§ 3.42 p.m.
§ Mr. Douglas Jay (Battersea, North)
I beg to move, in page 1, line 10, to leave out "and fifty".
My hon. Friends and I put down this Amendment so that we may question the Minister of State, Board of Trade, a little further on why he selected the figure of £250 million as the new minimum for 824 special guarantees under the Bill. Although it may appear so by the Amendment, we are not seeking to say that the limit of £250 million ought to be reduced to £200 million. Indeed, we welcome, in general, the extension of public enterprise which the Government are now making under the Bill. We always rejoice when the Government act, for once, in the country's interests and not merely out of their own political theories.
On this particular issue of the limit, we have not, we believe, had a very full explanation from the Minister of why he chose the £250 million. We presume that he had a fairly substantial reason and did not take a guess out of his head. He spoke of increased export business likely with Middle Eastern countries which would require these special guarantees, and also of increasing dollar exports, of which we are all glad to hear. When we pressed him for an intelligible reason for raising the limit from £150 million to £250 million and not, perhaps, to a figure larger than £250 million, he told us merely that this was a realistic and proper estimate. We did not feel that that was quite good enough as an explanation to the House as to why it was being asked to authorise what is, in effect, the expenditure of public money.
The Minister will agree, I think, that although, in general, these are liabilities and not, in the long term, an outright expenditure of public money, nevertheless, under this particular Section of the 1949 Act, it is possible to make advances out of the Consolidated Fund on quite a large scale. Therefore, the House is, in a sense anyway, being asked to authorise the issue of public money. The reason for putting down our Amendment is not to propose that it should be less or, indeed, more than £250 million. We should like to have a little more explanation of the figure from the Minister.
§ The Minister of State, the Board of Trade (Mr. Derek Walker-Smith)
I will gladly give the Committee the reasons which we have for proposing the increase to £250 million for the maximum limit of liability for these special guarantees under Section 2 of the Export Guarantees Act, 1949. I would think that there are really three considerations which are relevant in deciding the maximum limit of liability 825 which it is appropriate to ask the House to approve.
The first, of course, is the relationship of the existing limit to existing commitments. The second is future expectation. The third, which is, though not perhaps in the same category of importance as the other two, one for which hon. Members will have some regard, is the convenience of the House; that is to say, to try to fix a reasonable limit which will not necessitate over-frequent applications to Parliament on the point. I will just deal briefly with, at any rate, the two major matters, because the last really speaks for itself.
In regard to the relationship of the existing limit to the existing commitments, we are in this position now. As I told the House on Second Reading, there is a total liability, taking the firm commitments and the contingent liabilities, of £148 million. The actual limit under Section 2 is £150 million, and the proposed limit is £250 million. To get some idea of whether that was a reasonable and moderate rate of increase, I have compared it with what was done in 1949, when the right hon. Gentleman the Member for Battersea, North (Mr. Jay) assumed some responsibility for the conduct of the then Bill through the House.
In 1949, the liabilities were £8 million: the actual statutory limit was £60 million, and the proposed limit was £100 million under that Bill. The ratio of the limit to liabilities taken by right hon. Gentlemen opposite was no less than 12½. If one applied that ratio to our present commitments, one would ask for a proposed limit of 12½ times £148 million, which is, if my arithmetic be correct, no less than £1,800 million. If, on the other hand, it is more appropriate to take only the firm commitments and disregard the contingent liabilities, the figure would be 12½ times £72 million, which is £900 million. Thus, it is, in fact, a very moderate figure for which I am now asking the Committee. The right hon. Gentleman's Amendment would, if carried—though he has indicated that he does not propose that it should be carried—reduce it to only £200 million.
To have a limit of £200 million would imply a ratio of only 4 to 3 in relation to the sum of the existing commitments 826 and contingent liabilities. I have done the same exercise in relation to that ratio applied to the 1949 position. The result is that if one applied a ratio of 4 to 3—the ratio which the right hon. Gentleman, by his Amendment, appears to think appropriate today—to the position for which he had responsibility in 1949, he ought to have asked the Committee for a maximum limit of liability of only £11 million. In fact, as he knows, he asked for £100 million, a figure which, if his arguments on this Amendment were right, would be excessive to the extent of no less than 1,000 per cent.
