§ Order for Second Reading read.
§ 11.5 a.m.
§ The Minister of State, Board of Trade (Mr. J. K. Vaughan-Morgan)
I beg to move, That the Bill be now read a Second time.
This is a short and simple Bill, the aim of which is to enable the Export Credits Guarantee Department to continue with its work of insuring exporters against the risks of not getting paid. The need for the Bill arises because of the growing use by exporters of the Department's services, which has brought its liabilities, taken together with the liabilities which might mature, within reach of the figures of maximum liability which Parliament has so far authorised it to incur.
There are two separate figures of maximum liability and we are now proposing an increase in each. First, there is the figure for the maximum liabilities which may be incurred under Section 1 of the 1949 Act. Section 1 business is usually described as ordinary "commercial" business because, in accordance with the Act, it is done only after consultation with the Department's Advisory Council and, in practice, only with its approval.
The figure of maximum liability under the Act was set by the 1949 Act at £500 million and raised in 1952 to £750 million. Since then, the Department's business has developed to the point 768 where current liabilities are £550 million and contingent liabilities £170 million. This is an uncomfortable position, leaving little room for manoeuvre. There are a number of contracts in prospect and unless the Act were amended, we might find ourselves having to decline sound business simply because we were at the practical limit of our statutory authority.
It is, therefore, proposed to increase the figure to £1,000 million. This figure, if the House approves it, will, of course, enable us to cope with any increase in export credit insurance required in respect of exports to Russia following the recent Trade Agreement. I should make clear, however, that the decision to introduce the Bill was taken long before the proposal to have trade talks with Russia was put forward.
I now want to turn to the other figure which we are proposing to amend, that is, for maximum liabilities which may be incurred under Section 2 of the Act. This is what is known as "national interest" business. It may be used either to render economic assistance to overseas countries, for example, the Commonwealth Assistance loans provided for at the Montreal Conference or, in the words of the Act,for the purpose of encouraging trade".These loans are commonly called "special guarantees", but in either case the business is required to be done "in the national interest". The point is that the responsibility here for the transaction is taken over by the Government from the Advisory Council, whose advice and consent is not required.
The Government take the initiative either for political reasons in the broadest sense of the word or because they may have a reasonable expectation of what future prospects of a country were which might enable them to take a longer and more speculative view than the Advisory Council could, would or should take. Nevertheless, despite the apparently uncommercial nature of such transactions, the normal underwriting principles have to be observed.
The limit of liability for Section 2 business was set at £100 million in 1949 and increased to £150 million in 1952 and in 1957 to £250 million. The present position is that our actual liabilities 769 amount to £94 million and we have commitments for a further £90 million. Although, in this case, we are not, therefore, so near the ceiling as we are in Section I, we have to bear in mind the dual purpose of Section 2. We must have room within that limit for more "special guarantees."
There is, for example, the possibility that an important market or a particular export may no longer be acceptable to the Advisory Council as a commercial risk, but the national interest may require that risk to be taken. We must also have room for any more economic assistance loans which may be necessary. Consequently, we now propose to raise the maximum liability to £400 million.
So much for the content of the Bill. But in asking the House to give it a Second Reading I feel there are two issues to be settled. First, does the record of the Department and its present rôle in the export trade justify us in authorising this further increase to meet the Department's expanding business? Secondly, are the limits in the Bill too little, enough or too much?
Now, as to the record of the Department, its very success is the reason for asking the House to approve the Bill. In 1945–46 E.C.G.D. covered United Kingdom exports to a value of £49 million. In 1950–51 it covered United Kingdom exports to a value of £288 million. In 1958–59 it insured £530 million, ten times as much as thirteen years ago. There has also been a steady increase in the proportion of our exports which is insured by E.C.G.D. This proportion was, I understand, about 5 per cent. before the war. In 1950–51 it was 12.3 per cent., in 1957–58 it was 14 per cent; and in the last financial year 16 per cent. As a matter of interest, in the last quarter of the last financial year, it was running as high as 18 per cent.
Why has the share of United Kingdom exports covered by the Department increased? First, export business has recently tended to become generally riskier. Secondly, lengthening terms of trade in a buyers' market have increased the gross outstandings in respect of export credit sales of an individual exporter, so causing him to be more concerned over the risks affecting those 770 outstandings. Thirdly, E.C.G.D. has consistently canvassed the export trade, and indulged in deliberate planned publicity. Fourthly, I think we can say that a progressive acceptance of export credit insurance was, in any case, to be expected, as knowledge of the benefits of insurance spread through the export trade.
