§ 5.2 p.m.
§ Order of the Day for the Second Reading read.
§ LORD CHORLEY
My Lords, I beg to move that this Bill be read a second time. The broad purpose of the Bill is to increase the Board of Trade guarantee under the Export Guarantee Act, 1945, from £200,000,000 to £300,000,000. I do not think I need take up a great deal of your Lordships' time in explaining the Bill. The safeguarding of the position of concerns exporting from this country to overseas markets by means of guaranteeing the purchase price at which they sell their goods, of course goes back to the early years of the inter-war period. It is an important and happy instance of the co-operation between the State and business, which I think has just as much support on the other side of the House as on this. Experience of this method has been happy and successful. The intention is not only to guarantee an exporter against the insolvency of his business opposite number over the water but also, what is perhaps more important in practice (because a sound business man 886 usually does not make mistakes as to the sort of man with whom he is dealing), it covers the very great difficulties which continually arise over exchange matters and from the threats of war.
As I think your Lordships know the Fund is administered on behalf of the Board of Trade by the Export Credits Guarantee Department, and its great value in practice has been amply evidenced by the rapidly increasing use which has been made of it over the years during which it has been in operation. Your Lordships may like me to give a few figures to illustrate that increase. During the three years before the war, the average amount guaranteed was not more than £43,000,000 per annum. Your Lordships may well say that that is a substantial sum, and it certainly was a substantial sum compared with the amount which was being guaranteed during the 1920's. In the difficult situation of the post-war years, however, the exporters have obviously felt that this was a most substantial safeguard to them, because in 1945 the figure immediately rose to £72,000,000; in 1946 to £138,500,000; and in 1947 to as much as £186,000,000, which, as your Lordships will see, was within £14,000,000 of the ceiling fixed by the Act of 1946. Already this year the amount is running at £170,000,000; therefore it is important that the ceiling should be raised as rapidly as possible to the £300,000,000, which, is the figure given in the Bill.
My Lords, that is the main aspect of the Bill. There are under the Act of 1945 three subsidiary guarantees, which perhaps I ought briefly to mention. Only two of those subsidiary guarantees are affected by the Bill which is before your Lordships' House this afternoon. In the first place, there is the £5,000,000 for transactions which are conducive to foreign trade, which amount we are asking should be raised to £15,000,000. This is a type of subsidiary guarantee which is intended to enable business firms in this country to export, let us say, brains, by sending consulting engineers or other people to arrange new business in different parts of the world—a valuable source of foreign exchange earnings. But of course one has to be quite sure that, if one sends out to some foreign country in that way a highly technical and valuable staff, they will, in fact, be paid, and that 887 the necessary commission and so on will be forthcoming. Therefore this provision is made. Considerable use has been made of this guarantee and it is felt that £15,000,000 will be a satisfactory sum to fix for the future. Then we ask for the sum of £15,000,000 which exists for what is called "external trade," to be raised to £30,000,000. This is trade which may be conducted from this country but is between foreign countries. The goods are not actually exported from here but the arrangements for their manufacture in some other country are made from this country, and then they are exported from one foreign country to the other. In that way substantial earnings may accrue to business houses here. There again, of course, it is particularly important that there should be a guarantee that remuneration will be forthcoming, and we think that the figure of £15,000,000 should be increased to the amount which I have mentioned.
Finally, your Lordships may like to be reminded that although this scheme, or what is substantially this scheme, has been in existence now for over twenty-five years, no loss in this connection has fallen upon the taxpayer. I am sure your Lordships will agree that that is a happy and valuable outcome. I am not suggesting that there have been no losses. The scheme was particularly valuable when the war came. Then many business men found that they could not obtain payment, and substantial sums were paid out under the scheme by the Board of Trade. Nevertheless, in spite of all that, there has, in fact, been a margin of 3 per cent. I am not suggesting that the years that are to come will not be difficult, because the sellers' market is beginning to disappear and the buyers' market to take its place, and obviously in such conditions trade will be more difficult and risks will be greater. Nevertheless, I am sure that in the light of all these circumstances your Lordships will feel that this is a valuable measure, and will give it your support. I beg to move.
§ Moved, That this Bill be now read 2a.—(Lord Chorley.)
§ 5.10 p.m.
§ VISCOUNT BRIDGEMAN
My Lords, I am sure that my noble friends on this side of the House will agree with almost 888 everything that the noble Lord, Lord Chorley, has said in moving the Second Reading of this Bill. We on these Benches welcome the Bill, and we feel that it will need no amendment by us. As the noble Lord has said, it makes no change in the general plan for export I credits and its purpose is solely to make certain that the fullest possible use can be made of the scheme. It is occasioned by the increasing extent to which advantage is being taken by exporters and merchants in this country of the facilities afforded by the scheme. It is a great tribute to the working of the export credit scheme that such an increasing use is being made of it. I have only one doubt in my mind, and that is whether the ceilings now proposed by this Bill will not soon be outrun by the use which is made of the scheme. But we can wait for that trouble to happen; we need not go half-way to meet it. If such trouble does come along, we shall be only too glad to support a further similar Bill in your Lordships' House.