I do not think, therefore, that both the Amendment and what was done in the 1949 Act can be right. It is, of course, possible that they may both be wrong—
§ Mr. Jay
Does the right hon. and learned Gentleman's modesty imply that the Government are much more pessimistic about future export prospects today than the former Government were in 1949? Must not this estimate presumably rest a little on one's expectations of future exports, and not just on this arithmetic?
§ Mr. Walker-Smith
No. I am coming to the question of future expectation. The right hon. Gentleman will recall it was the second of the two major considerations which I suggested were relevant in deciding upon the appropriate figure to commend to the Committee.
The right hon. Gentleman asks for a substantial reason why this figure has been chosen. I have had the curiosity to see what was the reason, substantial or otherwise, given by the right hon. Gentleman when he replied to the debate in 1949. I find that he said: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 …"—[OFFICIAL REPORT, 2nd February, 1949; Vol. 460, c. 1716.]Of course, that is an unexceptionable statement; but I do not think that even the right hon. Gentleman would go so far as to suggest that it is either strikingly original or closely particularised. I am judging the right hon. Gentleman by the standards which he has set himself. That very broad generalisation was the sole reason why he found it necessary to give to the House the figure which he then asked the House to approve.
827 An additional reason was given by the right hon. Member for Huyton (Mr. H. Wilson) in Committee, when he referred to thehigher proportion of our exports … going to these countries in the shape of capital equipmentand said that, therefore,we need a much bigger maximum liability…"—[OFFICIAL REPORT, 8th February, 1949; Vol. 461, c. 259.]The right hon. Member for Huyton was quite right; but, as the right hon. Member for Battersea, North (Mr. Jay) will know, precisely the same consideration, as he will have seen from the Economic Survey, applies to our exports at the present time in that there is a growing proportion of capital equipment.
Therefore, I am giving to the Committee, first, the two reasons which were given to the right hon. Gentleman as his two sole reasons—the general importance of exports, which was his contribution, and the special significance of capital equipment, which was the contribution made by his right hon. Friend the Member for Huyton. We have both those two reasons, which both still apply in undiminished effect today as they did then.
In addition, however, I gave two more specific and definite reasons on Second Reading. Those two reasons, which appear in column 404 of the OFFICIAL REPORT of 20th March, 1957, were the possibility that we might in the near future wish to prepare the way for full cover in the Middle East by using the extended operation of Section 2 of the 1949 Act as a sort of bridging operation: and, secondly, the dollar market orders, to which I referred in the following paragraph. There are, therefore, four reasons in the field of future expectation as against the two which the right hon. Gentleman thought it was sufficient for the House to have in 1949.
I hope that the Committee will conclude that by every test, both these two basic tests and the third possibly less important test of the convenience of the House, we are obviously justified in proposing this increase and, indeed, are compelled to do so in the interests of the export trade. For the right hon. Gentleman to ask for any reduction in it, and, indeed, to ask us to particularise the 828 reasons for it, is illogical when compared with the attitude taken in 1949. I hope that the Committee will agree that we have hit upon an appropriate figure after mature reflection and after having taken appropriate account of all the relevant considerations in this context.
§ Mr. Jay
I assure the right hon. and learned Gentleman that we are not attacking his figure. We are merely trying to understand it. If he is resting himself on the arguments which we used in 1949, and as the figure on those arguments is, as he himself said, so modest, is he quite satisfied that the limit which he is putting forward is not perhaps too modest?
§ Mr. Walker-Smith
I am not resting myself solely on those arguments. As I have explained, I have taken certain other considerations also into account. It might be that in the course of years we would look back and say that this figure turned out to be too modest an estimate—I would not altogether exclude that possibility; but the best assessment at which I have been able to arrive, on the information and with the advice available to me, and taking account not only of the present position but also our future expectations, is that this is the correct figure to ask the Committee to approve at the present time.
§ Amendment negatived.
§ Mr. Eric Fletcher (Islington, East)
I beg to move, in page 1, line 11, at the end to add:(2) In subsection (1) of the said section two there shall be added at the end the words "but such arrangements shall not make it a condition of granting a guarantee to an exporter that he shall cover the whole of the risks involved in any particular transaction".
§ The Chairman
I think that the next Amendment in the name of the hon. Member, in page 1, line 11, at the end to add:(2) In subsection (1) of the said section two there shall be added at the end the words "but such arrangements shall not make it a condition of granting a guarantee to an exporter that he shall cover the risks involved in all his transactions with a particular overseas market".might be discussed at the same time.
