Lords Sitting of 24 February 1949

Preamble
The House met at four of the clock, The VISCOUNT SIMON on the Woolsack.
Prayers
The Lord Palmer—Sat first in Parliament after the death of his father.
TYNE IMPROVEMENT BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

EXPORT GUARANTEES BILL
4.5 p.m.
Order of the Day for the Second Reading read.
LORD LUCAS OF CHILWORTH: My Lords, I am asking your Lordships to give a Second Reading to this Bill at a time when we have passed another milestone along the road to this country's economic emancipation, and when the United Kingdom is in sight of a balance between total overseas payments and receipts. The value of United Kingdom exports in January was £159,200,000, which is £13,500,000 more than in December, and £12,000,000 above the previous highest figure, recorded in November. This is easily the highest figure by value that we have ever reached. In terms of volume, exports in January have been provisionally estimated to be 162 per cent. of the pre-war year of 1938. This compares with 149 per cent. in November, the previous highest figure, and 148 per cent. in December. That growing volume is the first reason why I am asking your Lordships to give a Second Reading to this Bill. My second reason is perhaps even more important. We are moving into a buyers' market, which will be a highly competitive market, and it is anticipated that the Export Credits Guarantee Department, great as their service has been in the past, will have to answer still further and heavier calls, not only from the approximately 2,500 manufacturers and exporters who are at the present time availing themselves of the services of this Department, but also from the increasing
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number of small traders who are adventuring into the export market for the first time.
I think it would be for the convenience of your Lordships' House if I briefly sketched how the Department operates at the present moment Under the Export Guarantees Acts of 1939, 1945 and 1948, the Export Credits Guarantee Department are empowered to grant commercial guarantees after consultation with an Advisory Council and where that Council considers that there is a reasonable commercial basis for offering such guarantees. The Overseas Trade Guarantees Act, 1939, empowers the Department to give special guarantees without consultation with the Advisory Council, because the guarantees relate to transactions which would not normally be accepted by the Council as reasonable commercial propositions but which, in the national interest, it is considered desirable to support by the aid of guarantees. The present financial limits of liability for "commercial" guarantees are an aggregate of £300,000,000; with subsidiary limits (within the aggregate limit) of £30,000,000 for external trade, £15,000,000 for re-exports and £15,000,000 for "other matters connected with the export trade." For "special" guarantees—that is, guarantees which are allowed in the national interest—there is an aggregate limit of £60,000,000, and a subsidiary limit of £6,000,000, again within that aggregate limit, for other than "home-produced" goods. That, briefly, is the structure of the Export Guarantees Department at the present moment.
Clause 1 of the Bill broadens the whole basis on which this Department work so as to give them proper scope to encourage all exports, whether visible or invisible, which will help to add to our earnings from abroad. In this it differs from existing powers under which guarantees may be given only in connection with the export of goods from the United Kingdom, and with the sale by United Kingdom merchants of goods produced in one country abroad and sold to another. Under this Bill it will be possible to give guaranties for any transaction which, in the opinion of the Board of Trade, will encourage trade with, and result in earnings from, places outside the United Kingdom. The Bill will also enable guarantees to be given, if necessary, in connection with the sale of

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"brains"—that is, a technical service—as distinct from the sale of goods; the use on a rental basis of a United Kingdom contractor's own equipment in connection with the erection of engineering works abroad, and for the financing of overseas sales agencies or the holding of stocks either abroad or in the United Kingdom in anticipation of sales to desirable countries.
Clause 1 (4) of the Bill raises from £300,000,000 to £500,000,000 the maximum aggregate amount of liability which may be undertaken in respect of "commercial" guarantees. The amount of this liability has grown rapidly with the increase of business. During the last year, from a maximum liability at the end of December, 1947, of £123,600,000, it has grown to a liability in December, 1948, of £224,500,000. These maximum liability figures are an aggregation of the estimated outstanding commitments in respect of current guarantees, offers of guarantees awaiting acceptance, Guarantee Agreements with foreign Governments, plus net payments under guarantees already made. In seeking the increase to £500,000,000 for the maximum liability, provision is being made for further business arising from the increase in the value of our foreign trade which, as I have already told your Lordships, is an encouraging fact, and of the increased use which traders may be expected to make of the Department's facilities, especially as the sellers' market wanes—which again I have already stated, is something which must be anticipated.
It is not proposed to renew the subsidiary limits to which I have already referred and which are contained in the present enactments, as the main purpose of the Bill is to encourage the maximum earnings from overseas trade in all its aspects, without limitation in respect of any particular branch of trade. Close collaboration will, however, be maintained by the Export Credits Guarantee Department with the Board of Trade, to ensure that the effect of assisting transactions in goods of overseas manufacture which might compete with United Kingdom-produced goods is fully taken into account. As I have already mentioned, the Department's "commercial" guarantees are given after consultation with the Export Guarantees Advisory Council, which is constituted by the Board of
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Trade under Section 1 of the Export Guarantees Act, 1939. The Council includes representatives of banking, industry and organised labour and the members are normally appointed for a period of three years.
The Export Guarantees Acts of 1939 and 1945 provide that all expenses incurred, including payments under the guarantees and the administrative expenditure, shall be defrayed out of moneys provided by Parliament. In practice, however, the amount which Parliament is asked to vote is normally a token sum of £100. The receipts from premiums brought to account as Appropriations in Aid of the Vote, taking one year with another, have been sufficient to meet the Department's expenditure on claims and administration; and over the twenty-eight years since the guarantees were first given no charge whatsoever has fallen on the Exchequer.
