§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Archie Hamilton.]
2.37 pm§ Mr. Michael Morris (Northampton, South)This debate is, in a sense, round three in the Conservative Back Benchers' attempt to kill off the Byatt report and to persuade the Secretary of State for Trade and Industry to get his act together and produce an export strategy. Rounds one and two went to my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) and my right hon. Friend the Member for Waveney (Mr. Prior). As luck would have it, the timing of the debate may prove to be particularly apposite because the topic of the Government's help to exporters is reported to be on the Cabinet agenda, and at the beginning of the week we had the announcement of 200,000 new training places for our young people, which was particularly welcome. I should like a good number of those 200,000 young people to be in manufacturing industry and helping to improve our exports.
Seventeen years ago, before I came to the House, I wrote a pamphlet for the Bow Group, called "Helping the Exporter". Not a lot has changed since then, I am sorry to report. In that pamphlet we recommended changes in finance, targeting and organisation. As my hon. Friend the Minister knows, I have worked in the far east and I now regurlarly visit south-east Asia, my last visit, which was in January, being to Sri Lanka and Indonesia, with a brief stop-over in Malaysia.
I have seen business at the sharp end and I have the utmost praise for our people both in the private sector and in the diplomatic service. They all do a fantastic job in the steaming heat of the east. They have to contend with competition from France, Germany, Korea and Japan. The tragedy is that when they return home they seem to have to engage in endless hours of negotiation with the British Government.
The record of our three leading competitors gives a clear picture of what we are up against. In 1983 our aid programme was less than half that of France, Germany or Japan. We tied 54 per cent. of our aid to British manufactures while Japan tied 64 per cent., Germany 66 per cent. and France no less than 82 per cent. to their manufactures.
For years, we have believed in direct grants. Our competitors have sold on the basis of soft loans, thus making the money go further. We are very slow to learn. For example, our mission in Indonesia reported nine months ago that the Indonesian Government would accept only soft loans and not grant aid. We insisted on trying to put together a package of grant-aided work and lost the power project for which we were pitching. We have only just begun to respond to that clear message from the Indonesian Government. I hope and trust that Minister Habibi of Indonesia will be made especially welcome when he visits this country next week.
Our overall budget for soft loans is currently £66 million. I believe that China alone warrants £100 million. That is the kind of amount that our competitors are directing to that market. Against our £66 million, France and Germany have more than $1 billion available for soft loans and Japan has $2.5 billion. The contrast between those figures would be laughable if it were not so serious.
697 Why do we always have to match our competitors? Why cannot we take the initiative for once and go for the business? I do not blame the Overseas Development Administration for that. It is not the ODA's area of expertise. It should be a function of the Department of Trade and Industry and the budget should be controlled by that Department.
The evidence given by the Export Credits Guarantee Department to the Public Accounts Committee, of which I am a member, suggested that management were being asked to achieve the impossible. They were told that they had to break even and to pay off old debt and yet be competitive with foreigners when interest rates in this country were at an all time high. I acknowledge that there is now a consensus rate but not everyone abides by it, especially for capital projects. When the ECGD increases its premium rate to particular countries—for example, Thailand, which is a category B market and thus has a good credit rating—the countries concerned may regard it as a slight. I doubt whether MITI, the Japanese equivalent or COFACE, the French equivalent, have to go through the procedures that beset the ECGD.
As for the British Overseas Trade Board, what other country would cut its main promotional arm just when it is achieving success? The Government may say that a 2 per cent. real cut is not a great deal, but converted to Singapore dollars when exchange rates are moving it becomes a great deal more significant.
Perhaps I might relate the sorry tale of a small exporter in Nether Heyford in my constituency. This chap was unemployed but set up business on his own. His company, Petalgold Ltd., provides golf equipment. Golf happens to be one of my hobbies, but the Japanese love their golf. My constituent showed initiative and exhibited in the sports show in Japan in 1985 and collected orders to the tune of just over £30,000. He applied to go on the 1986 fair and was told that it had been cancelled. We shall never succeed if we approach the matter on a one year in, one year out basis.