Nevertheless, some will say that the Department is not doing enough, some will say that its services are too expensive. Of course, it would be easy to answer all of these criticisms and to match all these demands if insurance, so called, was provided without regard to the true underwriting risks—that is to say, without any regard to the possibility of a loss. But it is not the job of the Department to make a continuous loss. If it does, it is merely providing a concealed subsidy.
It is easy to criticise the Department because it will not always meet the unreasonable and uncommercial requests which are sometimes made by a small minority of its clients. But, in the long run, it boils down to this, that there are no grounds for encouraging an exporter to export if he has no ultimate expectation of being paid other than by E.C.G.D. at the taxpayer's expense. After all, Parliament, over the years, has accepted that E.C.G.D. should run its business on commercial lines seeking to balance income with expenditure over a period of years. It is not expected to make a loss since that would be subsidising our exports. It is not expected to make a profit because it would be doing so at the exporter's expense and handicapping him unduly for the benefit of the taxpayer.
By masterly manoeuvring, to which the nearest analogy that suggests itself to me is tight-rope walking, it has achieved a notional credit balance of £18 million after insuring since 1929 about £5,000 million worth of exports. And this £18 million of surplus or reserve, whatever we like to call it, must be seen against its current outstanding risks of £650 million and of having insured in the last financial year alone £530 million worth of exports. So I think that we can claim that the Department has provided a service of insurance to the exporter—in a field which cannot be covered by the 771 commercial insurance market—at no cost to the taxpayers and, as the figures show, without imposing an unreasonable charge on the exporter.
I am sure that this is the right and, indeed, the only sensible lines on which to run a Government credit insurance organisation and we have carried this view with other export credit insurance organisations overseas—and I emphasise credit insurance. If we, the pioneers in this field, abandoned the principles of sound underwriting, others would follow and we would not necessarily win the ensuing credit race.
The E.C.G.D. is a typical British institution. It was originally set up in 1919 to finance supplies to the devastated countries in the Balkans. From that beginning it has evolved into an organisation for encouraging our exports all over the world by providing credit insurance. It is a Government Department engaged in trading in the open market and under an obligation, as I have explained, to make neither a profit nor a loss. It is responsible to a Minister of the Crown, but it is guided in its working policies by a group of unpaid private individuals. Here, I would like to pay a very warm tribute to the very able men from the City and from industry, who, under the chairmanship of Sir Geoffrey Gibbs, give us the benefit of all their wisdom and experience.
I am aware that the Department has its critics, and I am the last to suggest that such criticism should be ignored. Far from it. But, of course, the basis of most of the criticism of the Department by the individual businessman is that it will not provide him with the service he wants at the price he is prepared to pay. And, after all, other than the financial results to which I have referred, there is no yardstick by which to measure the services of E.C.G.D.
Most of the complaints that we receive of course, are allegations that some other foreign institution is doing better than our own and that the British exporter is thereby handicapped. But there is a good deal of confusion and very often like is not being compared with like. I am often told that another nation is able to give better terms or insure more in a particular market. Of course, this is sometimes true. It can happen that more cover is given in a 772 particular market by a foreign credit insurance organisation, or that the premium charge is less. Inevitably, this must happen sometimes because their assessment of the market may be more optimistic than ours, and their commitments there may be less.
But it is rarely pointed out, at any rate, to me, that the contrary more usually happens, which is that in many markets our assessment is more optimistic than that of our rivals and that we are thereby able to do and insure more business. No two organisations function on exactly the same lines and there may always be the odd case where the overseas organisation does more than E.C.G.D.
But the fact is that the Department, in general and over the broad range of British exports and for any exporter in particular, gives at least as full a cover in respect of risks specified, a percentage of cover exceeded by none, and at a cost which, overall, we believe to be less than that of others. As the Department's business develops and as it gains more experience, the spread of its risks has been improved; it has been able progressively to reduce the premiums charged and to develop new ways of serving its customers.
Sometimes I wish that those who "grouse" would really take a little more trouble to find out how their competitors abroad fare. They would find, for example, that the Department's credit limit service—the method of approving the amount of credit which an exporter may give to a particular buyer—is well in advance of practice elsewhere. The E.C.G.D. has information about 140,000 buyers in all parts of the world which enables it to give very quick service over a wide area. It makes no special charge for this. It may be worth contrasting this with the service in one country where an exporter is obliged to get his own reports on his buyer and to submit them with his application and in another country where an exporter is charged so much for each buyer on whom a figure is agreed.