§ Mr. Fletcher
They were deliberately put down as separate Amendments, Sir Charles. I thought that each Amendment raised a question of considerable 829 importance and that they involved totally different points. If you think that it is convenient that they should be discussed together, I would not demur, but we might want to divide on both of them.
§ The Chairman
Provided that they are both called. I will, however, call them separately, but they can be discussed together.
§ Mr. Fletcher
I am quite prepared to advocate them together, but I gather that I may reserve my right to divide on each Amendment separately. It is possible that I may have a satisfactory answer from the Minister on one of them, but not on the other.
§ The Chairman
I will certainly call the second Amendment to enable a Division to be taken, if that is the hon. Member's desire.
§ Mr. Fletcher
On that footing, Sir Charles, I will try to stress the arguments in support of the two Amendments. They raise two separate points and I will deal with them separately. I attach considerable importance, and, I think, British exporters in general attach considerable importance, to each of them separately.
The object of the first Amendment is to read into Section 2 of the Export Guarantees Act, 1949, certain conditions under which the Export Credits Guarantee Department should issue its policies. I am considerably fortified in the suggestions I am making to the Committee by certain proposals which were made by the President of the Board of Trade in 1949. It may be recalled by some Members of the Committee that on Second Reading I referred to the right hon. Gentleman's speech in 1949. I have subsequently received quite a volume of corespondence from persons who are interested in this subject.
These Amendments are not proposed in any captious spirit. I am not attempting to criticise the work of this Department, for which I have the greatest admiration, but I am hoping to put forward some constructive suggestions following the lines which the present President of the Board of Trade, speaking in 1949 as a member of the Opposition, as he then was, has the credit for having first suggested in this Chamber.
830 Those who are familiar with the working of the Export Credits Guarantee Department will appreciate that, with all its merits, it has for a long period suffered in the eyes of the commercial and mercantile community from a measure of rigidity which, over the years, has been criticised in quarters interested in the subject. It is not often we have an opportunity in this Chamber of dealing with the activities of this Department. Indeed, this is the first opportunity we have had for several years. Therefore, I make no apology for drawing to the attention of the Committee what I regard as certain very serious limitations and inconveniences in, and, I think, blemishes upon, its operations, for which the President of the Board of Trade must accept responsibility.
I am disappointed that the right hon. Gentleman is not here today himself. I am disappointed because he has devolved upon the Minister of State, Board of Trade, for whom, of course, I have the greatest respect, the responsibility of dealing with this subject. I am disappointed because the President of the Board of Trade, who, as a back bencher in opposition, showed, I thought, a great deal of intelligence—I will not comment on what I think of him as a Minister—in 1949 made some very constructive suggestions, and I think it is important that the Committee should know what has been done about them.
The first of the two Amendments being considered together has as its object the amendment of Section 2 (1) of the principal Act of 1949 by writing into it an obligation on the Department, in making its arrangements for giving export credits, not tomake it a condition of granting a guarantee to an exporter that he shall cover the whole of the risks involved in any particular transaction.I do not think that I could possibly call as a witness in support of that proposition anyone more distinguished and persuasive than the President of the Board of Trade himself. Speaking on this very subject, on 2nd February, 1949, he said: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 831 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.This is what the President, as he now is, went on to suggest, and I agree with him:The time has come"—and he was speaking in 1949; I am speaking in 1957, and, therefore, with a fortiori force, compared with his of eight years ago, and I say that the time is overdue—for the Department to allow the insurer to select his risk. For instance, anyone exporting to South America today—say to the Argentine—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.In parenthesis, I would remark that we can substitute Ruritania or any other country we want for the examples given in 1949.
To go on with the quotation:That may be the only risk he wants to ensure 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?"—[OFFICIAL REPORT, 2nd February, 1949; Vol. 460, c. 1708–9.]Moreover, the argument that the right hon. Gentleman was putting forward was supported and extended by the present Parliamentary Secretary to the Board of Trade, who—
§ Mr. Fletcher
He has not been here. Anyhow, he has not been heard committing any great indiscretions here today.
What both he and the President thought true in 1949 is even truer in 1957, because in 1949 the competitive power of British exporters was much stronger than it is today. In those days we were living in what was called a sellers' market. They were the post-war years when British exporters had considerable advantages. 832 Today, as the Minister of State knows, the position has changed, changed for the worse for British exporters. They are now having to compete with resurgent exporters in Germany and Japan, to say nothing of competitors in Holland and Belgium and elsewhere. Today, the work of the Export Credits Guarantee Department is more vital. It is its métier to assist British exporters in their competition with exporters in other countries.
