§ The President of the Board of Trade (Mr. Douglas Jay)
With permission, I wish to make a statement.
Since 1964 a number of far-reaching improvements have been made in the facilities offered by E.C.G.D. I am happy to announce today two further major extensions of these facilities which should bring immediate additional benefit to a large number of exporters and encourage their search for new business and new markets.
First, a scheme will now be launched to cheapen and simplify the financing of exports in the important field between 30 days and two years. The basis of this scheme at first will be an unconditional guarantee by E.C.G.D. to the banks, of 100 per cent. of a bill of exchange at Bank Rate, with a minimum of 4½ per cent. The banks will not make any additional charge. The exporter will receive cash for his goods by the time of shipment and will be freed from bank recourse from the time when the Bill is accepted.
Secondly, I propose to extend the existing scheme by which E.C.G.D. gives a guarantee to banks which provide finance for exports at a fixed interest rate of 5½ per cent. plus the usual bank charges. At present, the scheme has been limited to a minimum order value of £25,000. E.C.G.D. will now be ready to consider any cases where two years' or more credit has been authorised.
I am circulating a more detailed statement of these two new schemes in the OFFICIAL REPORT. They will both, I believe, bring substantial new assistance to exporters.
§ Following is the statement:
§ As a first step the new facility for credit periods between 30 days and two years will apply to credit insured exports where payment is due against a negotiable instrument, for example a bill of exchange or promissory note.1912
§ For each insured exporter E.C.G.D. will give the exporter's bank a guarantee covering them up to a stated maximum amount outstanding. The exporter will undertake to make good to the Department any payments which are made to the bank and which are not immediately payable by E.C.G.D. to the exporter under the standard credit insurance policy. To obtain the finance the exporter will apply to his bank in the normal way producing the bills of exchange and supporting evidence of shipment, together with a form of warranty that the transaction is export business eligible under the scheme.
§ The bank will advance 100 per cent of the principal value of the bill of exchange relating to the shipment charging the exporter interest at bank rate—variable, but with a minimum of 4½ per cent.—until payment is received. Once the buyer has accepted the bill, the bank will look to him for payment, or should he default, to the E.C.G.D. The effect will be that the exporter will have received cash for his export by the time of shipment and will be freed from the risk of bank recourse at an early stage.
§ The only additional cost to the exporter—beyond the interest—will be the E.C.G.D. charge for the supplementary guarantee. This has been set for the time being at 2s. 6d., yearly per £100 of the guarantee limit. Banks will not make any additional bank charges for the facility.
§ E.C.G.D. will begin to invite applications from their policy-holders within the next few weeks. It will be a condition of application that the exporter has held standard E.C.G.D. comprehensive cover for at least a year. As the number of exporters concerned is too large for us to take on all applications straight away, E.C.G.D. will first approach those companies conducting the largest volume of insured export business. All eligible firms on E.C.G.D.'s books, however, will be invited to apply as soon as we are ready to deal with their applications.
§ There is a different set of problems to be tackled where there is no separate negotiable document, such as a bill of exchange, providing evidence of the buyer's indebtedness, in respect of which E.C.G.D. could give its unconditional guarantee. We are continuing discussions about this type of transaction, and hope that a solution may be found which would enable us to extend the advantages of this scheme to transactions where firms are unable to obtain negotiable instruments.
§ E.C.G.D. are also extending their facility for guarantees to banks under which the banks provide finance at a fixed rate of 5½ per cent. plus appropriate bank charges. These are issued case by case and cover the field of credit terms of two years and upwards and where at present a minimum order value of £25,000 is operative. There may be instances where it is necessary in order to meet credit competition to give two years credit or more for contracts below this value limit. E.C.G.D. will now be prepared, in cases where the banks are agreeable, to consider them for cover under the existing scheme.1913
§ Taken together with existing facilities access to special export finance will now be possible over a very wide field of credit business. The new scheme will be available for re-exports, but we are not prepared to extend these guarantees to the financing of merchanting business conducted outside this country with goods not produced in Britain.
§ The new arrangements will bring immediate benefit to a large number of exporters in many industries and will be a positive encouragement in their search for new customers and new markets. We shall watch with interest the use made of the scheme and be ready to introduce changes if they prove desirable in the light of experience.
§ Mr. Barber
I should like to congratulate the right hon. Gentleman on his timing. He describes his proposals as major extensions, and I should like to ask two questions. First, what estimate has the right hon. Gentleman made of the volume of exports which will be covered by these new facilities? Secondly, what is the right hon. Gentleman's estimate of the additional volume of exports which he expects will result from the proposals?
§ Sir D. Renton
Can the right hon. Gentleman say what there is about these new facilities which prevented them being introduced until a General Election was to take place?
§ Mr. Lipton
Is my right hon. Friend aware that his very welcome statement today gives the lie to the accusation that we are holding anything back or keeping things under the carpet?
Is the right hon. Gentleman sure that in introducing this large extension of the powers of the E.C.G.D. at this time he has, in fact, strengthened the staff and capacity of his Department so that it can immediately undertake these new and heavy responsibilities?
§ Mr. Cooper
Will the right hon. Gentleman give permission for the building of a new shop window in which all the Socialist propaganda can be displayed?
§ Mr. Michael Foot
Further to that point of order. Is it not clear that the Opposition complain when Ministers make statements, and when they do not?