The impression is sometimes created that the Department behaves rather like Mr. Molotov used to at the United Nations, and constantly says "No" to 773 the most reasonable offers. The usual accusation is that it is inflexible in its attitude. This epithet is varied by the use of "rigid" or "hidebound", or "unimaginative". But inflexible is the more usual. What it means is that the Department is not guilty of abandoning the principles of credit insurance and its statutory duty in order to help the complainant to get export business on his own terms.
I can assure the House that the Department is not inflexible. It has constantly modified and developed cover to meet changing conditions and circumstances and the new developments there have been in the last few years show that it is always striving to improve its services. But if flexibility means yielding to pressure, or special pleading, than I think that we are better without it. It is the essence of its task that the E.C.G.D. should treat all exporters with equal fairness and should not make a concession to one which, in the long run, is only at the expense of others, one way or another.
So much for the record of the Department and its role. The other question I posed was: are the limits of liability proposed in the Bill too little or too much? If the Bill becomes law, the E.C.G.D. will be in the position for some time to come of not having to turn away business because it is beyond its statutory limits of liability. I think that we have to consider the reason for having a statutory limit at all.
Except for two short periods the Department has never been a charge on the public funds, and, as I told the House, it now claims a notional £18 million credit balance. Nevertheless, the fact is that the public purse is committed to backing these guarantees—in the theoretical situation that each policy resulted in maximum loss. At present, that theoretical commitment is limited to £1,000 million. What the Bill proposes is to expand this to £1,400 million. I think that that is a very reasonable step forward. I cannot forecast when the House is likely to be asked again for a further increase in this authority. But I would not rule out the possibility if the present rate of development continues that that might be in two or three years' time. But I see no reason to object to that.
774 I think that Parliament has the right and the duty from time to time to have a look at this scheme and debate the work of this important service, and it is encouraging to think that the present opportunity is brought about by the very success that the Department is achieving.
§ 11.25 a.m.
§ Mr. Douglas Jay (Battersea, North)
Week by week this House is asked either to celebrate the success of a public enterprise by authorising a big expansion in its activities, as we are today, or, alternatively, to rescue from decline a languishing private industry by the free grant of public money, as we were doing in the case of the cotton industry a week or two ago, and no doubt we shall be doing again in the weeks ahead. Subsidies for private enterprises and loans for public enterprises seem to be the Government's current interpretation of their policy of Tory freedom.
Today, anyway, we are celebrating the success of a public enterprise; and I think that the relatively small audience which the Minister's Bill has attracted this morning is partly a tribute to the fact that the activities of the E.C.G.D. are so non-controversial nowadays. We can all join the Minister of State in congratulating the Department on its continued achievements, welcome the expansion of its activities and wish it success in future.
The life of the E.C.G.D. shows that what are essentially commercial and, indeed, really insurance activities—I am sure that the hon. Gentleman the Member for Bradford, West (Mr. Tiley) takes an interest in them from that point of view—can be carried on to almost everybody's satisfaction with a financial profit to the Exchequer by a branch of a Government Department; because, administratively, that is what the E.C.G.D. is, and not even a public board. This is really a State insurance scheme that we are discussing today.
The Minister spoke of the E.C.G.D. originating in 1919, but I believe that it was the Parliament of 1929–31 which effectively set it up in anything like its present form. It was an Act of the Labour Government, in 1949, which expanded and gave it new powers and new functions after the last war. That Act has certainly stood the test of time, as so many Acts of that Parliament have.
775 The Minister gave us the figures today. The 1949 Act fixed the limit of the Section 1 guarantees, the annual commercial guarantees, at £500 million. In 1952, they rose to £750 million and today we are putting them at £1,000 million. Section 2 of the 1949 Act also introduced the powers, of which the Minister spoke, to give guarantees in the national interest both to encourage trade and to give economic assistance to under-developed countries—the special guarantee and economic assistance scheme as it is called. These liabilities started at £100 million in 1949 and we are now asked to raise them to £1,400 million in the present Bill. This is another tribute to the foresight of those who introduced that provision into the 1949 Act.
Thirdly, Section 3 of the 1949 Act-about which the Minister said almost nothing in his opening speech, but will, perhaps, say a little more later—provided the machinery by which the E.C.G.D. carries out the economic assistance part of the scheme and helps overseas Governments who wish to spend money on British goods by giving them tied loans. "Tied loans" was the phrase that the previous Minister of State used when he introduced the Bill in 1956–57, very much on the analogy, as I understand it, of the American Export-Import Bank, which is also a part of the American Government. In return for its loans, the E.C.G.D. holds securities. In this case the E.C.G.D. not merely guarantees credit as it normally does under Sections 1 and 2, but makes outright loans of public money for the encouragement of trade.