My hon. Friend the Minister has been helpful to the footwear industry. It is a difficult industry as it comprises many small firms. It normally shows at six trade fairs but, because of the cut in the British Overseas Trade Board, it has been told that it can show at only three. That is not fair treatment and it does not help British exporters.
Some people say that we cannot afford more, but I am a member of the Public Accounts Committee which investigates twice a week what has happened to public money. We have seen huge losses and examples of misspent money. We have received evidence about big crashes such as De Lorean, and await detail about medium-sized losses such as Lear Fan and unknown losses such as the Sinclair C5 vehicle. There are dozens of examples of public money going down the drain, a significant amount of it having come from the Department of Trade and Industry.
People in high places tell me that civil engineering contracts produce little benefit to the United Kingdom. I have asked for some detailed figures on a contract that arose out of some discussions that I had in Indonesia in January—the Marika Hydra project. It is a joint British-Swedish project. Its value is £321 million, of which the United Kingdom's share is £175 million. It falls into five categories—civil engineering of £108 million, of which 698 the direct UK content is £75 million, mechanical and electricals of £51.5 million, of which the UK content is £44.6 million, design of £5 million, of which the United Kingdom content is £4.9 million, supervision of £6.5 million, which is all to the UK, and third-country purchases of £2 million. That produces a total UK content of £131 million out of £173 million—a ratio of 70:30. It will create employment in the UK but, on 13 May, my right hon. Friend the Chancellor wrote to the chairman of Heavy Electrical Machinery saying that, despite further evidence that that body had sent to the Chancellor about the benefit of follow-on orders, he had
asked my officials to study further the details you have presented but I fear my immediate reaction is that your evidence contains nothing to alter the approach we have adopted since the preparation of the Byatt report in 1982.That response is not adequate.The Treasury is bad, but the Department of Trade and Industry has also been dilatory since 1979. I dropped in on Sri Lanka in January and discussed the Samanala Wewa project. I raised the issue with the Foreign Office 18 months ago and again in January. The Prime Minister discussed it when she was in Sri Lanka and armed with detailed figures 12 weeks ago. There has still been no decision.
There might be people in high places who think that companies such as Balfour Beatty get an unfair share of ATP, but they are the companies with get up and go. Contracts are too often lost because that element is missing. They are also lost because of lack of funding. It is not enough to have the right goods in the right place at the right time. Hawker Siddeley has given evidence to the Department concerning five contracts that it has missed. I just hope that the Samanala Wewa project does not go the same way.
I realise that my hon. Friend will be restricted, not least as his right hon. Friend the Minister for Trade is away in south-east Asia. Normally, I would have fulsome praise for the activities of my right hon. Friend, but I cannot help but reflect that Ramadan has just finished, that there is now the "Eid" festival in that part of the world, and that trying to sell in south-east Asia now is like trying to sell in London during the Christmas recess.
It is time that the Government got their act together in areas such as south-east Asia. We need to recognise and understand the legitimate aspirations of the Association of South-East Asian Nations, and that quantum leaps in technology are being made in Indonesia and Malaysia. We must recognise the sheer size of trade with Singapore. As long as we have a system of five different decision-making bodies — the Department of Trade and Industry, the Treasury, the ODA, the Foreign Office and ECGD—we shall fail. We need to be single-minded.
We should set up, perhaps on a trial basis and perhaps just in south-east Asia, the post of trade commissioner for the region. The concept was originally used in the old Board of Trade, and it could be developed. I can envisage a senior man aged about 50, supported by an assistant and a secretary, at a cost of about £250,000. He or she, experienced in trade, could be responsible for establishing a strategy in a region and ensuring its implementation.
My hon. Friend has been tolerant, as always, and I hope that he will show a degree of understanding. I end with a quotation taken from a publication that I shall refer to shortly. It says: 699
The Malayan market—great potentialities for British trade and manufacturers—it is the key position which if held and consolidated will ensure for the future a dominant position for British Commerce and Manufacture".The source of the quotation is "The Crown Colonist" and the date is April 1931. Does nothing change in Britain?
