§ For the removal of doubt it is hereby declared that the guarantees which may be given by the Board of Trade under sections one and two of the Export Guarantees Act, 1949, include guarantees (in this Act called "British bank guarantees") of advances made by a bank carrying on business in the United Kingdom to manufacturers, convertors merchants and others concerned with the manufacture, treatment or distribution of goods in order to promote or facilitate the manufacture of goods for export or the export of goods.—[Mr. Mitchison.]
§ Brought up, and read the First time.
§ Mr. Mitchison
I beg to move "That the Clause be read a Second time."
I think it would be convenient to deal at the same time with the second new Clause in my name and that of my right hon. and hon. Friends—(1) Whenever the aggregate amount of the liability of the Board of Trade in respect of guarantees given under section one of the Export Guarantees Act, 1949, shall exceed five hundred million pounds the amount of British bank guarantees given under that section shall be not less than the amount of such excess.(2) Whenever the aggregate amount of the liability of the Board of Trade in respect of guarantees given under section two of the Export Guarantees Act, 1949, shall exceed one hundred million pounds the amount of British bank guarantees shall be not less than the amount of such excess.We could also deal with the consequential Amendment to the Title which appears on the Order Paper.
The object of the first of these Clauses is merely to introduce to the President of the Board of Trade a type of operation which is, I think, obviously within the terms of the 1949 Act and therefore within the purposes of the additional credits which we propose to grant today. That, in fact, is the case, although it has not always been acted upon in the past. So we shall introduce the President of the Board of Trade to a type of operation which we believe to be fully within his powers and which we desire to commend to his attention.
By way of commendation, the second new Clause goes on to make a direction as to the way in which the additional credit—if I may use the term—that is 2693 now being given to the President can be employed for this particular purpose.
These export guarantees were originally for a much narrower purpose than they now are. When the 1949 Act was introduced on 2nd February, 1949, the right hon. Member for Huyton (Mr. H. Wilson), who was then President of the Board of Trade, said specifically thatTo 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."—[OFFICIAL REPORT, 2nd July, 1949; Vol. 1460, c. 1683.]The figures we have heard from his successor in office amply justify that confidence, and the question now is whether the operations of this very successful body under the Act can be extended rather more widely than they have been in practice in the past. There is not the least doubt that the terms of the Act are wide enough to cover anything which is proposed by the Clause.
A remarkable thing about the Act and about the purpose for which we give the credit today is that it is not really an Act to set up an insurance arrangement at all. It is an Act to provide for guarantees. As the Committee are well aware, guarantees are far wider, both in the ordinary sense of the term and in their technical use, than insurance can be, and one of the most obvious guarantees known to us all is where some mechant's or trader's overdraft at a bank is guaranteed. That is not insurance, but it is, of course, a guarantee in the most ordinary sense of the word. Curiously enough, there is not a word that I can see about insurance in the Act at all. It is an Act to provide these guarantees.
If they are for the purpose of encouraging trade with places outside the United Kingdom—and, of course, there can be no doubt that that must be their main purpose—then what can the Board of Trade do? According to the Act it may:…after consultation…with consent…make arrangements for giving guarantees to, or for the benefit of, persons carrying on business in the United Kingdom, being guarantees in connection with the export, 2694 manufacture, treatment or distribution of goods, the rendering of services, or any other matter which appears to the Board of Trade conducive to the said purpose.How comparatively narrow appears to have been the practice of the Department in this matter! I have read the reports of the debates and I have listened to what has been said today, and, as far as I can see, the guarantees have not extended at all to manufacture. By and large, they have not been guarantees as to payments in this country by a manufacturer, for example, financing himself in order to go into the export trade; and yet that is well within the terms of the Act. They have not been guarantees for the specific purpose to which my right hon. Friend the Member for Huyton referred in introducing the original Bill—the financing of stocks in this country before any sales were made; is to say, in order to promote and facilitate sales to foreign countries, of course, and in the interests of the export trade.
There is a particular reason for making it perfectly clear at the moment that this can be done—and that is the purpose of the first Clause. Having regard to the economic situation of the country, and for reasons of policy with which I am not concerned today, general bank credit is being restricted and is being made considerably more expensive. I am, sure it is the intention of the Committee and of every person in it, as well as of the Government, that that restriction, should not operate to limit the export trade when its express purpose is to expand it. Accordingly, we look to this additional credit to see whether anything can be done with it in order to promote that purpose.