It is interesting to note, and it is not very well known, that the E.C.G.D. holds its securities in a respectable fund called the Acquisition of Guaranteed Securities Fund. Here we have a case of a public body acquiring securities with public money and holding them—which is perhaps an interesting precedent, if in a different field, for the National Superannuation Fund which the Labour Party one day hopes to set up. I do not think that the Institute of Directors has made any protest against this sinister Fund, or regards it as any menace to private enterprise.
The fact is that the successful operations of the E.C.G.D. have not merely 776 shown a slight profit but have been of enormous assistance to British export trade over the years. The Minister has told us that the percentage of exports covered has now risen to 16 per cent., and it therefore appears to be steadily, if gradually, rising. Indeed, quite a substantial part of our export trade could not be carried on at all if it had to be left entirely to private traders, bankers and the private insurance industry, and if we did not have this public enterprise standing behind it and now ready to grant financial backing which will attain the enormous figure of £1,400 million if the House passes the Bill. That is no doubt one reason why the Institute of Directors does not wish to close this Department.
However, for the reasons I have given, we can accept the proposal in the Bill that the financial limit should be raised. I would not feel kindly disposed to the idea, hinted at by the Minister, of abolishing the limit altogether. I do not think that Parliament would be doing its job if it agreed to that. I admit that the Minister did not suggest it himself, but he intimated that it had been suggested. Nevertheless, since we are trustees for the shareholders in this enterprise we are entitled to ask the Minister a few questions in order to elucidate how the business is being carried on.
First, will the Minister tell us a little more about the way in which he arrived at the new limits of £1,000 million and £400 million respectively? These are both very substantial jumps on the previous figures. He gave us the amounts of total liabilities which the Department had incurred, but he did not amplify the step in the argument by which he jumped from this to the limit he now proposes. Are these just convenient round numbers, or is there some slightly more scientific method by which the Minister has arrived at them? I also find it a little difficult to relate these limits to the figures in the annual accounts giving the maximum liability on current guarantees. I remember my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) describing this as being as clear as mud after listening to the Minister's explanation of the previous Bill.
The last annual accounts, which are, admittedly, for March, 1958—because 777 we are always a year in arrears—show that the maximum liability on current guarantees under Section 1 was £453 million. This morning the Minister said that that figure had now risen to £550 million, and that there were also contingent liabilities of £170 million. As far as I know, the contingent liabilities are not revealed in the accounts shown to Parliament, and until the Minister spoke we were quite unaware of them. I take it that he has added those two figures together to make a total of £720 million, but we have to go a substantial way above that to reach the figure of £1,000 million mentioned by the Minister. Perhaps he can elucidate that point.
I want to ask him about what he has called the notional credit balance, which is what the ordinary man would call the net profit of the Department. According to the latest figures in the accounts, at March, 1958, this amounted to £12 million under Section 1, and another £2¼ million under Section 2. This morning the Minister mentioned a figure of £18 million, and I should like to know whether that figure relates to the whole of the Department's operations and not purely to those under Section 1, corresponding to the previous figure of £12 million. I should also like to know whether the surplus extends back to 1949 or 1929. If I understood him correctly, it goes right back to 1929.
Two years ago we were told that 90 per cent. of the Department's work still consisted of the ordinary commercial guarantees, and that all the Section 2 operations still amounted only to 10 per cent. It would be interesting to know what the figures are now. From the figures given this morning it would appear that the ordinary commercial guarantees have now fallen to rather less than 90 per cent.
The Minister might also give us a little more information about the Section 2 operations, and let us know what the Department has been doing, to what countries it has been lending, whether it has been lending mainly to traders or to Governments, and, in particular, what it has been doing by way of tied loans under the heading of economic assistance. We have had a little information on this matter in the case of Yugoslavia, Iran and Pakistan. Although it has rarely happened in the Department's history, 778 some things went wrong in those cases, and these operations were brought to light. Can the Minister tell us whether the dollar export policies, introduced quite recently, have proved successful, and have played a considerable part in the large increase in our dollar exports in the last few years?
I hope that I am not asking too many questions too quickly, but the Department's operations are of considerable interest. Have the loans made by way of purchases of securities been made simply to Governments, as in the case we heard about two years ago? It would be interesting to know whether some loans have been made to trading organisations, public or private.
I should like to know what is happening in relation to Clause 3, which was the Clause referred to by my hon. Friend as being as clear as mud, and which provides for the Board of Trade purchasing securities. I note that the 1949 Act says that these securities may be shares, bonds, stocks, bills, or promissory notes. In the case we discussed two years ago it appeared that promissory notes of an overseas Government were involved. Does the Department hold securities of one kind or another issued by trading bodies, or does it have only Government securities? The trading accounts are not clear on that point. We should like to know the value of the securities held, if that is not taxing the Minister's powers of information too heavily.
