§ The President of the Board of Trade (Mr. Reginald Maudling)
With permission, Mr. Speaker, I will make a statement about some developments in the services offered by the Export Credits Guarantee Department.
They can be summarised under three headings. The first is premium rates. The policy of the Department, and of the Advisory Council, for whose continuing help I am much in their debt, is to pay its way on the average over a period. To run consistently at a loss would be tantamount to a subsidy to exports; but neither should we aim at making a consistent profit. We have made a new assessment in the light of experience of the likely level of recoveries after major defaults, and I am satisfied that this justifies a substantial reduction in premium rates.
I have, therefore, approved a new scale of premiums for medium-term business which will reduce the total premiums charged by about 25 per cent. The main benefit of these reductions will be concentrated in those markets where at present we charge the highest rates. There will also be reductions in respect of comprehensive business in the more expensive markets.
The second heading is longer-term export finance. Any extension of the length of credit on which our goods are sold adds to the strain on our balance of payments. That is why we support the Berne Union and resist any general extension of the length of suppliers' credits. But in the case of very large capital projects and of ocean-going ships, where the return on any investment may take many years to mature, the buyer may need and expect credit going beyond five years from delivery and he can already obtain it in some foreign countries.
239 We are, therefore, introducing a new system whereby the Department will guarantee loans for longer periods made by financial institutions in this country to creditworthy overseas purchasers. The extent to which we can grant this facility will be limited by our balance of payments position. We shall have to be selective, therefore, in accepting individual projects and be satisfied that they will bring substantial benefit to our economy.
In highly exceptional cases, where the business could not otherwise be financed and where, in the opinion of the Government, there are compelling reasons for regarding the project as one of outstanding economic importance to the United Kingdom, supplementary finance may be provided from the Exchequer under Section 3 of the Export Guarantees Act.
The third heading relates to small exporters. In order to help small and medium-sized firms with little or no experience of exporting, I have decided to introduce a new form of export credit cover for firms with a current export turnover of less than £10,000 a year. This will be available across the counter at all branches of the Export Credits Guarantee Department and will cover small exporters in respect of transactions with individual approved buyers, at a flat rate of premium. The cover will be available for a limited time. This simple and easily accessible facility should encourage new firms to enter the export market and subsequently become customers of the Department on a normal basis.
This is, of necessity, no more than an outline of the new arrangements. I am circulating a more detailed explanation in the OFFICIAL REPORT, and I am also taking steps to make them known as widely as possible throughout industry. I believe that these developments, taken in conjunction with the improvements we have recently made—part-period cover, "matching", the general extension of special facilities originally designed for the dollar area, and the special rates for ships—together represent a major extension of the services available from the Export Credits Guarantee Department and can stand comparison with those offered by any similar institution throughout the world. It is important that they should be known and used as 240 widely as possible, and I should welcome any help that hon. Members can give to this end.
§ Mr. Jay
While we on this side always welcome extensions of the activity of this successful public service, can the President of the Board of Trade tell us, first, why it so often happens that proposals for such extension are put to the Government, are declared by the Government to be impracticable and then are duly granted eighteen months or two years later?
Secondly, can the right hon. Gentleman assure us that the facilities which British exporters will now enjoy are at least as good as any of those available to the major competitor exporting countries? One would like to be definitely sure of that in all these respects.
Thirdly, do these facilities, as I assume they do, apply to all countries to which British exports go, whether in or outside the sterling area and on both sides of the Iron Curtain?
§ Mr. Maudling
Yes, Sir, these facilities apply to all countries where the Department offers cover. They will amount to putting us in a position to offer facilities at least equal to those of any competitor, and in many cases much better.
§ Mr. Stratton Mills
Will my right hon. Friend note that what he has said, particularly about the longer-term export finance for ships, will be particularly welcomed in shipbuilding areas? Can he give further details of how the scheme will operate, particularly as regards shipping, and when it will come into effect?
§ Mr. Maudling
It comes into effect straight away. I thought it better to circulate the details in the OFFICIAL REPORT, otherwise I should weary the House with too long an explanation.