As their problems of competition with concerns overseas become more acute the price they have to pay for insurance becomes more important. They are saying to themselves, and, in particular, they are saying to the Department, "Why should we have to pay an insurance rate for covering a whole series of risks when what we want to have to pay and would like to have to pay is merely the rate to insure us against the particular risk that we want to insure against?"
That is what is happening in other countries. If they are forced by Government policy to incur expenditure which is needless, it places them at a commercial disadvantage as compared with their competitors overseas. Therefore, this position has become more acute in 1957 than it was in 1949. This applies to exporters of all kinds, whether of raw materials, from abroad or produced here, or manufactured goods. It does not matter which.
I want to quote the observation of a group of people who are concerned in this. I have had a letter from people in a concern in which I have no interest at all. In some respects, I may have occasion to criticise it. These are the motor manufacturers for whom, in a great many other respects, this island is very concerned to see that they are not placed at a disadvantage. They say that they would like more flexibility and that competition is very keen, as we know it is, in selling British tractors and motor cars overseas. They say that it would help them if there were an alternative exchange cover so that they could cover, if they wanted to, the political and exchange risks only, and so that they did not have to cover the insolvency risks if they did not wish to do so.
The same is true of those who, in competition with the Belgian, Dutch and Scandinavian exporters, try to secure that great entrepôt trade in textiles for 833 British dealers in commodities obtained from South America and elsewhere. What is the answer to it? Why not have this flexibility? This is a Government service designed to encourage, aid and protect British exporters. I hope that we shall hear this afternoon from the Minister that he is prepared now to lay down a departure from what has been the policy of the Department for the last ten years and that the President of the Board of Trade will now permit this Department to adopt that greater measure of flexibility for which, as a back bencher, he was such an advocate eight years ago.
I do not particularly mind whether this is written into the Bill or not. If we have an assurance from the Minister that the necessary directives will be given to this Department to enable the purposes for which I am arguing to be adopted, I shall be satisfied Otherwise, because I believe that this matter is so important, I should hope that my hon. Friends would press it to a Division.
I hope that we shall hear from the Minister exactly what plans he has for this Department for the policy of guarantees in the immediate future. I am not being critical. I hope that I am trying to be constructive. I am, for example, quite aware of the fact that, as recently as 11th March, the Comptroller General of the Export Credits Guarantee Department sent round a circular to the interested parties, giving them some advance information about the new guarantee that is to come into operation as from 1st April. It indicated that under that new guarantee, which includes higher percentages of cover against loss and against risk, hitherto not covered, they will have certain options in place of their existing "V" or "V (S)" policies.
I appreciate it and give the Minister and his Department full credit for the fact that, as this letter of 11th March says, the Department, and the chambers of commerce, all of whom are vitally interested in this matter, are proposing to hold meetings in London and in the principal industrial centres to explain the broad outline of the new guarantee. I raise the matter because I think it of the greatest public interest that the Minister should tell us some of the details, so that the public may know these matters which 834 are to be told confidentially, or not confidentially, to exporters in these meetings in London and the principal industrial centres.
§ Mr. Walker-Smith
Would the hon. Member help me by stating under which of his Amendments I should be in order to enter this wider field?
§ Mr. Fletcher
I should be the last to trespass on your province, Sir Charles, in indicating how the Minister would be in order. I am quite content to keep myself in order which, as you know, I have sometimes the greatest difficulty in doing, though, so far, I have not had any difficulty this afternoon.
I now pass to the second Amendment with which you, Sir Charles, have invited me to deal compositely with the one with which I have been dealing up to now. It is totally distinct. I am hoping that the Minister will accept both, though, of course, I must proceed in my argument on the assumption that he may not accept both but may accept one or the other.
The second Amendment is still directed to the same theme of greater flexibility for this Department, but it is slightly different. I now suggest that the Department should remove itself from its present rigidity in insisting that all risks should be covered. At present, the Department makes it a condition of granting a guarantee to an exporter that he should cover the risks involved in every transaction into which he is minded to enter with a particular country. Why should not the exporter choose to say, "I should like to cover myself against this transaction, but I do not particularly want to incur insurance in respect of every other transaction"?