I do not want in any way to limit the matter, but it is perfectly clear that a man who is, say, in the textile trade, or the boot and shoe trade, which happens to be very active in my own constituency, or in many other trades—I am giving instances of the consumer goods trades, but, no doubt, they could be applied to other trades, too—and who is contemplating entry into the export trade, at the moment may be capable of performing a most valuable service to the country, and of doing exactly what the President would have him do, and yet be restricted because he cannot get the necessary bank credit.
2695 It may be asked why such a person cannot get the necessary bank credit. I call the attention of the Committee to the fact that the whole object of the Bill is to enable public funds to be used for purposes which private funds would not, in fact, fully meet. Whether we regard them as matters of insurance or, more correctly, as matters of guarantee, there are certainly cases in which a private bank is not prepared to do what it is the intention of this Committee should be done out of public funds.
I am not for a moment inviting those who administer the Acts to go hazardously into giving guarantees, but their record in this matter—their record of business and their record of administration—shows that they have so far succeeded in making what I may be allowed to call a roaring success of something that private enterprise in these particular circumstances could not do. Now, I say, let us see to it that they spread this public enterprise a little further and carry to this particular field, which they do not seem to have exploited so far, the type of success which they have shown in the more limited fields they actually have covered.
It will be said again that there are practical difficulties. I have been thinking about what the practical difficulties may be said to be, and I suppose they could be considered, on the one hand, from the point of view of a bank making an advance, and, on the other hand, from the point of view of giving a guarantee. I see no difficulty whatever from the bank's point of view if it gets a secure guarantee from these funds—and, after all, that is the purpose of it. If they get that, it needs no further security whatever. After all the Consolidated Fund should be good enough for the purpose.
If that is so, it leaves it open to the Department to secure itself, and to secure itself as fully as any bank would do, and in the way in which an advancing bank would secure itself; and, therefore, when an overdraft, or an advance of this sort, is guaranteed, I can see no difficulty whatever in the Department's taking security on the goods, and taking security in another, more intangible, way, which, I am sure, the President will be the first to recognise—that is, by its own inquiries into the standing and substance of the 2696 importer, merchant converter, or whoever may be concerned.
After all, the Department has done this, and done it very successfully, with goods abroad and with people abroad. How much simpler and how much easier to do it with goods and people here in this country; and going abroad, the goods go in the hands, and, as it were, under the clutch of the Department itself. How much easier to make inquiries, and to secure oneself, with regard to a man who is a manufacturer of textiles in Yorkshire or of boots and shoes in Northamptonshire, than it can be ever to discover the particular circumstances and particular credit at any given moment of an importer in North or South America, or wherever it may be.
The very fact of the success of the Department in the exceptional and special cases dealt with under the second line of credits—I think they are called the special credits—and the facts we heard just now, justify one, I think, in the belief, that, if it can do that, it could certainly do this. After all, the main object of this extension of credit is to promote the export trade. We have succeeded in rather difficult special fields, and all we ask now is that an obvious field should be fully exploited, a field in which public funds could do more than could be done elsewhere in the country's present circumstances and having regard to the credit policy of the Government and the credit restrictions of the moment.
The purpose of the Clause is, first, to remove doubt, if there can be doubt, and to define what are called British bank guarantees—that is, the type of guarantee given in favour of someone concerned in the export trade to a bank carrying on business in the United Kingdom and making some advance to that person. Having so defined and clarified the nature of British bank guarantees, it says that when you come on to the full tranche that we are proposing to allow by this Act, the amount of the British bank guarantee shall be at least equal to the excess over the original limit.
Let me give some figures as an illustration. The first original limit was £500 million, and up to that figure the Department remains as free as ever it was. Once it comes into the new credit that we are proposing to give it, then it 2697 will depend upon what it has done in the past how far and for how long it still maintains that freedom. If, in spite of what we are saying today, it has obstinately refused to give any form of these credits in the past, then when it comes to the new money it will have to start giving them and keep on giving them. But if, as we hope and expect, it has had regard to what we are saying today and has given at least some reasonable measure—say, £200 million—of this particular guarantee, then it will have £200 million of the new money free and will only be tied as to the last £50 million.
It is a nice exercise in arithmetic, and Members of the Committee are as capable of doing it as I It seems to me that this is a real field of importance, particularly at the moment, and if what we are proposing today is met in the spirit in which we propose it, then we shall do no more than give effect to the intentions of the original Act, and to the very words with which the President of the Board of Trade introduced it. We shall be doing it, in the circumstances of the moment, in such a way as to carry out the real intention of this Committee and the House—that is to say, to promote the export trade and to enable the manufacturers, converters, dealers, and others, from whom the whole of the export trade must originally spring, to develop their business in what are at the moment the best interests of the country.