In the case of the Section 2 scheme, we are required under the Bill to set the new limit of £400 million. I take it that this limit covers all the operations under Section 2, that is to say, the normal cases where the credit is guaranteed but not actually advanced by the Department for one purpose or another, and where the money is, in effect, advanced by the purchase of securities. I take it that both operations added together make the limit of £400 million which we are now asked to authorise.
As the Minister said, from time to time one hears criticism of the Department's activities. One hears it said by some traders that premiums are too high. Others say that the length of credit guaranteed is not long enough. There are some who want 100 per cent. cover, and I think that the 779 maximum is still 95 per cent. That is a natural complaint to be made. In particular, I have heard a criticism made recently that the premiums for trade with China are unreasonably high. I forwarded to the Minister these detailed arguments relating to exports to China. I think that we can reasonably ask that all these complaints should be sympathetically and carefully considered and, above all—and this is the main principle—that British exporters should not be put at any substantial disadvantage to exporters from other countries, subject to the over-riding provision that we must not turn E.C.G.D. into an instrument for subsidising exports. Subject to that, we wish British exporters not to be worse off than their competitors in other countries.
But I do not think that these grievances, even if justified, need detract from the general welcome that the House should give to the successful work of the Export Credits Guarantee Department or to the Bill.
§ 11.41 a.m.
§ Mr. Arthur Tiley (Bradford, West)
I must begin by declaring traditionally an interest in the Bill. I am becoming a little tired now of telling the House that I engage in insurance, but it is remarkable how many fields of insurance are concerned in our political work here.
I have a long experience of dealing with the Export Credits Guarantee Department, and I would remind my hon. Friend that we must not gauge what we are doing in this field by what other countries are doing. I always feel that it is a little dangerous and complacent to look at what other nations are doing, because our need to export is greater than that of any other nation and we must always be in the forefront. I felt once or twice during his speech that my hon. Friend had forgotten those halycon days when he himself was a merchant adventurer, seeking orders all over the world, and I thought that his responsibility in Horse Guards Parade was making him a little Whitehall-minded.
I am pleased to be able to speak after the right Gentleman the Member for Battersea, North (Mr. Jay) on this occasion, and to agree with almost everything that he said. I do not want to use 780 the few minutes in which I wish to speak in making debating points about the Department. It is a Government institution, and it cannot be otherwise. I think that the officials at the Department would pay a tribute to the work that private enterprise played in this field before the Export Credits Guarantee Department was dreamed of.
There is an excellent relationship between private enterprise and the Department in this matter, and I shall not make a speech of disharmony. I would add my praise to the growth of the Department. It is a vastly different Department from the one that we knew in early years and immediately after the war. The staff seems to be imbued not with the spirit of the civil servants, but with the intention of making our exports grow, to the well being of the whole country.
I am glad to pay tribute to the work of the provincial offices, particularly in my own city, Bradford, and to the support that the provincial offices get from the head office in London. I sometimes wonder whether it would be a useful thing if there could be a more frequent interchange between trained personnel from the provinces and the head office personnel, for periods of two or three months, so that local conditions and difficulties which are learned by the men out in the field could be more readily understood at the head office in London.
There are difficulties, and I shall make a few suggestions, not in a carping fashion. I shall not make criticisms which do harm. I am making a few suggestions which, I hope, will make the Department grow and succeed even more in future years. I want to see its service improved. I shall not expect an answer to the points which I intend to raise this morning, because I think that they are too important to demand an answer "off the cuff," but I hope that my hon. Friend will give me an assurance that he will look into these matters, which I shall enumerate, with the highest officials of the Department.
I know that in Bradford we wonder whether there is a keen awareness in London of the difference between the approving of credit limits and the granting of insurance cover as between short-term credit and long-term credit. I will give one simple illustration. It is 781 a vastly different thing to be fixing up a policy, its credit terms and its terms of cover, if one is selling an atomic reactor, or a bridge, or 10 aeroplanes than it is if one is selling wool tops, or yarns, or waste, or cloth. It is felt in the textile district of Bradford that this difference is not adequately understood. One may have ample time for delay if a large firm of engineers is quoting for the construction of a harbour in another part of the world, but there is not a moment to be lost in the offices of the West Riding, which, with modern telephonic devices and electronics, are receiving cables from all over the world, demanding, in a few hours, acceptance of an order—or the order is lost.