The accounts of the Department's commercial transactions are published yearly in the annual volume of Trading Accounts and Balance Sheets issued by His Majesty's Stationery Office. The latest account issued is that for the year ended March 31, 1947, but the accounts for the year ended March 31, 1948, about to be published, show that there was a reserve of over £4,000,000 to meet future liabilities. The reserve at present available to meet future losses stands at about £6,000,000, or about 3½ per cent. of the Department's liability of approximately £163,000,000 on guarantees actually given (that is, excluding guarantees offered but not taken up which are included in the previous figure I gave to your Lordships, namely, £224,500,000). Although the Export Guarantees Act of 1939, Section 7 (1), requires the preparation of trading accounts, this provision has been omitted from this Bill, it having been agreed to be unnecessary because the Treasury have standing powers under the Exchequer and Audit Department Act of 1921, Section 5, to direct any Department to prepare such accounts, and the Treasury have, in fact, directed the preparation and publication of trading accounts for "commercial" guarantee business.
I now come to that part of the Bill which deals with "special" guarantees. Clause 2 continues the powers given by

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the Overseas Trade Guarantees Act, 1939, for the giving of guarantees in the national interest. These guarantees relate to transactions which are not of a normal commercial character, and consultation with the Advisory Council is therefore not necessary. Between 1939 and 1941 the guarantees, in the main, were given in order to facilitate the purchase of arms by, and thus strengthen the resistance of, certain European countries against possible German aggression. In all, guarantees given under the Overseas Trade Guarantees Act in those years totalled to about £16,000,000, of which about £1,500,000 is in default, the countries concerned being Greece, £295,000, and Roumania, £1,242,000. Amounts owing by other countries but not yet due for repayment total to a little over £2,000,000.
Although, in existing conditions, guarantees of transactions of this particular nature may not be required, there is even more need than in the past for special guarantee facilities in order to encourage trade with many countries, the risks (political or otherwise) in connection with which could not be regarded as commercially insurable and could not, therefore, be accepted under Clause 1 of the Bill. The type of transaction for which these special guarantees might be given in future are, first, "fixed price" contracts for capital goods requiring a very lengthly period of manufacture, for which the United Kingdom exporter desires cover against possible substantial increases in the price of materials and cost of labour between the time of signing a contract and the delivery of the finished goods to the overseas purchaser. Then again, there are special transactions of perhaps rather an unorthodox character which might lead to increased exports to most desirable countries, such as, for example, Canada and the United States of America. There are also possible credits to countries, again, for example, in Europe, to facilitate the conclusion of trading arrangements or for other purposes but for which the risks might not be considered commercially acceptable to the Export Credits Guarantee Department or its Advisory Council.
VISCOUNT SWINTON: May I ask whether Russia is included?
LORD LUCAS OF CHILWORTH: If the noble Viscount includes Russia as an Eastern European country, it is.
VISCOUNT SWINTON: Are these increased facilities being asked for in order to give larger credits to Russia and her satellite States?
LORD LUCAS OF CHILWORTH: When I have finished, the noble Viscount will have the answer to that question. If I have not supplied it, I shall be only too happy to supply it then.
An example of this latter type of credit, which was given in 1946 under the Overseas Trade Guarantees Act, was that for £1,500,000 to enable Austria to purchase wool from the United Kingdom and other Empire sources. Clause 2, subsection (2), provides for an increase from £60,000,000 to £100,000,000 in the maximum liability which may be assumed for these "special" guarantees. In the present difficult world conditions and in view of the imperative need for encouraging by all possible means trade with hard currency countries and also with certain countries capable of supplying the United Kingdom with food and other essential goods, where there is a risk which may not be necessarily a commercial one, it is necessary to have latitude to give guarantees which though possibly involving risks not commercially insurable, must nevertheless be taken in the general interests of the United Kingdom. It is felt that not less than £100,000,000 should be earmarked for this purpose.
With your Lordships' permission, perhaps I might be allowed to explain this a little more fully. The Advisory Council may be prepared to recommend guarantees for business with a particular country up to £x million, but no more. To fulfil some of the trade agreements recently concluded, it may be necessary to ship goods considerably in excess of that figure, in which event the excess would have to be taken under Clause 2 of the Bill, which provides for "special" guarantees. Under some of the trade agreements recently concluded, for example, with a number of countries in Eastern Europe—and here I might say that, if it had not been for the facilities of the Export Credits Guarantee Department, these agreements could never have been concluded—a considerable quantity of capital goods will be exported against

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the import of food and other essential goods badly needed by the United Kingdom. Capital goods may take as long as two, three or four years to manufacture, and as the Department's liability commences from the placing of each order, its potential liability, counted against the £100,000,000 which is asked for, is constantly increased.
If, for example, £5,000,000 worth of orders were placed by a particular country in three successive years, and each order took three years to fulfil, the Department's liability for the purposes of the Bill would be not £5,000,000, but £15,000,000. For reasons which I have already explained, it may be necessary for a substantial part of this amount and of similar amounts for other countries to rank against the £100,000,000 limit. In addition, ample provision must be made for insurance on other transactions which may involve risks not normally insurable on a commercial basis but which, nevertheless, must be taken if the United Kingdom is to balance its external payments and fill the dollar gap before Marshall Aid ceases.
I would here pause to give your Lordships perhaps some slight explanation of what is meant by the term "unorthodox transactions." Your Lordships will readily appreciate that it is necessary to increase our exports, for instance to Canada; indeed, it is vitally necessary. It may not be attractive to some exporters to go into that market where we would wish them to go. Your Lordships are aware of the Gilpin Report which has in substance recommended that we should send to Canada experts so that they can be on the spot for advice to the Canadian buyer in the extension of capital works. In particular, I have in my mind sewerage systems. We know very well that the natural country to go to for such equipment and plant is America. If we can have experts on the spot, ready to advise and to conclude commercial agreements, then we shall be in a much better position. But the conclusion of such agreements may entail substantial capital investments which may not be attractive to the money market. Some of the capital required may in turn, be loan capital with a contingent liability for repayment. It is in such cases that the facilities of the
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Department can be made available if after careful and due consideration it is thought that that class of business comes within the terms of what I have called "unorthodox transactions."
