EXPORT SERVICES (Hansard, 27 May 1977)

§ Mr. Michael Morris (Northampton, South)

As you will know, Mr. Deputy Speaker, I have been trying for a number of weeks to obtain this Adjournment debate on services to exporters. My interest in exporting goes back many years, principally to the time I spent as an executive with the Reckitt and Colman group in India and Sri Lanka, and my time in Canada and Pakistan. I first put my thoughts on paper in a Bow Group pamphlet in 1967.

My current interest was stimulated into action when I discovered, almost by 1859 chance, last autumn, when the Government were making their round of cuts, that amongst those cuts—almost incredibly, it seemed to me—was a decision that there should be a cutback of 10 per cent. on the British Overseas Trade Board—and that at a time when the Prime Minister and the Chancellor of the Exchequer were standing week after week at the Dispatch Box emphasising to the House, and, through the House, to the country, that our future depended on export-led growth.

I submitted then, and still do, that the need for economies in public spending is appreciated and supported not just on the Conservative Benches but throughout the country, but I also submit that the one area that should not have been cut is exporting, except in the case of a service that is no longer needed or is not fully utilised.

I thought, however, that rather than just expressing my personal views it would be of more value to the House to find out the views of those at the sharp end—our exporters in the field—so I circulated nearly 350 trade associations, chambers of commerce and export clubs asking for their views on and attitudes to a number of the export services provided by Government and quasi-Government agencies.

I have to confess that the response was overwhelming, not just in terms of quantity—although there was plenty of that—but in the depth of the consideration given to the questions and the length of the answers. This afternoon I wish to pick up the highlights of some of the answers, but I shall be happy to make my papers available to the Department if it wishes.

One central point emerges: nowhere can I or any exporters find a Government strategy for exporting or an assessment of what services are needed to achieve the goals set out by the Government of the day. All that we see—and this is recognised across the Floor of the House—is the disappointing decline of our share of world trade over the past 25 years.

I believe that there is much in Lord Kaldor's thesis that our problems are structural and marketing, and have relatively little to do with exchange rates. Certainly that is my experience and broadly that of the clients whom I have 1860 served, and, indeed, it has been expressed in many of the letters that I have received as a result of my inquiries. I am also pleased to say that the latest NEDO working party has come to very much the same conclusion.

I should like to move on to some specific areas. Much of my time has been taken up with BOTB activities, and I should like firmly to put on record my thanks to Sir Frederick Catherwood for the co-operation that he has given me.

I deal first with joint ventures. There is no doubt that in the opinion of the exporting world these are a success. They are probably the most important service provided apart from ECGD, and everyone knows that they should be expanded and not cut back.

The Government's working paper BOTAC/77 suggests that there are exporters who are not serious. Certainly my inquiries and the evidence lead me to doubt that statement. In item 2 of this paper the point is made that No charge should be such as to deter serious users of the services concerned. Later, under item 6, the paper says: Demand for many Board Services has been growing and the Board is concerned to find equitable but effective means of managing this growing demand within the resources made available to it. We do not want to deter exporters. We recognise that demand is growing, yet somehow we manage to come forward with not just a 10 per cent. cut for joint ventures, but a 25 per cent. cut-back. Since, according to what the Chancellor said during Question Time earlier this week, there is some room for manoeuvre in the Government's finances, I suggest that, at the least, this cut-back of £700,000-odd should be reinstated.

The paper goes on to propose certain increased charges. As the Minister knows, last year the charges for exhibition space were £4 per square metre. This year the figure is £6. The paper proposes that the charges should go up in three years' time to £45. I suggest that this increase is out of all proportion. It is interesting to note that a number of trade associations, particularly in the footwear and lighting industry, have checked out the full cost of the exhibitions that they attend and have found it to be considerably below £45 per square metre.

1861 The proposed discounts for new exporters participating in new joint ventures are insufficient and could make it difficult to encourage manufacturers to export. Instead of the 50 per cent. discount proposed for year 1, the consensus seems to be that it would be more sensible to have a two-thirds discount for year 1 with a one-third discount for year 2. As a marketing man, I would not necessarily expect to make a profit on my exports in year 1.

There is also considerable questioning of the standard charge both for joint ventures and British pavilions. Exhibitors on the joint ventures feel that as they incur higher costs in any case they should be charged at a lower rate.