§ Mr. H. Rhodes (Ashton-under-Lyne)
I beg to second the Motion. In rising to do so, may I say in support of this Clause that it has been put down with sincerity and a real desire to offer constructive methods of increasing our exports.
During the day a significant thing has emerged from the general discussion on exports. It is that we in this country will have to look forward to a new pattern of exports in the future. There has been considerable talk about the pattern which may come. Capital goods have been mentioned as supplanting the former consumer goods that we have exported. But in my opinion that is long-term and, in the meantime, we shall have to do all we can to increase, or at least to maintain, the consumer goods exports that we have been sending abroad during the last few years.
2698 The consumer goods industries in this country are in a difficult situation at the moment. I am not prepared now to discuss the reasons we will leave that for another time. Suffice it to say that they are in this position, that with credit restriction they have to dispose of stocks, which means that there is quite a bit of distress selling. And the banks are also in a difficult position because, working under the guidance of Her Majesty's Government, they have to be very careful in the way they allocate their credit.
It is a fact that many firms, in the textile industry in particular, are hard-pressed at the present time to finance their businesses. They cannot at the moment raise the capital to finance export orders that they have had offered to them. The point here is quite simple: can we afford to miss export orders at the present time or are we going to obey the injunctions of the Chancellor of the Exchequer? Are we going to take notice of what he said last Monday, that the whole basis of the Budget calculations is the maintenance of exports and increased production?
So we have to consider this matter in a new light. It may be, for instance, that a bank holds securities quite adequate for the risk that it takes when it loans money to a borrower and it may be that the borrower cannot provide any more security. What are we going to do? Are we going to allow the bank to deny credit to a perfectly good exporter? I do not think we should. I think that if the Clauses we have put on the Paper were adopted, they would do what I am sure the President of the Board of Trade desires, help the exporter who has reached the limit of his borrowing powers with his bank.
It may be said that is impossible for a producer to divorce the home trade and his general business from a particular export project. That will have to be worked out. My opinion is that it could be separated. I ask the President of the Board of Trade, when he replies, to say something on that aspect of the problem.
We are asking, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, that there should be a departure from the practice of insurance only, to guaranteeing bank advances. There is nothing new in this. It was 2699 envisaged in the Overseas Trade (Credits and Insurance) Act, 1920. It seems a long cry from the time in 1920, when circumstances were very similar to what they are now, when £26 million only was asked for, to the present when we are asking for the colossal sum which appears in the Bill.
It is true that there may be objections, and it may be argued that the proposals we are making would be regarded as too much of a speculation and that the guarantees might be misused. That is the risk. But we must take a lot of risks during the next 12 months, because any consumer goods exports that we lose this year may be lost for ever. It is up to everybody who is concerned for the interests of the consumer goods trades to apply his mind to the problem now, because in 12 months' time it may be too late. No opportunity should be neglected of supporting exports which come from consumer goods industries.
It was once possible for a group of nations to be able to sweep the world with their consumer goods products. This happened twice, once when we wrested the textile trades from the East by means of the Western machinery; and second, by the East when they wrested a large amount of the textile trade from the West by using Western machines and Eastern cheap labour.
It may be that a large-scale unbalance of that sort has been seen for the last time, and that in the consumer goods field there will have to be worked out a system of world allocation and of working in a better way and with a better plan for the distribution of consumer goods throughout the free world. But that is another problem; we are not applying ourselves to that now. We are thinking in terms of how we can benefit and help our own consumer goods industries.
Since so much depends upon what action is taken this year, surely it is not beyond the powers of the Board of Trade and of the Government so to interpret the desires that we express in the two Clauses which we wish to see written into the Bill, that our consumer goods trades can look forward to the benefit that will accrue.
§ 10.45 p.m.
§ Mr. P. Thorneycroft
I have listened with interest, and some sympathy, to the terms in which these new Clauses have been presented. I would say to the hon. and learned Member for Kettering (Mr. Mitchison) that, although I ask him not to press the Clauses to a Division, I can meet him in the spirit in which they were proposed.
One should not over-estimate what the Export Credits Guarantee Department can do. For example, it cannot step in to provide an alternative banking system, but what it can do, in certain circumstances, is what these Clauses lay down. The power already exists, and that is the real answer, and as the hon. and learned Member says—
§ Mr. Bottomley
If I may interrupt, may I point out that it is not suggested that it does the duties of the banks; but the banker has to supply given standards. He cannot give better standards and terms to one trader than to another; but, if one trader says he has a valuable export market and, thus, he wants extra credit, the Export Credits Guarantee Department can step in and help.