I know that the Department is making a forward movement in this direction and that we are shortly to have in our provincial offices 30,000 or 40,000 ready-made decisions in respect of foreign customers, which can be given on the spur of the moment, but that is not always the important point. It is often an increased limit or altered credit terms which provokes the delay. This means that valuable orders leave our country and go to competitors because of the delay of two or three days which ensues before decisions are reached.
I should like to say a word about pre-shipment risks. When this cover was brought into being and the comprehensive policy of E.C.G.D. was extended to cover it, it was a step in the right direction, but we have left it incomplete It was not expected, when it was first introduced, that it would cover all eventualities, but we have not made any movement since then. It must be pointed out that no cover applies until an import licence is issued. This, again, is a very severe handicap to our important textile firms in the West Riding. It is a purely political risk that we wish to cover and not an ordinary trading risk.
In Japan, on 1st April each year, an Anglo-Japanese trading agreement is signed and from that moment all import licences are granted, but in the next few weeks and months all our workers and administrative staffs in firms in Bradford will be building up their stocks and preparing their patterns and making their cloth to sell to Japan next year. All these months elapse every year and no cover is provided until import 782 licences are granted after 1st April. Far more difficult questions than this have been solved by the Department. I am sure that here is a problem which could be dealt with because it is a political risk. It is not a risk of insolvency nine months from now; it is a risk of having all these fashion goods and textiles in our warehouses months before firms are ready to take orders from Japan, and if no import licences are granted heavy losses will follow.
I want again to point to the difficulty which occurs with South America. Everybody knows that one country after another in that part of the world has been closed to at least our textile interests. It is a very serious thing if a country is completely lost to one in trade. Some of the West Riding and Bradford houses have been dealing with South America for more than a hundred years. When a country is lost to one, the organisation goes, the advertising and the agencies close down and are never recovered.
Peru and Guatemala imposed recently some penal duties on the import of textile cloth. They were imposed without warning long after the orders had been received and many months after the firms had accumulated their stocks and got them ready for shipment. Here, again, is a political reason for the imposition of the duties. The goods lay on the shelves of the warehouses and factories in Bradford.
If it were a trade risk, my people would deal with it. They are used to competition and to being provoked in the ordinary course of business, but here is action by a Government, and it is our business in this House to deal with actions of that sort.
Now a word about the documents themselves. I fully realise the difficult field in which the Department operates. It is an easy thing if one has 1,000 lives insured to know by the law of averages what percentage are going to the in the next year. It is easy to know if one has 1,000 buildings insured what percentage of those buildings will, on average, be destroyed by fire. It used to be easy to know if one had 1,000 cars insured how many would meet with an accident, but that no longer applies.
In this matter we are dealing with all these political implications all over the 783 world and we are selling good faith and a promise to pay in the abstract. The abstract quality is always difficult to define in print. The policies are full of technical points. They have endorsements, amendments, attachments, small print, large print, printed slips, marginal notes, and so on. There are many differences between the documents which the Department provides in the different fields of its operation. It is a very easy thing when a loss arises for a firm to find that on a technical point it becomes uninsured.
I sometimes wonder, in view of all the difficulties that there are in the matter—we must not minimise them—how it is possible to express in black and white on one policy what one is setting out to do in view of the implications of political change and of the normal trading risks all over the world. I wonder whether the Department is generous enough on occasions in dealing with the claims when some technical requirement has been disobeyed. It is not a difficult thing in insurance for those running the Department, who have years of experience, to know whether a claim is made in good faith or in bad faith.
I, too, wish to pay a tribute to the work which my right hon. Friend's important Advisory Council does in London. The great changes and benefits which have ensued in recent years in this Department in the cover it provides have obviously been due to some deep thinking. But I wonder whether the Minister realises that there is no one from the textile industry on that Advisory Council. I think it might be a good thing if someone from Yorkshire, which is so important in the field of exports, were invited to serve on the Council. More than that, the Council is composed of very big businessmen. I have no doubt that the Institute of Directors will be well represented on it.
The West Riding of Yorkshire has hundreds of family concerns, little businesses and large ones, which have been in the family for 150 years. There ought to be on the Council a person representing the smaller businesses who knows the problems of those businesses. The Bradford Chamber of Commerce recently set up a panel of exporters who have these policies to consider, not in a 784 carping, critical fashion, all the difficulties attendant on the textile exporters and the details of the policies which they have with the Department. They have had many helpful interviews with the local officials in Bradford and I believe that they have requested that a delegation from Bradford should be received in London in the near future to discuss at a high level some of the points I have enumerated and others. I hope that I may ask the Minister to take a personal interest in the visit.