There has also been a policy change with regard to the number of firms that should be eligible. It has been suggested that there should be a minimum of nine or 10 firms. There are a great many industries in which it is much more useful to have five or six effective companies taking part and doing a good job than it is to stick to this figure of nine or 10. I hope that we can get some extra flexibility here.

The Minister will know that his Department has had a long and detailed submission from the Ship and Boat Builders' National Federation demonstrating how the industry's exports have risen from £20 million to over £80 million in four years. The federation believes that this is mainly as a corollary—and the evidence that I have supports this—of the increased participation in joint ventures and outward missions. I pay tribute to the federation's help to me. It has certainly emphasised the importance of continued joint venture support. I quote briefly from its letter, in which it said: The British boating industry has established a regular presence overseas and should it cease to appear as a group at the foreign shows the advantage gained would be completely lost and competitors step in. In its statement to the Minister's Department the federation demonstrates in frightening detail what are the implications of the increased costs on the square metre basis. There are other, specific points, made by other chambers of commerce. They say that in their general opinion the cut-back is on too broad a basis. They suggest that there has been 1862 no in-depth analysis to single out those industries of potential, which have growth capabilities.

Amazingly, from my point of view, the cut-back does not take account of the priority industries singled out at the Chequers talks in 1975. It seems that the left hand does not tell the right hand where the priorities lie. There is also the point that the BOTB requires a commitment at least five months ahead. For some of the smaller industries it has to be longer. Most exporters feel that that length of prior commitment is unrealistic and that too often opportuniites come up too late for them to be able to apply.

Exporters also feel that the BOTB has failed to recognise the extent of rationalisation of European exhibitions in many industries. In certain industries, particularly lighting and engineering, there has been a great rationalisation of the number of exhibitions. If there is to be a 25 per cent. cut-back exporters feel that they will miss major markets.

The Minister may feel that I am being excessively critical, but I have received a long letter from the Manchester Chamber of Commerce, one of our leading chambers, saying: The Chamber values highly the work of BOTB and it is convinced that the Nation's investments in the grant aiding of missions has paid and is paying a very high rate of return in terms of the National balance of payments problem. It would, therefore, be a matter of very serious regret and concern (and indeed astonishment in the context of the Nation's economic circumstances) if any projected cut back in BOTB activities were to result in radical readjustments to the Outward Missions programmes. That view is echoed by every trade association that has written to me, by every chamber of commerce and by almost every exporter. The Government would do well to reflect on that grass-roots advice.

There has been a strong adverse reaction to the £50 charge per trade inquiry to overseas posts and there is an irritant factor about the way in which travel subsidies operate. The consensus among trade associations is that the same system should apply throughout, namely, a system based on the Outward Mission Scheme, in which a set sum is paid for a journey no matter how the individual gets there.

1863 I have always been particularly interested in the Queen's Award to Industry. It has been in existence for 12 years, with minor changes, one of the most recent of which was the inclusion of firms involved in our invisible earnings. There is still pride in winning an award, but industry and commerce are sceptical about its commercial or promotional value. The consensus that I have received is that the award is beginning to look a little tired, and needs a revamp.

Could we not involve an incentive in the award so that the winners could be given, say, free air travel by British Airways or British Caledonian? It would be in the Government's interest, perhaps by using the COI, to ask some of the major sales promotion companies in this country to pitch a presentation for a revamped award and see what ideas come forward.

On Monday, we discussed the Annan Report on the future of broadcasting. One of my regrets was that Lord Annan was not asked to review the BBC Overseas Service and, that it does not feature in the "Think Tank" review of overseas services. The BBC Overseas Service broadcasts in 21 languages as well as in English all over the world. To many it is a political lifeline. To others it is a major source of technical information on the progress of British industry. Regretfully, it is seen by the BBC to be less important than local radio and it is certainly unused by many in industry. The time has come for a thorough review of the role of the Overseas Service and particularly how it can help exporters.

The Minister will expect me to say a word about the ECGD, which continues to be a well-respected and welcome service. However, there is still criticism about the lack of flexibility of the Department in terms of its adaptation to ever-changing circumstances.