I should like to give an illustration. As you know. Sir Charles, you are perfectly free to take out any kind of insurance you want, whether you are a householder or a multi-householder. Whatever the interest you want to insure, if you are fortunate enough to possess three houses, you can insure one house against fire and burglary and you do not have to insured the other two. Under the Bill, the exporter is told, "You cannot insure this particular transaction unless you insure every transaction you want to enter into with this country," I have never understood why that should be the case.
835 Here again, I rely on the advocacy of the present President of the Board of Trade who, on 2nd February, 1949, said that another improvement he wanted to suggest in the working of the Department was this. The right hon. Gentleman said:In he past the Department has advised, if not insisted upon, an exporter covering with them the whole of his business in a certain market.I there interposed that the right hon. Gentleman was being unduly reticent because, as I understood, the Department not merely advises but insists upon that, requires it and fixes it as a condition. It was against that rigidity that the President of the Board of Trade, as he now is, was campaigning.
The right hon. Gentleman went on to say:Supposing that a man is exporting to Egypt …In the conditions of today Egypt may not be a particularly good example to quote. It might be better to quote the case of Iraq, Saudi Arabia or the Lebanon. The right hon. Gentleman continued: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 lo 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."—[OFFICIAL REPORT. 2nd February, 1949; Vol. 460, c. 1709.]I am not one to pay undue compliments to Ministers of this Government, but that seems common sense. It is supported voluminously by what the export community is today saying.
It is an unhappy fact that they do not have many opportunities of stressing these matters because the activities of this Department, admirable as they are, are very rarely ventilated and discussed in this Committee and, when they are, exporters like to have their views put forward. They stress the fact that competition is becoming more and more difficult. To take again the case of motor manufacturers, they urge that the stipulation that manufacturers must cover their whole export credit business if E.C.G.D. is to cover short-term insurances, should be waived. They believe that there should 836 be more elasticity of markets and customers allowed to E.C.G.D. That is what I advocate.
The Minister of State knows that I put these Amendments down because we had a discussion of this matter. We had a debate as recently as 20th March. I give the Minister full credit. He was very anxious that this question should be considered. To do him justice, he would be the last person to wish the Committee stage of the Bill to go through without discussion. Naturally, he was anxious to know what sort of Amendments he might have to meet in Committee. In view of that, these Amendments have been on the Notice Paper for the last ten days or so. I have been trying to consider what possible argument there could be against them, supported as they are by his colleagues, the President and the Parliamentary Secretary.
I want the Minister to tell us what he conceives to be the functions of this Department. Is it designed chiefly to make the greatest possible amount of money for the Revenue, or is it designed to give the greatest possible amount of encouragement and benefit to British exporters in their efforts to compete with international competitors? The Department does very well. It makes a very considerable profit every year. Surely it cannot be argued that on grounds of economy it is desired to resist these Amendments. Surely it cannot be argued that the chief object of the Department is to penalise exporters in order to produce a little extra Revenue. Whatever Government have been an power, that has never been put forward as the primary objective of this Department.
I hope that today we shall hear that, in consonance with what the colleagues of the Minister were urging eight years ago—I must admit, unsuccessfully—the Government are now prepared, wher they have the opportunity, to stimulate still further the possibilities of giving the mercantile community maximum flexibility and the fullest possible advantages in competing with international competitors.
§ Mr. Walker-Smith
By your direction, Sir Charles, we are discussing these two Amendments together. The hon. Member for Islington, East (Mr. E. Fletcher) has not been grudging in his explanation of their effect. Turning to the first of the two Amendments, the intended effect, I 837 understand, is to compel the Export Credit Guarantees Department to split—or, at any rate, to consent to the splitting when asked—of the so-called political risk from the so-called commercial risk in the special guarantees.
I should say this about the drafting. The hon. Member has said that he did not care whether his Amendments were written into the Bill or not. At the time I thought that was rather an unusual confession coming from an hon. Member moving an Amendment, but it is a fact that the drafting is clearly defective. I have had the pleasure of listening to the hon. Member for the last two Sessions on at least three technical and complicated Bills for which I have had some responsibility. He knows that I normally do not take drafting points, but he claims a certain expertise in these matters and perhaps it would be proper to point out that his drafting in this case is defective, more particularly as the Amendment refers tothe whole of the risks involved.I take it that it would include fire risks and other risks with which the Export Credit Guarantees Department is not concerned in its insurance policies.