During the last few days I have been advertising commercially in this House some of the technical skills and artistry of our Bradford factory workers. Of course, when I say "workers" I mean directors as well, because in the textile trade the directors work in the businesses as hard as anyone else. I am not surprised that people throughout the world want to buy Bradford cloth, because it is perfect. There are no difficulties in the normal course of business which our men and women in the textile industry in the West Riding of Yorkshire are not prepared to face, but they are now confronted in this matter of exports with political difficulties and with the actions of Governments.
Private business has no tools with which to fight these battles. Here is a political challenge, and those people send us to this House to deal with political battles. How can they deal with them? Their job is to trade; our job is to accept the political challenge. The Department of my right hon. Friend is in being for that purpose. The Export Credit Guarantees Department is one of the tools which it can use. I hope that this challenge will be accepted and that we shall have a wider interpretation of the liabilities which the Department should accept politically. Then, I think, we should do a good deal more to help our export trade.
I am very glad to support the Bill and to pay tribute to the new spirit which in recent years has infused the Department and to the wider cover which it has been possible to give.
§ 11.58 a.m.
§ Mr. John Stonehouse (Wednesbury)
I am very happy to follow the hon. Member for Bradford, West (Mr. Tiley), who has made a very constructive speech, and I am also glad to be able 785 to support the Bill. I, too, wish to pay tribute to the excellent work done by the Export Credit Guarantees Department.
In my constituency there is a large number of small firms, and I would ask the Minister to bear in mind the point made by the hon. Member for Bradford, West that so much of our export drive is contributed to, not so much by the larger firms which get publicity for big export orders, but by the aggregation of small orders received by small concerns. As I say, in my constituency there are many small firms each making a contribution to the export drive.
I ask the Minister to bear in mind the importance of his Department paying particular attention to the needs and requirements of these small concerns. Their orders may not be very large, but I ask that his officials should give really close attention to the needs of these small firms.
I wish to ask whether the Minister really believes that adequate publicity is being given to the work of this Department. We have seen advertisements in the Press, but are his own officials making attempts to contact firms, not only those already in the export business, but those which could expand the scope of their activities into the export business and widen out from the purely domestic market, if they knew that this Department existed and its work could be extended to give them the service they need? I know that there are many firms which concentrate on the domestic market, because it is a comparatively easy and simple market to operate. These concerns might well find a market overseas were the Department to make them aware of the facilities which is provides.
I ask the Minister to consider the point made by the hon. Member for Bradford, West regarding the importance of speed and flexibility. Some years ago, when I was in Uganda, I was engaged in the importing of goods from Britain for cooperative societies. I well remember how difficult it was to secure the execution of those orders in the time that we required them to meet demands from consumers in Uganda. Sometimes it took as long as six or nine months, or even twelve months or more, before we had delivery of the goods.
786 When it came to textiles, the commodity to which the hon. Member for Bradford, West referred, we found that many competitors were able to beat Britain because they were more flexible. We found that the Japanese were very quick off the mark when dealing with competition from British textiles. I recall that very important textile firms in Britain sent out their representatives to Uganda with new designs to show to the importing house. Note was taken of the designs and some of them quickly found their way to Japan, and orders were executed by Japan and delivered in Uganda before the British textile merchants were able to make their deliveries.
This means that our textile merchants must be able to execute their orders quickly and obtain a service from the Department as rapidly as possible so as to meet this competition and to deal effectively and efficiently with the orders they receive. I commend the work of the Department. I am glad that the Bill is to be put on the Statute Book so that the work of the Department can be enlarged and extended.
§ 12.4 p.m.
§ Mr. Vaughan-Morgan
By leave of the House, I should like to reply to some of the points which have been raised.
I am grateful to hon. Members for the tributes which they have paid to the Department. My hon. Friend the Member for Bradford, West (Mr. Tiley) referred to my past as being that of a merchant adventurer. I was never a merchant and I would ask the right hon. Member for Batter-sea, North (Mr. Jay) to confirm that I was not an adventurer. I may have been venturesome, but I was not an adventurerer.
The hon. Member for Battersea, North began his speech in a pleasing way by saying how nice it was to pay tribute to a successful Government Department. But I hope that we shall not continue with this kind of "tit for tat". Let us compromise by saying that this is a happy marriage between public service and private enterprise. I repeat that we should not neglect the work of the Advisory Council. Nearly all the members of the Council are businessmen and, certainly, the Department could not carry on without their help.
787 For reasons of tact may I ask the right hon. Gentleman not to talk too much about profit. E.C.G.D. has only a notional balance and it sometimes goes "in the red", so perhaps it would be better not to talk about it as profit. Referring to the historical past, it was the 1929 Act which put the Department on to a commercial basis for the first time and, as the result of the Niemeyer Report, advocated that it should be run on straightforward commercial lines.