For the sake of making it abundantly clear to your Lordships, I might cite one other case—namely, the export of motor cars to America. At the present time, that is a most attractive market, but no one who knows anything about it would hesitate to deny that it is a somewhat speculative market. It is one, nevertheless, which is earning dollars. The finance of the export of motor cars to America at the present time is being undertaken by private banking interests who, with the caution characteristic of private banking interests, have taken the same line as the Department's Advisory Council. They have said that there must be a limit. However, as I have pointed out to your Lordships, it is necessary that these dollars should be available. It may be that that is the type of transaction which would rightly be regarded as an "unorthodox transaction" and rank for consideration under Clause 2 of this Bill as a "special" transaction.
Owing to the purely political character of the transactions envisaged when the Overseas Trade Guarantees Act, 1939, was passed, to which I have already referred, and cited Greece and Roumania as examples, trading accounts would have served no useful purpose. Now, however, with the increase in the maximum liability which is being asked for and also with the greater freedom which will be given to the Department to use the money, it is intended to give both commercial and non-commercial guarantees in the financial accounts. Clause 3 of the Bill continues the powers granted to the Board of Trade by Section 3 of the Overseas Trade Guarantees Act, 1939, to acquire and dispose of securities guaranteed by the Board and to establish an Acquisition of Guaranteed Securities Fund. The accounts of this Fund, showing the financial transactions done under those powers, are published each year with the Appropriation Accounts of the Export Credits Vote.
Under existing Acts, returns are published for "commercial" guarantees—by a quarterly return of the aggregate amount of the guarantees. The quarterly

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periods end on March 31, June 30, September 30 and December 31. For "special" guarantees, also, there is a half-yearly return showing the amount of the guarantees given in respect of each country. The returns are for half-years ending February 28 and August 28 each year. For the sake of simplicity and uniformity, it is proposed that the returns for "special" guarantees shall be brought into line with those for "commercial" guarantees. Accordingly, Clause 5 of the Bill provides for the publication of quarterly returns showing the aggregate amount of guarantees given under Clauses 1 and 2 respectively. The returns are published in the Board of Trade Journal, and it is intended that the new statements will appear together in a combined return, and relate to the usual calendar quarters.
Clause 6 of the Bill represents an attempt to clear up a misunderstanding which is in the minds of some as to the relationship between the Export Credits Guarantee Department and the Board of Trade. It should be made quite clear that the Export Credits Guarantee Department is a Government Department, under the Secretary for Overseas Trade as the Minister in charge. Matters of general financial policy concerning the scope of the Department's guarantees continue to be controlled by the Treasury, while on questions relating to export policy a close collaboration is maintained with the Board of Trade. The Bill, therefore, seeks to give statutory recognition of the existing position so that misunderstandings may be avoided in the future.
I am aware that the proposals contained in this Bill widen the powers, and increase considerably the freedom of the Department. I have given the reasons in broad outline, namely, that our rising export figures must be not only maintained but increased; the changing character of those exports—future increases may be in capital goods as opposed to consumer goods, with the attendant enlargement of capital outlay and risk; the difficulties which must be expected in markets increasingly competitive; the inclusion of the entrepôt trade which, it is hoped, will increase abundantly. The last factor, I think, will give great satisfaction to the noble Lord, Lord Strabolgi, who raised this matter on a Motion in your Lordships' House a short time ago. In fact, our prosperity as a nation may be contingent upon, and increase step by step
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with, the business done by the Export Credits Guarantee Department. I would make it quite clear that it is not intended that the Department should operate as a punter on a racecourse, with a pocket full of money. The self-evident skill and efficiency of those responsible for the management of the Department is, I suggest, an assurance in itself against that. As I have already told your Lordships, for the twenty-eight years that export guarantees have been operating, no charge has fallen upon the Exchequer—a wonderful record and a great tribute not only to the officials of the Department but also to the manufacturers and exporters of this country.
My Lords, I know that this is a subject which is of major interest to a number of your Lordships. The noble Viscount, Lord Bridgeman, who I understand is to speak from the Front Opposition Bench, is an acknowledged expert; so, indeed is the noble Lord, Lord Rennell, who I believe is to speak from the Liberal Front Bench. I am also fully conscious that I am addressing your Lordships under the watchful eye and inquiring mind of the noble Viscount, Lord Swinton. However, I have done my best to explain why we are asking for this Bill—to justify the amounts. And although I may not have satisfied all noble Lords, I will attempt to reply to any questions that noble Lords may wish to ask. In the meantime, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Lucas of Chilworth.)
4.36 p.m.
VISCOUNT BRIDGEMAN: My Lords, I am sure My noble friends on these Benches would wish to join with me in thanking the noble Lord opposite for the clear and agreeable way in which he has moved the Second Reading of this Bill. But he has been far too kind in saying that he thinks I am an expert in this matter; that title belongs to other noble Lords who sit with me on these Benches. It is only few months since we had the last Export Guarantees Bill before your Lordships' House, and from the fact that we have another so soon, one might almost be tempted to suggest that the Department concerned did not deserve quite full marks for planning and foresight. But having said that, I hasten

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to add at once that the matters which are contained in this Bill are undoubtedly very fit and proper matters for Parliament to discuss. The last thing I should wish to suggest from these Benches would be that, rather than produce this second Bill, the Ministry concerned should have gone back into the "jungle" of Orders in Council and affirmative and negative Resolutions. This is the right way to deal with this matter, and the Bill comes at a time when this question is very much in front of us all.
Probably the feature of this Bill which will cause most satisfaction in this House and outside, in commercial and banking circles, is the increased flexibility which is given to the Department, provided always that the increased flexibility does not lead to practices which are lower in standard than those observed by the Department in the past. The decision not to renew the subsidiary limits within the commercial guarantees will, I think, be a great help. I know that commercial and banking circles are looking forward to being able to make much more use then they do now of this scheme, once the provisions of the Bill pass into law, as no doubt they soon will.