Similarly, the other Amendment is not wholly satisfactory in its drafting, though it is not open to such major difficulties as the first. However, I assume that what the hon. Gentleman really wants is that we should discuss the principles rather than the precise effects of his Amendments.
The first Amendment raises a point which the hon. Gentleman rightly says is from time to time, though less frequently now, raised by outside interests. However, if he will reflect for a moment on the basic principles here at issue, I think he will realise why the Department follows the course of conduct that it does. The basic appropriate insurance principle involved is simply a combination of the wide spread of risk with a high turnover. That basic principle is applied in the standard E.C.G.D. guarantee by giving cover against both the so-called commercial risks—the risks that the buyer will become insolvent or will not pay—and the so-called political risks—transfer or exchange restrictions, cancellation of import licences, and the like. It is the application of that basic principle on which the present low premium rates are based.
838 By his Amendment, the hon. Gentleman advocates that for that should be substituted the principle of selectivity at the option of the exporter. The selection of risks against the Department as envisaged by his Amendment would involve a separate assessment of each risk instead of, as now, consideration of the entire field of risk. The result would in a short time be the raising rather than the reducing of premium rates.
The hon. Gentleman looks puzzled. Therefore, I will ask him, if he does not find the quotation offensive:Why peer into the crystal when we can read the book?I have been ascertaining the experience of the Department in this matter over the course of years, and if the hon. Gentleman will listen patiently I think that he will be convinced by the voice of history.
§ Mr. E. Fletcher
I find the quotation offensive, because it seems to me to be completely irrelevant. I fail to understand how it can be more expensive to insure against few risks than to insure against many risks.
§ Mr. Walker-Smith
If the hon. Gentleman will allow me, that is what I am about to explain to him.
If we look at the history of the matter, we find that before 1939 the Export Credits Guarantee Department gave insolvency cover only, which is what the hon. Gentleman now asks should be done, as it were, at the unilateral option of the exporter. That being so, it is very relevant to compare the rates charged in those days for the one risk of insolvency, which is what the hon. Gentleman wants, with the rates charged today to provide cover against both types of risk.
Before 1939 the premium rate varied between 12s. 6d. and 25s. per cent, and the percentage of guarantee was 75 per cent. Now the premium rate is down to 9s. 3d. per cent, and the percentage of guarantee is up to 85 per cent, in the case of insolvency and 90 per cent, in the case of the political risk.
That is what has happened. The hon. Gentleman wonders how it is possible for that to happen. The answer is simple. As I have sought to explain, it is by the application of the basic insurance principle of wide turnover and the spread of risk. The reduction in the premiums, I 839 think the hon. Gentleman will accept it—could not have been brought about except by observance of the basic principle so that the good and the bad risks could be averaged out. The omission of the insolvency risk might result immediately in a reduction in rates, although it would be a negligible reduction, but eventually, by its effect on the spread of risk and turnover, it would almost certainly involve an increase.
§ Mr. Fletcher
Do I gather that the right hon. and learned Gentleman is now suggesting that the President of the Board of Trade was talking nonsense in 1949?
§ Mr. Walker-Smith
No; the President of the Board of Trade was not talking nonsense in 1949. I was proposing to deal with the attitude of my right hon. Friend at a convenient moment so I will deal with it now.
The hon. Gentleman will observe from the passages in the OFFICIAL REPORT, of 1949 which he has cited that my right hon. Friend put the possibility both of the split of the risks which is the subject of this Amendment, and the split of the market, which is the subject of the other Amendment, in a temperate, constructive and more or less interrogatory way. The difference arises from the fact that time has answered the interrogatory approach of my right hon. Friend in the negative. [Laughter.] The hon. Gentleman presumes to laugh. The standard criticism that he and his hon. Friends seek to make of my party is that it does not learn from experience.
What has happened in this case? My right hon. Friend is content to accept the verdict of time over the past eight years. It is the hon. Gentleman who is a diehard in the matter. It is he who refuses to face the facts about what has happened in the last eight years. It is he who is blind to experience and now seeks to put into a positive and prohibitive form what my right hon. Friend put forward in 1949 only as a suggestion.
§ Mr. Walker-Smith
The decisions which I announce to the Committee arc the collective decisions of the Government; the phraseology is my own.