§ Mr. Thorneycroft
This is not the time to discuss banking systems, but bankers I have known have discriminated, with prudence, between different traders; and without going into that aspect of the matter, there is power under the existing law for the extension of guarantees to lines of credit of this character. So, the trouble is not in the law. The trouble is in the application of the law, and I think that I carry both the hon. and learned Member and his hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) with me when I say that the whole subject bristles with difficulties.
To start with, very often the trader would only come to the Export Credits Guarantee Department when his credit was virtually exhausted with the bank, and that would be a difficult moment to ask for a guarantee; and if we sought to extend the guarantee, the bank would have certain views as to how it should be extended. I do not want to exaggerate these points, but there are considerable practical problems.
Having said that, let me add that we do, and have done, many of the things 2701 which the hon. and learned Member suggests. For instance, in the joint venture guarantees, we cover those exporters, and manufacturers, from the time the production programme is laid down, through the purchase of the raw materials, through the production processes, and the time when the goods are sold abroad; and we have, in some cases, provided cover against merchandising and advertising expenses.
These things may sound all right in general terms, but without quoting the name of the firm, here is a practical example of what was done in the case of one firm. It was a wool firm, and we carried or guaranteed to carry the wool stock to be made into goods for the United States market. The Department gave cover for over four years to the firm, the liability for goods in course of manufacture was £187,000, and the turnover achieved by that firm was £900,000 more than in the year previous to the guarantee being given. That is why I would emphasise that there are many examples of really substantial achievements along the lines indicated by the hon. and learned Gentleman. In these circumstances, I think I can say that the law as it stands is satisfactory, and that we are, in fact, doing many of the things we have been urged to do.
I would only say a further word about the second Clause. I hope the hon. Gentlemen will not press it and tie up one-third of the cover which we are allowed to give in the very special form of guarantee which they desire. It may be, and, in many respects, undoubtedly is, an admirable form of guarantee, but I think the Export Credits Guarantee Department, with the experience they have had and the knowledge displayed, should not be tied down to a particular parcelling out of the various guarantees which they, in fact, extend.
I hope I have done something to meet the arguments put forward, and perhaps, in these circumstances, the hon. Gentlemen will see their way not to press the Clauses to a Division.
§ Mr. Mitchison
While I much appreciate the tone in which the right hon. Gentleman spoke, as well as what he had to say, and we are very glad, on this occasion at any rate, to discover that he has actually been concealing his own good deeds in the past, I ask him if he can 2702 let us know on some convenient occasion, whether in answer to a Question or otherwise, not about any particular case, but what sort of amount of advance or bank guarantee, or whatever it is called, is intended, and if he can arrange for that figure to be given from time to time in the returns or accounts of the Department.
If he will allow me one other comment, I appreciate, as I am sure we all do, that we may very well get the case of a man who is not in a position to get further credit facilities from the bank, but who provides exactly the kind of case which, under proper safeguards, we ought to cover, and the case which it was the whole object and intention of the Act to cover. The best tribute that we can pay to the practical working of the Department is that they have met, in other fields, and met successfully, far more difficult problems than the problem of how to make advances to a trader who might not get them otherwise. Perhaps we may have an answer in due course to those questions.
§ Mr. Rhodes
May I ask the right hon. Gentleman if he will consult with the export groups, the development councils and any organisations interested in this field, so that, perhaps at a later date, he could give us the result of his deliberations?
§ Mr. P. Thorneycroft
In answer to the hon. and learned Gentleman, if there are any figures I can produce which would be of assistance to the Committee along the lines which the hon. and learned Gentleman has suggested, I will certainly produce them, but I should not like to say offhand how easy it is to do so, because these contracts vary infinitely from one to another. If I can help, I will certainly do so, and place the information at the hon. and learned Gentleman's disposal.
With regard to the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who speaks with great knowledge on these subjects, I would say that any export group that wants at any time to make contact with me in order to secure export credits would be most welcome, and that I will do anything I can to help in discussing methods by which assistance might be given. I should be only too glad to enter into discussions of this kind. Speaking on behalf of the Export Credits 2703 Guarantee Department, it is our desire to extend credits in the directions in which they are desired, and we are only too anxious to find out what the problems are and how we can help.
§ Mr. Bottomley
While acceding to the President's request not to press these Clauses to a Division, might I suggest that his very reasonable reply might be published in suitable form by the "Board of Trade Journal" whose circulation will ensure it publicity?
§ Mr. Mitchison
In view of what has been said, I beg to ask leave to withdraw the Motion.
Motion and Clause, by leave, withdrawn.
Bill reported, without Amendment; to be read the Third time Tomorrow.