It is true that in these days it is virtually impossible for any merchant or exporter to do business with a number of foreign countries without recourse to the export credit scheme. It is not merely a question of commercial risks. British merchants and exporters have always been ready to take those, and they will always be ready to take them on proper occasions. But, as Lord Chorley has said. there are so many risks which are entirely out of the control of any business undertaking—as for example, risks associated with wars, and the likelihood of wars, import and export licences and sudden changes and restrictions—not so much in this country as in foreign countries. In the case of foreign countries one may suddenly find at any time that import licences have been put on or taken off. Then there are all the hazards of managed currencies and exchanges, and the diversion of goods—particularly of raw materials. I could give a long list of risks of this sort. They all go far beyond ordinary commercial risks, and they are, in many cases, risks which no reasonable business person could meet unless he could have recourse to this scheme.
We have had this scheme, I think, since 1919. Ever since then, increasing use has been made of it. The fact that this Bill is before your Lordships, providing for increased facilities, indicates the efficiency 889 and popularity of the Export Credits Guarantee Department, which is well known and recognised, if I may say so, not only in the City of London but in every other quarter of the business world. I am very glad to have the opportunity of paying tribute from these Benches to the work of the officials of that Department. In these days of so many controls and restrictions, it is remarkable that the working of a very complicated scheme like this should be so smooth, for its working does not involve only the Export Credits Guarantee Department. It involves also the Board of Trade, the Treasury, the Bank of England, and other concerns whose agreement has to be obtained, to a greater or less degree, to any export transaction. It would be perfectly possible if that work were not efficiently done for the whole of the procedure to have a bad name in the City, whereas its reputation, in fact, is of the highest.
I will finish by making one slightly more political remark. Here is a Bill extending a scheme which, over twenty years, has shown the proper way in which the Government should stand behind private enterprise. It is a shining example of the correct use of Government influence in commercial affairs—in marked contrast, perhaps, to other schemes which I could mention but which, for the sake of brevity, I will refrain from mentioning. For these reasons, I and my friends on these Benches warmly support the Second Reading of this Bill.
§ 5.16 p.m.
§ LORD BARNBY
My Lords, there is little doubt that unanimous assent will be given by your Lordships' House to the Motion for the Second Reading of this Bill. Equally, there is little doubt of the benefit that this scheme has extended to industry and commerce. It is well that the House should be reminded that these facilities were first instituted by my noble friend Lord Swinton, when he was President of the Board of Trade, as the outcome of the recommendations of a Committee which he appointed to examine this matter. I would ask the indulgence of your Lordships' House for adding that I was one of the original members appointed to the Committee by my noble friend. It will be understood, therefore, that I have watched with interest ever since the developments of this scheme.
890 Without wishing to introduce a controversial note, I cannot refrain from adding a word to what my noble friend Lord Bridgeman has just said. I read in the Report of the proceedings in another place that the President of the Board of Trade, in introducing this Bill, laid emphasis on the fact that it was "an incursion on the part of the State into the insurance field." and represented "a most successful and little publicised piece of public enterprise." In these days, when it is popular to represent that all forms of business activity are best carried out by public ownership or public activity, the implication cannot be allowed to pass without note—namely, that here is something greatly to the credit of State initiative. The noble Lord, Lord Chorley, in introducing this Bill has not echoed the sort of note which was struck by the President of the Board of Trade. I think it is fitting to remind the House that here is an enterprise, the main purpose of which is to assume political hazard as against the commercial hazard which private enterprise is organised to take. The President of the Board of Trade, in introducing the measure, reported that 90 per cent. of the total guarantees under division (1) represented raw materials. Therefore, only 10 per cent. represents capital goods—a surprisingly low proportion.
There is one technical point which I would raise, though I do not wish to detain your Lordships with technicalities. It is with regard to Clause 1 (1) (c) of the Bill which deals with what is described as external trade. This aims at achieving the movement of merchandise under British initiative from one part of the world to another, outside the confines of the United Kingdom. That in itself is excellent. As we are approaching the time when trade will become more difficult, and we may expect a downward movement of prices rather than the reverse, and so an inclination of purchasers to evade their contracts, it would be worth while for the Department to consider that a purchaser should make a cash deposit at the initiation of a transaction. Where such deposits are made, instead (as is customary) of limiting cover to an agreed percentage below tie 100 per cent. value of the invoice, the Department should give a much higher percentage—perhaps nearly 100 per cent. cover of the balance where an appreciable deposit has been made. Apart from that point, I support 891 what this Bill proposes and would echo the tributes rightly paid to the officers of the Department on their sympathetic and prompt attention to applications.
§ LORD CHORLEY
My Lords, I thank noble Lords for the support they have given to this Bill. The suggestion made by the noble Lord, Lord Barnby, I will bring to the notice of my honourable friend. I am very glad that both noble Lords who have spoken agree that this little bit of socialised insurance has redounded to the credit of the Government and has been of the greatest value to commerce. Finally, I should like warmly to associate myself with the warm tribute which the noble Viscount paid to the work of the Export Credits Guarantee Department and to those officials associated with it. As he says, their work is uniformly esteemed by those business people who come into contact with them. At a time when so much scorn is poured on officials—almost always unmerited scorn—I am glad indeed that such a eulogy has been paid to them.
§ On Question, Bill read 2a; Committee negatived.