Of course, I should say straight away that my noble friends on these Benches are fully at one with His Majesty's Government about the need to do everything they can to promote the export drive, and to turn the adverse balance of payments at least into a situation where we break even. In so far as this Bill is a contribution (and I hope a notable contribution) towards that end, I am quite sure that it will have our full support.
As the noble Lord, Lord Lucas, has said, there is more need than ever just now to promote the export drive. I do not wish to look a gift horse in the mouth but, as Lord Lucas stated, we are coming to a stage when the sellers' market is turning rapidly over to a buyers' market. The time has passed—it has been passed for some months—when we could count on selling everything we made, at whatever its production cost. As we all know, we are having difficulties in foreign countries. In the last twelve months, several foreign countries have imposed import licensing schemes, which all add to our problem, and exporters have to wait longer for their money. The need to close
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the gap between imports and exports is causing more and more small traders, who perhaps did not previously export at all, to go into the export market. That, of course, is as it should be, for those small traders need perhaps more than any other class of trader to use the export trade scheme.
We are also, perhaps, getting to a stage where, instead of dealing with what we might call straightforward buyers overseas, we are having to deal with more difficult buyers. All the time the Government—not wrongly at all, as I think—and the Board of Trade, the exports promotion Department, are urging traders, in the good cause of promoting our exports, to take risks which, for a variety of reasons, traders would normally hesitate to take, even if there were not difficult transfer and payment conditions existing at the present moment between some foreign countries and ourselves. So we welcome this Bill—and how, indeed, should we wish to do otherwise, when the noble Viscount, Lord Swinton, as we well recollect, played a great part in promoting the scheme, not, I think, at the inception but at any rate during its early days?
And now, if I may, I am going to say a word or two about one or two points arising on Clause 1, which deals with "commercial" guarantees. The first thing I am going to say is that I hope very much that in view of this increase—the increase of 60 per cent. in the credit facilities which will arise under this Bill on the "commercial" guarantees—steps have been taken to plan for a corresponding increase in staff. I say this not entirely as a shot in the dark, but because up to now the reputation of the Export Credits Guarantee Department has stood very high in regard to both the promptitude and the ability with which it deals with by far the greater part of the transactions which come before it.
Of course, there are a certain number of cases of delay. I have heard of some of these cases, and no doubt other noble Lords have heard of others. One must do all one can to prevent those delays. But, as I say, in the main the reputation of the Department is of the highest; therefore it is important that the sudden rush of work, which I think will be caused when this Bill becomes law, should not operate in such a way as to "flood out"

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the Department, and particularly its senior executives, who have the responsibility of taking decisions in all important matters where difficulty may arise. When I refer to staff, I am not speaking only of senior grades. I refer also to the need to see that the minor grades, such as that of the shorthand-typists, are properly filled. I hope it will be possible for the noble Lord, Lord Lucas, to tell us that adequate preparations have been made to meet the state of affairs which I have foreseen, and to ensure that the business of the Department does not, so to speak, get worse before it gets better.
Now I wish to come to the subject of the rates offered. There has been a certain amount of criticism—some of it I think justifiable—to the effect that the rates are on the high side, particularly if we take into account the practice of the Department of insisting, if they insure one cash-against-documents transaction, that they should insure the whole of the transactions undertaken by that particular firm. It may be that in a great many classes of exports, such as heavy engineering, railway material, and so forth, the margin of profit ordinarily received on those transactions is large enough to enable the rates to be carried. I can assure the noble Lord, however, that for the small trader, struggling in a difficult market to export consumer goods and things of that sort, there is little "fat" in the profit. A rate of 15s. or 17s., or even 18s., per cent, (which I have heard of) makes a noticeable difference to the profit of small traders like that. I do not know whether that aspect of the matter is fully realised, but I would make that point because the noble Lord himself has said that he expects the small trader to make more use of these facilities. If that does happen, I think the squeeze will come in the way I have described.
There is another way of looking at it. If the volume of business increases by 60 per cent.—as presumably it will, if the cover is increased by 60 per cent.—with all this business going through the Department it ought to be possible to lower rates in certain cases without upsetting the financial balance of the Department, which is something which we are proud of now and which we all want to maintain in the future.
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Now I would come to a further point, which has already been raised; and that is the question of insuring retention moneys. I think I am right in saying that, up to now, the Department have declined to insure retention moneys on big contracts, which may be held for one or two years and which, in the aggregate, perhaps, amount to more than the anticipated final profit which the exporter or the firm carrying out the contract is likely to receive. If it were possible under the Bill for the Department to revise their view as to insuring retention moneys, I think a great step would have been taken in promoting the acceptance of these very important and valuable contracts in countries overseas. I hope, therefore, that there will be some room for some slight change of view in this particular connection.
Another point arises. Do your Lordships all know that the Department insures only a proportion of the credit risk and another proportion of the transfer risk? Of those two, I think, the transfer risk is the more important to exporters. After all, the exporter should be in a position to decide whether the importer at the other end is worthy of credit. I do not see much reason to doubt that the exporter and the importer equally have no control over the transfer risk. That is a matter which probably depends entirely on the Government of the country at the other end. So if His Majesty's Government are trying to persuade traders to export into countries where transfer risks are high, they should be prepared (and the increases would appear to justify such a course) to cover the whole, or nearly the whole, of that risk.
I have heard of one other point of criticism in regard to the "commercial" guarantees—in fact, in regard to all the export credit business That is the insistence of the Department, in certain cases, on handling business through a provincial office because the address of the firm concerned is in the provinces, although in fact the business is really being handled in London. Take, for instance, the case of a firm which may be in the Midlands—a firm not really accustomed to exporting, which perhaps has not the finance required for financing export and which therefore goes to a financial house in London and asks them to handle the business. Naturally this

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house would like to use the contacts which they have with the office of the Department in London. I am sure there are a number of cases of that sort. If there are, and if we wish to introduce more flexibility, surely there is room for more flexibility in relation to these transactions than there has been in the past. If this could be brought about, I am sure that it would be a great convenience in certain cases—particularly to small firms handling more difficult business.