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)The short answer is yes, it does. I hope to give my hon. Friend the Member for Northampton, South (Mr. Morris), who has great expertise and enthusiasm in export matters, some reassurance that the Government are flexible in their approach to these questions, and that we are anxious to do whatever we can, within our budgetary constraints, to help to improve the performance of our exporters.
Before dealing with the specific points of my hon. Friend's speech, I should like to put it to him that we are talking today about a job creation programme. Much attention is being focused, within our national political debate, on the need to create more jobs in the United Kingdom, and I put it to the House that there is one job creation programme that has been singularly undiscussed over the past few months and years. It is that number of jobs which can be created by increasing our share of world trade.
We are told that the United Kingdom had about a 14 per cent. share of world trade in manufactures, goods and services in 1964, but by 1978 our share had gone down to 8 per cent. Each 1 per cent. represents a loss of about 250,000 jobs. Therefore, it can be argued that in a job loss programme during that period we exported 1.5 million British jobs. The Department of Trade and Industry and my hon. Friend have a common cause and should combine in trying to achieve one objective. We should recognise that the biggest job creation programme on which the United Kingdom can embark is that programme which, through increases in competitiveness, can help us to import back into the United Kingdom those 1.5 million British jobs. When the Government go on and on about competitiveness, they do so on the basis of a job creation programme.
My hon. Friend said that his remarks were topical. They are very topical in the political context. One of the more regrettable and unfortunate problems of timetabling in the House is that we have not had time in recent months to discuss this very important job creation programme.
I am grateful to my hon. Friend for raising this subject. Exporting and increasing our percentage of world trade are vital parts of the nation's economic activity. I know that, like my hon. Friend, many representatives of industry are concerned about the changes to some of the export services that are supervised by the British Overseas Trade Board. The debate provides the opportunity to reaffirm that the Government remain committed to a programme of export support and to explain clearly our policy approach.
Government support for exporters takes three main forms. The first comprises the export services under the guidance of the BOTB, and that is the area on which a major part of our debate is focused. The BOTB services offer a wide range of support. Some provide information; others, such as the trade fair and mission programmes, provide practical and financial help for companies seeking to establish themselves in overseas markets; others provide help in rather specialised areas such as foreign technical requirements and export documentation.
700 The other principal forms of Government support, which must not be forgotten, are the aid and trade provisions to which my hon. Friend referred and other support for major projects, along with the services of the Export Credits Guarantee Department.
Let me spell out the main objectives and policies of the export promotion programme under the guidance of the BOTB. The main objective is to use the resources to stimulate additional exports — a point which is sometimes lost on some of the Department's client companies — which are exports that would not have come about without the export services and assistance offered by the Department and the BOTB.
A further aim is to cut the cost of breaking into new markets by providing companies with certain information and technical services that are most efficiently provided centrally and using the unique resources available to Government. The services are basically available to all companies and cover all overseas markets. We do not want to say, "Whitehall knows best where a firm should sell its goods or services." However, to be cost-effective, we must achieve some selectivity by type of firm, by market and by concentrating on the period when help is most needed. For example, there is, to a large extent, concentration on small and medium-sized firms.
Trade fair support is particularly attractive to smaller firms and nearly three quarters of users have fewer than 200 employees. It is also more effective to concentrate support on newcomers to markets, in the belief that, once companies are established in markets, the operation should not need a continuing subsidy from public funds.
My hon. Friend mentioned the example of a new, young and vigorous company going to Japan, taking part in a trade fair, but not being able to follow that up with a second visit. I understand that, although we have to look carefully at those who may make more than the number of visits that our budget can bear, our limit, which is interpreted fairly loosely, of about four visits comes close to satisfying our objective of giving firms a sufficient initial boost to allow them to work under their own devices and finances subsequently.
I have already said that some activities are more efficiently carried out centrally to exploit, for example, the unique information and assistance network provided by the commercial sections of our embassies and high commissions abroad. We aim not to compete with the private sector but to operate in other areas to achieve our objectives. For example, much of the detailed operation of the trade fair and mission programmes is handled by chambers of commerce and trade associations. Where export market research is needed, we contribute to the costs of professional research by the private sector. The Foreign and Commonwealth Office overseas posts are encouraged to make as much use as possible of banks, local chambers of commerce and British business groups.
