to nurse the child through its growing pains. I was particularly interested in the remarks of the hon. Member for Preston, South (Mr. Shackleton), and to find that here, at least, is one thing that he regards with approval that has emerged from the bad old Tory days.
I suggest to the hon. Member, without going any further, that he, perhaps, should consider in his quieter moments whether or not some of the improved results of this Department, as compared with those of more recent experiments of the Labour Government, are not due to the fact that this good work was started under a Tory Government, and that, therefore, the principles were, perhaps, better adapted to the despatch of business than those of some of the experiments which we have recently seen.
§ Mr. Hudson
We realise that it has done very good work, and no one is more pleased than we are on this side of the House.
914 There is one small point upon which I was not quite clear from what the President of the Board of Trade said in opening, and that is the extent to which this Bill makes alterations. It may be because I have been so long out of touch with this particular Department, but I was not clear whether the new guarantees extend to exports from parent companies from this country to its subsidiaries, or whether the subsidiaries are to be given a guarantee in respect of any trade with countries overseas irrespective of the country of origin. As the President of the Board of Trade knows, this was started in order to promote the export of goods from this country. Perhaps the Secretary for Overseas Trade would explain to what extent this guarantee applies merely to goods originating from this country, or whether it applies also to certain important visible export trade of subsidiaries between two countries overseas. Subject to that, we on this side welcome the Bill.
§ 4.42 p.m.
§ The Secretary for Overseas Trade (Mr. Bottomley)
On behalf of the Department I acknowledge the kindly references made to the staff and the good work they do. I must say to the right hon. Gentleman that my hon. Friend the Member for Preston, South (Mr. Shackleton), merely carried on what is traditional in the Labour Party, and that is picking up anything that is good and improving on it. In that sense I think we have succeeded this afternoon by introducing this new Bill. Criticisms such as those made by the hon. Member for Somerset, North (Mr. Leather), this afternoon—for some of which I must admit there is some little justification—might have been better made to the President of the Board of Trade or to myself a little earlier. If in future he would do that it would be most helpful. We find that other interested people make these comments and we are able to make adjustments accordingly.
§ Mr. Leather
I do not want to give a wrong impression. I have time and time again discussed with the hon. Gentleman's officials the kind of criticism I have just made. I have been very careful not to go over their heads.
§ Mr. Bottomley
I accept that. Possibly it is as a result of those representations that officials have seen me from 915 time to time. If hon. Members would write and let the Minister know in addition it would be helpful. I say no more than that.
In connection with the staffing arrangements, the Comptroller-General, when appointed, saw me and made references to the staffing difficulties, and we were able to go to the Treasury and get adjustments made. If more are needed we shall not hesitate to look at that, though I am bound to point out that again on this occasion we find Members of the Opposition asking for an increase in the staffs of Government Departments. The hon. Member for Somerset, North, also said that in pressing on the dollar drive we might have missed something else, or not done it as efficiently as it had been done before. I must accept that, but I must also point out that the dollar drive was so urgent that it just had to be pressed on with. Since then we have been pushing along to make sure that the whole is covered with the maximum efficiency.
The hon. and gallant Member for the New Forest (Colonel Crosthwaite-Eyre) asked whether the subsidiaries overseas had to be wholly owned. The answer is that the Bill says that these subsidiaries are to be controlled by the United Kingdom company, which in effect means that as long as there is a majority holding in the case of a United Kingdom company, it is covered in both instances.
§ Mr. Walter Fletcher (Bury and Radcliffe)
Is the hon. Gentleman certain that he is right on that? I am not a lawyer, but I have some experience of these questions. Is it not the fact that from a legal point of view control does not consist entirely in the shareholding. There is control through directors and directions given from this end. It is not entirely a matter of the shareholding.
§ Mr. Bottomley
That is so, but the hon. and gallant Member for the New Forest asked about the shares and I was answering that particular question. I think the hon. Member for Bury and Radcliffe (Mr. W. Fletcher) was not in the Chamber when that point was made.
§ Colonel Crosthwaite-Eyre
I want to get this straight. It would be perfectly possible to have a company where the 916 English parent company had only a 35 per cent. shareholding, but because of the circumstances envisaged by my hon. Friend it would still qualify under this Bill.
§ Mr. Bottomley
The assurance I will give to the hon. and gallant Gentleman is that, as long as we have effective control that kind of guarantee would be given. He also asked whether it would be possible to get an increase in the amount of £6 million for this kind of overseas trade. I can give the assurance that we can go above the £6 million; whatever we want in addition would come out of the amount of money voted by Parliament in order that this Department can work, but we cannot estimate what the amount would be. There has been unity on this Bill, and I think I have answered all the point put to me.
§ Mr. Bottomley
The Bill does not give the Department more power than it already possesses to cover goods not of United Kingdom origin, but, in accordance with assurances given by my right hon. Friend in debates on previous Acts, all requests for cover for foreign goods are screened first of all by the Board of Trade and then, if satisfactory, guarantees will be given.
§ Question put, and agreed to.
§ Bill accordingly read a Second time.
§ Committed to a Committee of the whole House for Monday next.