Then we come to Clause 2. The points which I have raised on Clause 1 are relatively minor ones. But when we come to the second clause the points which I have to raise are rather more substantial. First, we are told—it was said in another place and the noble Lord, Lord Lucas, has said it to-day—that a considerable volume of business is expected under this head. The last figure quoted in another place, I think, was a figure for February. According to that, only £8,000,000 was being employed, let alone the ceiling figure of £60,000,000 which exists at the present moment and which, under the Bill, will become £100,000,000. A little more information would be welcomed on this side of the House, because we feel concerned that this money should be used to promote genuine trade. We believe there is a risk that cases may occur in which the limits of prudence, both commercial and political, are overstepped and the result will not be genuine trade. As the noble Lord explained, this clause covers a wide variety of cases, not merely difficult commercial cases but cases of financing capital and financing brains, and also cases of exports to countries where the limit of prudence can no doubt be easily exceeded.
Let me say at once that the decision to finance goods for export on a fixed price contract (if I understood the noble Lord aright) will be well received, and will go a long way to promoting such difficult types of export as ships and heavy machinery, which take two or three years to build under conditions in respect of raw material prices and labour costs which cannot possibly be foreseen, and for which it is not possible to place a contract under a rise and fall clause. But to return to these unorthodox transactions: we wonder how much money is now outstanding. If the noble Lord can tell us the main countries in which these credits are outstanding, we shall be pleased. The noble Lord
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made a certain amount of play with Canada and the United States. I do not think anybody on these Benches would quarrel with the principle of exporting to Canada or to the United States. Speaking generally, the risks to be foreseen lie in neither of these two countries, except possibly in the case of motor cars.
But the United States and Canada are not the only countries. A certain amount has been said already in this debate about the Eastern European countries, and we know that large quantities of goods are going beyond the Iron Curtain. We do not know where they go to, and it may be that their country of destination is not an accurate guide to their final destination. We know that one Agreement has been made with Poland, on which high hopes are set, and other Agreements, upon which equally high hopes are placed, are now being studied. I feel there is a great risk that, in our anxiety to maintain our figures and make it appear on paper that we have balanced our Budget, we may be led into a type of transaction which does not result in genuine trade. I am going to give an example of what I mean, but before I do so I must take care to say that this is only an imaginary example. I have heard of no instance of this having happened, and I give it simply as an example of something that might happen.
We always take Ruritania as the country in which imaginary things happen; so let us take it again. Suppose that we sent to Ruritania a valuable shipment of electrical equipment. When the time comes payment is made by that country under conditions which we do not want; for example, they may say that we can have payment only if we take it in the form of fruit, which perhaps we do not want. So, instead of some worth-while import, back comes a cargo of fruit of a semi-luxury type, which, when it arrives in London, is sold by the barrow boys and even by the spivs. And the answer to that is the fruit you first thought of—namely, a lemon! That is an imaginary example, but it is the sort of thing that might happen under this new Bill if overeager people were too anxious to get exports at any and all costs. Therefore, we shall watch very carefully the safeguards, particularly the safeguards over returns, which I was glad to hear the noble Lord mention under Clause 5. We on these Benches will watch carefully

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that political considerations are not allowed to outweigh commercial considerations and that we do not, as the result of this increased flexibility, find a lack of prudence, because that would be a very serious thing and would go a long way to damage the first-class reputation which the Export Credits Guarantee Department, and the senior officers in particular, have built up over twenty years and more.
Those are all the points with which I need trouble your Lordships now. I hope that the noble Lord opposite may be able to give us some welcome assurances on these points. If anybody can show me that the fears I have expressed in certain directions are unfounded and unjustified, then nobody would be more pleased than I should be. If it turns out that this Bill, with its increased flexibility and increased availability of guarantee, does the desired job of closing the gap in overseas trade, then we would be glad about the day on which live gave it a Second Reading. But the dangers are there. Let us hope that they will not materialise.
4.58 p.m.
LORD RENNELL: My Lords, may I add my congratulations to the noble Lord, Lord Lucas of Chilworth, on presenting this Bill and on the way in which he has done so? May I say, in all humility, that it was an admirable speech and the figures he quoted were figures of great value, because they were short, they were few and they were easy to follow. I am afraid that I have not followed the accounts of the Department since before the war, but I think that the results to which the noble Lord referred, after twenty-eight years of the operation of the Department, are a matter for sincere congratulation to all those associated with it, and more particularly to the staff, both before and since the war.
There is one point in that regard which I would like to raise. The noble Lord referred to accumulated reserves or, as they may be called, profits on the insurance of credits during these years, and quoted a figure of £6,000,000. He also referred to the publication of accounts. To those not used to the mysteries of Government accounting, these accounts are not always easy to find, and some of us could have wished,
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many years before the war, that operations of the Credit Department had been treated separately as a self-contained and self-accounting unit, rather in the nature of those of a public corporation, so that the profits of the Export Credits Guarantee Corporation, if there were such an organisation, would be utilised for reducing the premiums on investment or for adding to its own reserves. Provision is made in the Bill whereby the Guaranteed Securities Fund can purchase securities—that is, instruments that have been guaranteed by the Department. That fits in well with the idea of converting the Department into a corporation. With the many public corporations to which the present Government are addicted, one more would not be a novelty, and I think this particular one would receive a large measure of support from many quarters.