On the question of organisation, when my right hon. Friend the Minister for Trade returns to the United Kingdom I will draw his attention to the appropriate section in Hansard in which my hon. Friend described his interesting idea about regional trade commissioners. My hon. Friend will not expect me to give an instant answer to that proposal. Although the idea has been expressed before, it is certainly worth putting to my right hon. Friend, who will undoubtedly wish to reply at an opportune moment.
701 By way of emphasising the importance of the various forms of support, I wish to say that, given the rapid improvement in our performance as exporters, it is correct for the Government to see where they can best help those who most need help in this period of general improvement. It is surely correct for us to assess the targeting of our aid and its efficacy, and to take what we may discover from the monitoring of our measures and put it into any amendments we may wish to make in future.
In that regard, I shall now turn to soft loans, with which my hon. Friend dealt at some length, and aid and trade provision. The Government recognise that some countries may prefer loans to grants supplemented by export credits. We are discussing with the financial community what mechanisms might be devised for providing soft loans. I assure my hon. Friend that we are taking top flight advice from the City. We may wish to determine the role that the banks or capital markets can play in providing the funds that may be necessary, as already happens with ECGD-backed contracts, thereby reducing calls on public expenditure. As ever, there is a place for the private and public sectors to work in partnership. I can tell my hon. Friend that ATP support is now available for China, but at present only in the usual ATP grant form. Moreover, the funds available are limited within the present ATP provision.
On ECGD, my hon. Friend pointed out the risk of offending some nations if the league table, in terms of the classification of cover proffered, is presented clumsily. That is a serious point for the Department of Trade and Industry to consider, and I shall certainly draw it to my right hon. Friend's attention. It is a perfectly worthy point for my hon. Friend to make, as he is interested only in defending the interests of British exporters who may feel offended by downgrading or the proclamation of second division status. We shall certainly study that.
Let me stress that the Government have twin objectives. They are firmly committed both to promoting United Kingdom project interests, and to the need for greater international restraint and openness in the use of soft finance. The latter is inevitably a long-term objective. We recognise that in the meantime British companies pursuing project business on the international market must be protected against the practices of other Governments in softening the terms of finance. The projects and export 702 policy division of the Department of Trade and Industry was set up with the specific purpose of focusing Government support for firms seeking worthwhile project business overseas. The main instruments of financial support in addition to the ATP are ECGD's fixed rate export finance scheme, and the overseas projects fund from which support can be provided on a repayable basis towards certain pre-contractual costs.
I began my speech by describing why improvement in our foreign trade performance is important for job creation. May I put on the record some data that have been scandalously under-reported during the past few weeks? Exports of goods and services were the fastest-growing component of United Kingdom output in 1984, together with fixed investment. They are forecast to continue to grow strongly in 1985. Exports of non-oil goods and manufactures—this is an area of current interest to the House—reached all-time highs in volume terms in the first few months of this year. Excluding oil and erratic items, the volume growth for exports of manufactures in 1984 was 10.5 per cent., and for the three months to May the volume was 11 per cent. up on the comparable period last year. Incidentally, on the same basis, the volume of imports has increased by only 5 per cent.
The House will agree that it would be helpful if those who comment on the trade figures pointed out that these dramatic figures are probably the biggest increases for 10 years. Of course, exporters have achieved those impressive figures, not the Government. Government support measures can contribute on the margin, and I should stress that our contribution is still useful, especially in helping small firms. Recent studies to examine the impact of several BOTB services suggest that companies using them in one year will win additional export business of more than £2 billion.
I have every reason to conclude on a positive note. I agree with my hon. Friend that increasing our share of world trade will help us to embark on the best possible job creation programme. I welcome my hon. Friend's positive suggestions. If he believes that there are some points to which I have not responded comprehensively this afternoon, I am sure that my right hon. Friend the Minister for Trade will get in touch with him when he returns to the United Kingdom.
§ Question put and agreed to.
§ Adjourned accordingly at six minutes past Three o' clock.