I have received specific pleas from the Royal Institution of Chartered Surveyors about the lack of understanding of consultancy services and the time taken to get reactions. The Institution and other bodies, such as the Concrete Society, would like the present £1 million contract minimum dropped to £250,000. There are also the pleas that I have received from the Fine Art Guild which, by the nature of its trade, is involved in verbal contracts. Its members feel that the Department 1864 fails to understand the nature of their problems.

I believe that the Government recognise that many contracts nowadays are on a project basis, which makes individual company cover inappropriate. There has been a better understanding of the mechanics of tender and performance bonds, but there are still instances in which the ECGD, for one reason or another, will not get involved. The result is that a company must go to its own joint stock bank. When it gives help, that bank puts it against the company's normal overdraft facilities, with the result that those facilitiese are quickly used up. I suggest urgent talks between the senior management of the ECGD and the directors of the joint stock banks to ease this problem at the highest level. There was a welcome Press release this morning from the joint stock banks about their rôle in exports.

I have had endless pleas for more favourable terms on pre-shipment finance on smaller contracts up to £100,000, with a considerable amount of detail provided by the Coventry Chamber of Commerce.

I should like to say a few words about export documentaation. I have received pleas for the removal of "T" forms for EEC trade, and pleas that EUR forms should be allowed to be lodged at any major Customs office and not the port of exportation. This would be quicker and more efficient. Incidentally, I find it surprising that the submissions that I have received include the fact that—despite our entry to the EEC, with the supposed reduction of formal documentation—the number of Customs officers at Dover, Folkestone and Newhaven has doubled since we entered the Common Market.

There has also been adverse comment about the export conferences—not so much about holding the conferences, which are very much welcomed, but the fact that exporters are asked particularly to bring along one man from the shop floor. It is difficult to see how one man from the shop floor can be particularly involved in an export conference. There should be room for flexibility. The BOTB might well wish to have one of the technical people attend, or a specialist in a particular field of exporting, as opposed to the export director. To suggest that there should be one man from the shop floor seems to me idiotic.

1865 I do not expect from the Minister this afternoon any commitment other than to have another look at the BOTB budget as a whole, and particularly at the amount of money that we are spending on joint ventures. I cannot emphasise too strongly the importance that our exporters attach to joint ventures and outward missions. The chambers of commerce have told me that they remain ready to help in any way possible to take over some of the administrative burden of running these ventures.

If the Government wish to see the volume of manufactured exports rise, as I believe they do and as we on the Opposition Benches do, they must listen to exporters and reinstate these cuts, which are not particularly large in financial terms but will have a considerable effect on future exports. If the cuts are reinstated, we can all look forward to a major expansion of our exports.

§ The Under-Secretary of State for Trade (Mr. Michael Meacher)

I welcome the opportunity provided by the hon. Member for Northampton, South (Mr. Morris) to discuss the important subject of exports and the rôle played by the Government's export services to back up the efforts of British industry. The hon. Gentleman raised a number of valuable points, and I shall try to reply to some of them in the time that is left to me.

In the three months ending April, Britain earned its first surplus on current account, taking three months together, since the summer of 1972. The surplus of £126 million in these months compares with a deficit of £565 million in the previous three months. The improvement owes much to the favourable shift in the balance of trade in oil, reflecting the build up of North Sea oil production, and the drawing down of speculative stocks amassed in advance of the recent OPEC price rise.

However, North Sea oil will not solve all our problems by any means. We need to use the breathing space that it will provide to carry through the industrial reconstruction that is required to improve our competitive edge in world markets and to maintain the thrust of our exports. That is why I value the debate today.

1866 Since 1972 the Department of Trade export services and promotional aids as no doubt the hon. Gentleman knows, have been supervised by the British Overseas Trade Board. Information about tariffs, overseas Government regulations, export opportunities and market conditions overseas are largely provided free. Modest charges are made for the Export Intelligence Service to which slightly over 7,500 exporters subscribe. Some charges are also made for help in finding agents overseas and for studies and reports on overseas firms.

I turn briefly to export credit insurance facilities. In addition to its traditional export credit insurance and finance functions, the Export Credit Guarantee Department has introduced, during the last year, several other new facilities to help exporters. The hon. Gentleman mentioned bond support. There has been considerable development in this field with performance and tender bonds, project participants insolvency cover, pre-shipment finance, and the temporary cost escalation scheme.