There is another factor which I feel is of some importance. Where there is a highly specialised stair operating in this very technical and peculiar field, of which few people really have experience, either within or without the Department, it would be a matter of great satisfaction to them to see that the profit which they and their predecessors had accumulated over a period of years was being carried forward to the credit of the Department, and was not being absorbed generally by the Exchequer into the revenues of the county, even if by bookkeeping and accounting methods the reserves were earmarked. I have not discussed this matter for many years, but I believe it would give a certain incentive to the people working in the Department if they felt they had a larger measure of independence than they now have as a Department within the Board of Trade. It would not be very difficult to achieve that end and, I think, it would have some merit.
Apart from that, I do not want to go into the points raised by the noble Viscount, Lord Bridgeman. I find myself substantially in agreement with him, except on the one point when he spoke of "looking a gift horse in the mouth." It is a somewhat dangerous operation to look a gift horse in the mouth, especially just now when you are likely to find a National Health denture inside. I do not propose to do that. I feel that this Bill stands and falls by its own merits, and that the merits largely out-

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weigh any demerits or criticisms that can be applied to it. There is one possible exception on Clause 2. As to Clause 1, I entirely agree that the powers should be extended, and that the subsidiary restrictions should be taken off. There is, however, a difficulty about Clause 2. The noble Lord must realise that any clause of this sort, creating a special fund which will, in fact, be used for taking risks that are not likely to be accepted, or have not been accepted, by the Advisory Council, is bound to create suspicion, however well intended the action may be, and however admirable may be the administration.
There is one way in which I believe that suspicion might be dissipated. I accept that there may be certain risks which it is in the national interest to cover in this way, and which ought not to be covered by a properly conducted insurance fund, more especially if it were turned into a public corporation, with continuing profits and reserves, as I have suggested. But there is a way in which the suspicion could be mitigated, and I think I am right in saying that it is not the case at present. If a proposal for the use of that fund—that is to say, for the giving of guarantees under Clause 2—were, in the first instance, submitted to the Advisory Council, and the Advisory Council were to say: "This is not the sort of guarantee which we think the Department ought to give," the proposal should then, and only then, go on to the President of the Board of Trade for his sanction in a special case.
That would give the Advisory Council the opportunity to look over this type of transaction. It would certainly save both the Board of Trade and the Export Credits Guarantee Department from the criticism that they always have a little fund up their sleeves with which they can do something peculiar if they do not want the Advisory Council to know what is going on. I believe this would be a safeguard to the public, to Parliament and to the Department itself. It would show that these exceptional cases really were exceptional cases; that they had been carefully considered and were not considered to be the right sort of risk to take commercially, but that they had, nevertheless, been certified by the Board of Trade as being in the national interest.
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I throw out those two suggestions for consideration. I trust that this Bill will pass, because one of its main functions may be this. At a time when all firms, large and small, owing to rising costs and rising prices, find their capital seriously reduced compared with their turnover, those firms will more easily obtain assistance from these guarantees. Thus they will be enabled to tide over the present difficult period until they can accumulate further working capital consistent with their turnover and with to-day's prices.
5.5 p.m.
LORD STRABOLGI: My Lords, with all diffidence I would like particularly to support one part of the speech of the noble Lord, Lord Rennell. In fairness to all concerned, I think the results of the successful working of this system which has gone on in various guises ever since 1920 should be made public in a clear and more understandable manner.
LORD RENNELL: In a more accessible form.
LORD STRABOLGI: Yes, in a more accessible form. For example, my noble friend speaks of the £6,000,000 reserve. If it were a merchant bank, that would be a profit; it no doubt would not be distributed but it would appear in the books as a profit. Over what period was that £6,000,000 accumulated? It is not a very long period. I would like to know what the total balance has been since 1920, when I stood up in the other place and severely criticised the original Overseas Trade Credit and Insurance Bill when it was introduced. I criticised it because I did not think it went far enough and, as I said at the time, I thought it was like putting a sticking plaster over an ulcer. It was then only a small affair with limited finance. However, it has increased ever since and I would be interested—I am sure the public and the business world would also be interested—to know what has been the net trading result, if I may use such an expression. The noble Viscount, Lord Bridgeman, is the first Conservative I have ever heard advocate an increase in the number of bureaucrats.
VISCOUNT BRIDGEMAN: I beg the noble Lord's pardon. I did not advocate an increase in the number of bureaucrats; I advocated an increase in the number of people necessary to do useful work.
LORD STRABOLGI: I have not looked up the exact definition of "bureaucrat" in the Oxford dictionary, but it is somebody who works in an office. Everybody who works in an office is a bureaucrat, and when the noble Viscount speaks about increasing the number of officials I do congratulate him on his excellent and most refreshing conversion. I think he recognises, as indeed the whole business community recognises, that this is one of the Government Departments that has really worked smoothly, quickly and with a minimum of delay and an almost complete absence of red tape; indeed, I do not know whether they use any red tape at all to tie up their files. This Department does work well and has been most successful, and I congratulate my noble friend on introducing this Bill in your Lordships' House.
May I ask for a little enlightenment on one remark my noble friend made in his interesting speech? I would like to ask what is the special risk about the export trade in motor cars to the United States? My information is that there is at the present time a very good market for British motor cars in the United States, and that the limit on the export of cars is not the risk involved, or anything of the kind, but the amount of steel available. I was told that at the end of last year one of the world famous British motor manufacturing firms could have increased their exports to the United States six-fold if they had received the necessary amount of steel. Scarcity of steel, I am informed, is the bottleneck. I hesitate to speak about the motor car industry in the presence of my noble friend, in view of his eminent past in that important industry, but perhaps he could give us a little enlightenment there, because I do not understand where the special risk is.