§ Mr. Rankin
Can the right hon. Gentleman make clear that the new or revised terms which he has just announced will ease the trade conducted by small exporters on a barter basis—that is, in the exchange of goods for goods? Will he also say whether these terms will definitely ease the position of exporters who try to trade with China?
§ Mr. Maudling
All exporters who are using the facilities of the Export Credits 241 Guarantee Department, to whichever country they are exporting, will find improvements in these proposals.
§ Mr. Leather
Is my right hon. Friend aware that the proposals that he has announced will give considerable satisfaction to many exporters, particularly in the capital goods industry, where this additional help is badly needed?
Will my right hon. Friend continue to direct his attention to three particular points? First, one of the basic reasons why many exporters still do not make full use of the excellent facilities of the Department is because of misunderstanding, which usually arises from bad representation and bad public relations by the Department. It has a very good case, but frequently it is badly put over.
Secondly, many exporters dealing with these complicated contracts find themselves in the position of having to bargain with the foreigner, on the one hand, and with the Department, on the other. They reach the right conclusion in the end, but if the officials concerned had power to agree much earlier, numbers of projects which now fail would succeed.
Thirdly, may I ask my right hon. Friend not to cease to pay careful attention to the German tax rebate system, which is still a grave disadvantage to British exporters?
§ Mr. Maudling
Most certainly, we will do all that we can to make these facilities widely known, by leaflet, pamphlet, speech and in every other way. That is important.
I do not accept that the decisions of the Department take a long time to reach. My impression is that the Department is staffed by people who give answers quickly and efficiently and that they compare with anyone in the world.
I do not think that the question of the German remission of turnover tax arises out of my statement. In any event, I would not accept what my hon. Friend has said.
§ Mr. Fletcher
Will the President of of the Board of Trade give an idea of the length of credit that will now be available to exporters of commodities to countries behind the Iron Curtain?
§ Mr. Maudling
Normally, commodities would be sold on short-term credits. I was dealing with long-term credit facilities for projects like steelworks, rolling mills and power stations, which, clearly, do not give a good return in less than a number of years and, therefore, long-term facilities are required. It would be against the country's interest if there were a general extension of time of repayment for the export of normal commodities.
§ Mr. McMaster
While welcoming the statement by my right hon. Friend and saying how much the export industry will appreciate the good work done by the Export Credits Guarantee Department, and particularly by the Advisory Council which works hard behind it, I should like to ask my right hon. Friend what attention has been given to the other proposal of the Radcliffe Committee, namely, that the smaller exporter should be able to select which risk he would like covered in order to minimise his insurance cover and so that he may be able to quote a competitive price against foreign competition?
§ Mr. Maudling
I am grateful for what my hon. Friend has said about the Advisory Council, which does a tremendous amount of public service. As for the small exporter, I think that my hon. Friend will find that the proposals I am making will meet his point about the person now exporting for the first time and wishing to insure individual transactions.
Mr. H. Wilson
While, of course, as my right hon. Friend has said, we all on this side welcome these concessions, which we pressed for specifically as long ago as the debate on the Radcliffe Report in November, 1959, I wonder whether the right hon. Gentleman will clear up this doubt which remains in the minds of some hon. Members, I think, on both sides of the House? It is quite clear now, is it not, that full cover will be available for trade with East Germany and that we shall not go on losing the possibility of big contracts with East Germany because of doubt about the Department's position?
§ Mr. Maudling
There is no reason for doubt about this. Some of the stories in the newspapers about our losing large 243 contracts to the French are quite inaccurate. What I am saying is that these improvements apply to all the countries for which there is E.C.G.D. cover, and that does include the Communist bloc countries.
§ Mr. Burden
Is my right hon. Friend aware of the very considerable facilities for assistance of small exporters particularly, and those who have not become exporters, given by a great number of London buying houses and their highly skilled employees, and will he ensure that the members of his Department are well briefed about these facts and will be able to pass this information on to individual exporters?
§ Mr. Maudling
I quite agree that the activities of the merchant houses and the London buying houses are extremely valuable. I take every opportunity of calling them to the attention of potential exporters.
§ Several Hon. Members rose—
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