I do not ask the hon. Gentleman to accept what I have to say. I ask him to accept it from his right hon. Friend the Member for Huyton (Mr. H. Wilson) who. in a different context, paid tribute to the approach and attitude of my right hon. Friend. I see that the hon. Member shakes his head and looks puzzled. I have searched the record, and there is no evidence that he took any part at all in the proceedings on the 1949 Measure.
§ Mr. Walker-Smith
The right hon. Gentleman asks why his hon. Friend should have done so. The hon. Gentleman was busy about his duties in the House at that time. I note that in February, 1949, his Parliamentary interventions ranged from the marking of fish to the deportation of Sydney Stanley. Since the hon. Gentleman raises the point about my right hon. Friend, I would ask him to tell the Committee what fascination those subjects had for him at that time which the export guarantees Measure at that time did not have. Will he also tell the Committee to what we owe his sudden interest in this subject after it has lain dormant for eight years. If he will not tell the Committee, I might suggest an answer to him. If he has an answer, I shall be glad to give way.
§ Mr. Fletcher
I was just as interested in the subject in 1949 as I am today. If the right hon. and learned Gentleman will read debates on other export guarantees Measures, he will find that I took part in them. What he appears to have overlooked is that since then the volume of criticism about the working of the Department, in the view of his right hon. Friend, has grown far bigger than it was then.
§ Mr. Walker-Smith
I would agree that the matter was not debated again until 1951, and then again in 1952, both limes on very small points. If the hon. Gentleman was more interested in the small points raised in the 1951 and 1952 Bills than he was by the whole general principle raised by the 1949 Bill, the Committee will see whether or not it finds it characteristic of the hon. Gentleman.
841 On his second point, the hon. Gentleman is quite wrong. I concede that there certainly are some who would ask to have a split policy, and that there are some who, under the terms of the second Amendment, would like to isolate the transactions in a particular market. Of course there are, but the fact is that as the work of the Department gets better known and, as its business gets bigger, the volume of representations on this point gets less; so the hon. Gentleman is wrong in his supposition that criticism is growing among the exporting public.
If I may say a word or two on the matter raised by the second Amendment, I would point out that the general practice of the Department is to follow what is called the "whole turnover" policies for consumer goods business; that is to say, to cover all risks on all markets to which the policy holder exports. That is, in effect, an application of the principle to which I have already referred—the basic insurance principle of the spread of risk—and it was introduced, as a matter of historical fact, as a result of a recommendation of the Niemeyer Committee which sat in 1929, and recommended that the scheme should operate on a broad commercial basis.
On the question of the special guarantees, with which the hon. Gentleman's Amendment is concerned, the Department does not, in fact, insist on the "whole turnover" policy; that is to say, it does not insist that the business in all markets be covered under these special guarantees. It is true that it does insist on the other principle—that all transactions in the market insured should be covered—and that is simply in accordance with the basic principle of achieving the maximum spread of risk within the markets covered.
There are certain other tangible advantages which flow from that—reduced rates of premium, with which I have already dealt; the spread of cover to a wider field of exporters, particularly of smaller exporters; the development of facilities: extended risk-taking; and continuous stable cover without violent fluctuations in rates and conditions. These advantages come from this "whole turnover" and spread of risk policy, and this Amendment would prevent the Department from applying this policy. It would reduce the spread of risk and would diminish the ability of the Department to average risks.
842 I say to the Committee that it will be a retrograde step to seek to write these provisions into the Act now. I would add that my right hon. Friend was quite correct in raising these matters in the interrogatory way in 1949, but the passage of time has proved the policy I have explained. The hon. Gentleman's Amendment takes no account of it, and I therefore invite the Committee to reject it.
§ Mr. E. Fletcher
I am profoundly disappointed with what the Minister of State has said. I think it is very significant that he has been left to make this reply and that the President of the Board of Trade has not come here to deal with the matter. I think that that is treating the Committee with scant respect.
The President of the Board of Trade obviously took great personal interest in this matter. He made a very long and obviously considered speech in 1949, and I thought that it was a very reasonable speech. It is very regrettable that he has not come here today, either to tell the Committee that he has changed his mind—and I do not believe that he has changed his mind—or to explain why this Amendment should not be conceded.
The Minister of State did not really deal with any of the points, particularly those bearing on the second Amendment, that I put to him. He did not attempt to deal with the most serious aspect of this matter, namely, the effect which this rigidity has upon the competitive power of British exporters. He tried to argue that if there were more flexibility, the premiums would increase, but he cannot really, to be logical, assume that the premium for insuring against some risks must be greater than the premium for insuring against the totality of risks.