While giving full support to the principle of this Bill, I am going to plunge for a moment into deeper waters. We have been trying for twenty-eight years to assist the British export trade by these and similar means—and not unsuccessfully. As my noble friend has quite rightly said, we are now coming once more into a buyers' market in certain commodities; but only in certain commodities. I can assure my noble friend that the sellers' market exists in a great many very important lines of manufacture, particularly capital goods. The
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sellers' market is still asking for certain capital goods, and the limit there is steel and the long delays in manufacture. Nevertheless, the terms of trade may go against us even more than they are now, and what is required is to remove the necessity for such special measures as we now have before us. I do not question their necessity at the present time, because I know how valuable this particular machinery is, and I know what an advantage it has been, especially since the end of the recent war. Nevertheless, we have to get back eventually—and my noble friend and all your Lordships know it—to multilateral trade, in the true sense of the term.
The exaggerated insistence that we have no option but to increase bilateral trade will not in the long run be of benefit to our country. The noble Viscount, Lord Bridgeman, quoted an imaginary case of Ruritania sending us unwanted fruit in exchange for electrical equipment. It was an exaggeration, of course, but I agree that there is that danger. The policy of pushing exports at all costs in certain markets may lead to a loss in the entrepôt trade—and again I make no apology for referring to this—and also it may injure our chances in other very important markets, especially the hard currency markets. What is required is that in a great many markets in the world sterling should become all the time a harder currency. I am glad to say that that is beginning to occur, and it is a thoroughly healthy development. If only our foreign colleagues and Allies would recognise that we once more require the acceptance of the sterling bill of exchange on London as the international trade currency, and would help us to that end, the whole world of commerce would benefit. London is the natural centre for the multilateral trade of the world and for the entrepôt trade. If we can have a currency which can be relied upon and is in sufficient supply—and sterling is the most suitable and the one that could be made available most easily—then it would mean that the corner would be turned, not only in the export and import trade of this country but of the commerce of the whole world.
The International Monetary Fund was set up for just such a purpose, but it seems to be making extremely slow progress. The great and the good, the eminent and the distinguished, amongst

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politicians of all countries seem to pay far too much attention to strategic and political questions, and not nearly enough to the vitally important economic and financial questions. I submit to your Lordships that they are far more important than any questions of strategy or political alliances. If we can get trade moving once more along its usual channels, and man can once more be assured of employment and a rising standard of living, then we can snap our fingers at all other dangers. To do that we have to find some form of acceptable currency which is in full and ample supply. I am certain that my noble friend has read the first leading article in today's issue of The Times, in which the dangers in our Canadian market are vividly described. There is an example of the effect of exaggerated bilateral trading on our old-established Canadian trade and with other hard currency areas. I sincerely hope that the arguments put forward, obviously with authority, will receive most careful consideration in the circles of His Majesty's Government dealing with these matters.
I have gone a little wide of the Bill, but everything I have ventured to say to your Lordships is perfectly relevant to the subject under discussion where we are asked to give a Second Reading to this important measure. We are asked to extend and develop a most valuable piece of machinery. It has proved its worth in the past, and it has been most useful in the difficult times since the end of the First World War, and between the wars. I am sure that the greater flexibility will be of value, and will be appreciated and utilised by the business community of this country. For all those reasons, I am glad that the Bill has had a friendly reception from both the Opposition Parties, and I venture with great diffidence to add my support also.
5.17 p.m.
LORD LUCAS OF CHILWORTH: My Lords, I am indeed grateful to all three noble Lords who have spoken, and for the support which they have given to this Bill. May I be human enough to acknowledge my gratitude at the personal compliment which two noble Lords have seen fit to pay me? The noble Viscount, Lord Bridgeman, started by denying that he was an expert. The
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speech which he made proved him to be wrong in that denial, and I was grateful for the number of points which he raised. It is true that we are now entering an era where risks have to be taken. Gone are the days when overseas buyers were scrambling to pay cash with the order, and the noble Viscount is quite right in saying that very likely we shall have to anticipate the time when an overseas buyer shows some reluctance to pay, even after delivery. That is one of the risks we seek to cover.
I will not, if I may use the expression, "pull his leg" about advocating an increase in the Civil Service. It will be written down against him, and will be used on many occasions in the future, so I will leave him to suffer that. But I agree that we must increase our staff sensibly with the increase in business. I was grateful to the noble Viscount for the tribute he paid to the staff of this Department. They have shown extraordinary skill, and the Government are deeply grateful to them.
Now perhaps I may answer a question which was raised by the noble Viscount, Lord Bridgeman, and by the noble Lords, Lord Rennell and Lord Strabolgi. There is grave apprehension about the profits, as they were called, that are made by this Department. They are not profits—they are surpluses; and the net result of twenty-eight years' trading is £6,000,000, as I told your Lordships earlier this afternoon. That is the answer, therefore, to the noble Lord when he talks about rates. The maximum liability after twenty-eight years was £225,000,000 at the end of last year. At the present time we have £163,000,000 actual liabilities, and the £6,000,000 reserve — the surplus — is exactly 3½ per cent. If we spread that over twenty-eight years, I estimate it would come to about four or five decimal points of 1 per cent. The noble Lord and I, even in our most lean times, have never worked on a margin like that. Our constant aim is to keep those rates down. I quite agree with the noble Lord about the difficulties of the small trader, but I can give him the assurance that if any trader has a market which can only be fulfilled if he cuts his margin to the bone, and he goes to the Department, he will receive every consideration. But he might be asked to prove that he has cut it to the bone.

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The Department may say, "Let us have a look at the bone."
The noble Viscount then raised what I thought he intended to be a major point—the question of retention money. We are appreciative of what the noble Viscount said, and in future the Department in approved cases—I am not going so far as to say in every case, but in approved cases—is prepared to cover the retention money on the same basis as the other risk: that is, perhaps up to 90 per cent. Therefore 90 per cent. of the retention money can in future be covered in approved cases. I am prepared to go so far as to say that the same principle will be applied on the transfer risk as well. Furthermore, when we come to what I might call the insolvency risk or the credit risk (I prefer to call it the insolvency risk), for which the porportion is at present 85 per cent., we are prepared to accept the same principle. That means that 85 per cent. of the balance that is held will be covered. So I think perhaps I have satisfied the noble Lord on those points.