The hon. Gentleman hoped that there would be early and close contact between the ECGD at senior level and the management of the joint stock banks. I can assure hon. Gentleman that there is already the closest relationship on a joint basis between the ECGD and the clearing and merchant banks. Indeed, I am sure that it is felt on both sides that the relationship works well. The most recent development has been the introduction of improved cover for contracts expressed, and sometimes financed, in foreign currencies. This improved cover enables exporters to take better advantage of the benefits that may accrue from quoting prices in foreign currency and, for business carried out through medium and long-term credit, also represents important public expenditure and balance of payments benefit.

Frequently this new financial assistance takes the form of financial assistance for participation in overseas trade fairs—to which the hon. Gentleman devoted much time in his speech—and also for inward and outward missions. Financial help is also available for export marketing research. Some 340 research projects received support in 1976 and towards the pre-contractual costs of participants in 1867 large overseas projects. The BOTB also provides support from time to time for non-official trade bodies at home and abroad.

As for charges for services—on which the hon. Gentleman put such emphasis—the main part of the Government's expenditure in this field relates to the provision of a worldwide advisory service which is available to exporters through the Board's organisation at home and through overseas posts. That is provided free. However there are a number of specific services, such as joint ventures for overseas trade fairs, the Export Intelligence Service and the Agency Finding Service, where it is the Board's policy to apply a charge for a specific purpose—not just for revenue collection—in order to ensure that the services are responsibly used and that waste is minimised. At the same time it helps to ensure that the services are carefully tailored to the real needs of exporters.

It is a fair point that if services are not used, that is the best indication that we have of a need for change. The considered opinion of the Board—and I naturally agree—is that the charge is a healthy way of ensuring that both the users and the providers of the service are kept constantly on their toes.

We need to keep this in proportion. Even with the proposed increases that the Board is considering—and I must emphasise that, as I am sure the hon. Member appreciates, the decision has not yet been taken and will not be taken for some time because we have just issued the consultation paper—the charges are extremely modest in relation to the cost of providing the service. For example, the amount recovered through charges on the cost of mounting joint ventures at overseas trade fairs is currently 8—per cent. If the charging proposals currently under consideration by the Board were implemented, this would be increased next year to only about 15 per cent. That is taking account of the special provisions for newcomers.

Discrimination between different industrial sectors, to which the hon. Gentleman referred, would be inappropriate. It would disadvantage certain sectors as against others on the basis of no obvious rationale. Clearly it would be of help to the 30 or 40 key sectors in the industrial 1868 strategy, but sectors outside would justifiably ask why they were being discriminated against.

The hon. Gentleman mentioned many details—I propose to cover only a few—about what industry believes to be the projected effects of the proposed increases in charges. I welcome the initiative that he has taken. I hope that he will let us have the information in full so that we can consider it in the Department and pass it on for full consideration by the BOTB.

The close association of the Diplomatic Service posts overseas, the regional offices of the Department of Industry, the commercial relations and exports divisions of the Department of Trade, the Central Office of Information and the Export Credits Guarantee Department at home provide these wide-ranging services which have generally been applauded by their users.

It is difficult to measure their value in objective terms. The best measure is the extent of their use. The overall workload increased by 34 per cent. in 1976 over 1972. Export House and regional offices sent out nearly a quarter of a million letters, telexes and cables in 1976, about 10,000 visits were made to firms and 6,500 visits were received from firms. Overseas more than 50,000 British business visitors called on Posts. The Export Credits Guarantee Department now covers 38 per cent. of British exports.

That gives an indication of the increasing and considerable use that is made of the service. I am not at all complacent. Improvements can be made, and we wish to make them so far as we can within the public expenditure constraints which face us. The record has by and large been good.

The overall cost of Government resources allocated to export promotion, excluding ECGD, was estimated at about £58 million net in 1976–77. Although the BOTB agreed that it should make a contribution to the Government's programme to reduce public expenditure and Civil Service manpower from 1977–78, it has been possible to arrange cuts—the cuts on the direct budget of £19 million are less than £750,000, so we should get that in proportion—mostly at the margin of its services, and deliberately so. Some 1869 pruning and economies have been made in the operation of basic services.

It has been necessary to make some reductions in a number of less important participations in overseas trade fairs planned for 1977–78. There have been consultations on the revised programme with sponsoring organisations to ensure that the cuts—