The right hon. Gentleman fired a fuse-lade of questions at me. I was not able to take a note of all of them, but I will do my best to answer him. He asked me to be more explicit about how we reached the figures which we are asking the House to approve. At the risk of having this quoted against me I will be frank and say that it was, shall we say, intelligent guesswork. It is hard to give precise reasons, but if we look at Section 1 we have a current figure of actual liabilities of £550 million, and the contingencies bring it up to £720 million, which offers small scope for manoeuvre. It seems not unreasonable to make it up to the global figure which we have given. The actual liabilities have gone up by as much as £125 million in two years. Another thing that we have to remember is that the size of actual contracts overseas tends to get bigger as well. We had to decide what would be a reasonable increase in those circumstances and we thought that £1,000 million was about the right answer.
Under Section 2 we are in about the same position. There is not much room for manoeuvre if one takes into account the fact that the Section has a dual purpose. First, with special guarantees we have to bear in mind—I hope that the right hon. Gentleman will not press me too much on this point—that economic conditions in some countries overseas may deteriorate and they may no longer be acceptable risks to the Advisory Council under Section 1. It may be that some very big contracts may have to be taken on non-commercial grounds.
The other use of the Section 2 provisions—economic assistance loans—involves very large sums. Bearing in mind those two commitments or risks, as we might like to call them, we are asking for a reasonable increase. The 788 right hon. Gentleman was quite right when he said that Section 3 is equivalent to the work of the Export—Import Bank but to make the parallel more exact I think that we should take Sections 2 and 3 together.
§ Mr. Vaughan-Morgan
That is right. The limit covers what is done under Sections 2 and 3.
I can assure the right hon. Gentleman that I meant nothing sinister by my reference to abolishing the limit. That was far from my intention. The only reason I mentioned it was because it occurred to me that someone might say, "Why not put in a Clause to do that by Statutory Instrument?" I am sure that that would be wrong. We ought to have the opportunity for a full-scale debate.
The right hon. Gentleman asked about the surplus. That goes back to 1929, although, of course, that part of the surplus accruing under Section 2 goes back only to 1949.
The right hon. Gentleman asked for further particulars of what has been done under Section 3. Speaking from memory, we have given assistance to India, Sudan, Yugoslavia and Pakistan and they are all Government-to-Government loans. I have noted the right hon. Gentleman's comments about the premium on trade with China. I think that the remarks I made earlier about being fair to everybody apply in that case. It is easy for someone who is interested in a particular market to single it out and to say that the premium is too high. But we have to take account of the interests of everyone concerned.
My hon. Friend the Member for Bradford, West raised an interesting point about delays and this was also referred to by the hon. Member for Wednesbury (Mr. Stonehouse). I am sorry to hear that there are these complaints about delays. I think, having looked into 789 them, that on balance, they are usually not justified; 70 per cent. of the applications submitted to E.C.G.D. are dealt with within forty-eight hours. The delays we hear about nearly always arise where it is a question of finding out about a new client. This may mean long correspondence with ports overseas to find out all we can about a particular customer. It is difficult to expect it to be very much expedited. If hon. Gentlemen have any cases in which they think the period has been unreasonable, let them write to me and I will see that the Department looks into it.
My hon. Friend also pleaded for the inclusion on the Advisory Council of a representative from his constituency and his industry. I will bear what he said in mind, but I must point out that already we have someone from the textile industry, and that the Advisory Council is not selected just to be representative of particular industries and sections of public opinion. It is desirable that its members should be chosen for the contribution they can make to the work of the Council and not for pressing sectional interests.
Other points that my hon. Friend raised were about different forms of risk-taking because of increased tariffs and of difficulties that arise from import licences not being given. I will look at everything he said about that, but I do not think that any of those are, or ever will be, insurable risks.
The hon. Member for Wednesbury said that he hoped we paid attention to the small firms. Some of the hon. Gentleman's remarks applied to the Board of Trade Export Services Branch rather than to the E.C.G.D. We certainly do pay attention to the small firms, and we are appreciative of the contribution they make to the exports of this country. He also asked me whether we gave adequate publicity to the service. I hope so. We spend £20,000 a year on advertising and T hope that we reach the right people. 790 The number of customers is growing and so is the size of the business. That is some guide that we are doing the right thing.
Lastly, I ought to pay, on behalf of all hon. Members who have spoken as well, as on behalf of the Minister who has most to do with it, a very warm tribute to the staff of this Department.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Legh.]
§ Committee upon Monday next.