Granted that the average risk for the exporter may be less, if the exporter has to insure for every transaction it must be manifest as a matter of logic that if there were more flexibility, and if the exporter chose to insure against more risks, or in respect of some transactions but not all transactions with a particular country, there would be some reduction in the premium that they would charge.
If that occurred, it would increase their competitive ability, and these Amendments—and I want to press the Minister on this—are put down in the interests of 843 the British export trade. Although there may be some administrative inconvenience to the Department, and although, proportionately, the premium may be higher than it is if averaged out, it still must follow that if the exporter is given an option of insuring merely against the risks against which he wants to protect himself, he will, in effect, be saving in his insurance cover.
When one bears in mind that these policies often cover transactions involving very large sums, and, therefore, the premiums are often very considerable, and, therefore, the margins are matters of importance, surely the only consideration which should operate in the Minister's mind is not that of administrative convenience, not the question of finding out what is the cheapest average rate, if various conditions are imposed on exporters, but what are the maximum incentives and encouragements that should be given to British exporters to try to compete in overseas markets with international competitors.
It does not seem to me that the Minister has attempted to deal with that question at all. He said, and I do not accept it, that the volume of criticism was less than it had been. That is not my conviction at all. It is true that it is many years since we had an opportunity to ventilate this matter in the House. That is one of the reasons why we are determined to press it at this stage, because this is a very material factor. I am profoundly disappointed with the Minister's reply.
§ Amendment negatived.
Amendment proposed: In line 11, at end add:
(2) In subsection (1) of the said section two there shall be added at the end the words" but such arrangements shall not make it a condition of granting a guarantee to an exporter that he shall cover the risks involved in all his transactions with a particular overseas market".—[Mr. E. Fletcher.]
§ Amendment negatived.
§ Motion made, and Question proposed, That the Clause stand part of the Bill.
§ Mr. E. Fletcher
Before we part with the Clause there are certain questions which I should like to ask the Minister. One of the most important questions that arises is the extent to which the Department is prepared to give financial help to manufacturers who wish to carry out 844 capital development abroad and to have the opportunities of competing in foreign markets for capital goods export orders.
As the Minister is aware, the Department's recent brochure entitled "Guarantees to Banks" has introduced a very noticeable change in the procedure of the Department, and has made provision whereby, when a major capital goods export order is placed in the United Kingdom, the Department will be prepared to consider entering into a direct contract of insurance with the bank which is to provide the finance. It is very commendable that under this new departure the Department will now be prepared to give a guarantee to the bank in respect of up to 85 per cent, of the credit to be given to the overseas buyer of the capital goods concerned.
§ The Deputy-Chairman (Sir Gordon Touche)
I am having a little difficulty in relating the hon. Member's remarks to the Clause. I think that the remarks which he is making should perhaps be made on a later Clause.
§ Mr. Fletcher
With great respect, Sir Gordon, this Clause is designed to give the Department power to increase its guarantees from £150 million to £250 million. I understand, from what the Minister said on Second Reading and also from what was said today in response to the Amendment moved by my right hon. Friend the Member for Battersea, North (Mr. Jay), that the Minister is seeking to justify this increased provision by Parliament of £250 million as compared with £150 million by the desire of the Department to make progressive expansion in the work in which it is concerned.
§ Mr. Walker-Smith
The hon. Gentleman will appreciate, of course, that here we are dealing only with the limited field of the special guarantees under Section 2 and that, of course, what the Department is addressing itself to is in the wider context of the ordinary guarantee system which represents, as I think I indicated on Second Reading, by far the larger proportion of the work of the Export Credits Guarantee Department.
§ Mr. Fletcher
I quite appreciate that, and I do not think that there is any real confusion about it. The work of the Department is split up between the two Sections, but where the line is drawn is somewhat arbitrary.
845 The point that I wish to suggest to the Minister is that while I commend the intention of the Department to make these guarantees to banks in respect of major capital goods, I hope that the benefit of the new ideas and concessions will be extended to cover such orders as those for heavy trucks, buses and motor traction and products in which motor car manufacturers are interested. In other words, I hope that the benefit will not be limited to major capital goods, but will be extended to other important export goods of the motor truck class, with which the economy of the country is so much concerned.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.