The noble Viscount then asked me a point blank question, incidental upon his remarks about trade with what he called the Iron Curtain countries. The answer is this. At the present time, the liability assumed by the Department as regards Russia is £17,000,000. In the case of Poland it is £3,000,000, with a contingent liability of approximately £6,000,000. In the case of other countries, it is very, very small, but those are the two principal ones.
VISCOUNT BRIDGEMAN: The amount for Poland is £3,000,000 so far?
LORD LUCAS OF CHILWORTH: Yes. The noble Viscount spoke of that mythical country, Ruritania—a country about which I have heard but to which I have never been. He talked about the importation of fruit and he thought that the answer to it all would be a lemon. Of course, the noble Viscount knows that over such transactions there is the watchful eye of the Treasury. I should think that if the Treasury did not like the transactions envisaged by the noble Viscount, the answer so far as they were concerned would not be a lemon but another type of fruit which I do not think it is necessary for me to mention. That brings me to the whole point of the noble Viscount's remarks upon this particular
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subject. I do not deny that some of the "special" transactions go over the borderline from commerce into politics. When they move into that sphere, they cease to be the responsibility of the Advisory Council, and they cease to be the responsibility of His Majesty's Government, because His Majesty's Government are responsible for that policy. As I have said, the Treasury control it as regards finance.
VISCOUNT BRIDGEMAN: I am sure the noble Lord does not mean what he has just said. He said that they ceased to be the responsibility of the Advisory Council; he then went on to say that they ceased to be the responsibility of His Majesty's Government.
LORD LUCAS OF CHILWORTH: I am grateful for the noble Viscount's correction of what I said. They become the responsibility of His Majesty's Government because they go outside strictly commercial considerations.
VISCOUNT BRIDGEMAN: The noble Lord has now made his meaning quite plain.
LORD LUCAS OF CHILWORTH: That is the answer to what the noble Viscount said. That comes within the scope of the whole economic policy of His Majesty's Government. It is a fact that the Export Credits Guarantee Department will in future be a weapon—or, if you like to call it, not a weapon but an instrument, which is a more happy word—in the development of the economic policy of the Government. From his vast experience, the noble Viscount knows that there will be a great many risks that have to be covered which strictly commercial considerations would, of course, rule out.
The noble Lord, Lord Rennell, made this point. Every risk goes to the Advisory Council first to see what proportion of that transaction could rightly be termed "commercial." It may well be that in one of these anticipated "special" transactions there is in element of commerce which the Advisory Council is quite prepared to take and advise upon. That element may be 15 per cent. in some cases, and 50 per cent. in others, but every transaction goes to the Advisory Council first and they are the determining body as to where the borderline between commerce and politics comes.
LORD RENNELL: I should like to get this point quite clear. Do I understand that no Clause 2 guarantees are given that have not been previously seen by the Advisory Council?
LORD LUCAS OF CHILWORTH: That I can say, because if they ask, "What is the content of commercial risk?" the answer may be "None at all"; but they may say "There is a proportion." The noble Lord, Lord Rennell, raised a point which I expected he would. That was the question of a self-accounting unit. But does the noble Lord realise that all these surpluses are paid into the national banking account, and therefore, if at any time losses were incurred, a Supplementary Vote would have to be obtained? I can assure noble Lords that there would be no difficulty about obtaining a Supplementary Vote.
LORD RENNELL: May I suggest that to obviate that course, the amount should be carried forward and the Department treated as a commercial concern? I am aware what is done. My complaint is that things are done in that way.
LORD LUCAS OF CHILWORTH: There are great difficulties, because these liabilities go on for year after year, and it is difficult to deal with the matter in that way. I know there are arguments, pro and con, but at the present time (although I will see that my right honourable friends, the President and the Chancellor of the Exchequer, are fully acquainted with the noble Lord's view) I cannot hold out a great deal of hope that the method will be changed.
There was only one other question raised by the noble Lord, Lord Strabolgi, to which I have not yet replied. I think I have answered his main question. This question was: What is the risk in exporting motor cars to America? The noble Viscount, Lord Bridgeman, I believe, asked: What is the risk of exporting anything to Canada? There is no risk in regard to the buyer, but there is a financial risk in setting up the organisation to sell. That is the risk there. The noble Lord, Lord Strabolgi, said that I had had a long experience of the motor industry. I must plead guilty to that. That experience has taught me that it is one of the most highly speculative markets in the world; also, it may collapse over-night. A private bank may be financing it and
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may say: "There must be a limit to our liability." Yet we know that unless there are provisions made in America for dealers to hold stocks of motor cars against anticipated demand, those dealers will never be able to sell them. The type of finance in respect of Canada is really the same, but in one case it is goods and in the other case brains. That is the risk, and we want dollars so badly that it may well be thought that that risk is worth taking. My Lords, I have tried to answer very fully. If I have not answered every point, I am sorry. I hope your Lordships will now give the Bill a Second Reading.
On Question, Bill read 2a; Committee negatived.

MINISTER OF FOOD (FINANCIAL POWERS) BILL
5.31 p.m.
Order of the Day for the Second Reading read.
THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL): My Lords, in the regrettable absence of my noble friend Lord Huntingdon, I ask your Lordships to give a Second Reading to this short Bill. It is being introduced solely to meet a point raised by the Public Accounts Committee in its Third Report in the 1946–47 Session, in connection with certain long-term contracts already entered into by the Minister of Food which extended beyond December, 1950, which is the date of expiry of the Supplies and Services (Transitional Powers) Act, 1945. Legally, of course, a Minister of the Crown does not need specific statutory powers to buy and sell. As an agent of the Crown he can exercise any powers which the Crown can exercise, except in so far as he is precluded from doing so by Statute. But he will be able to pay for his purchases only if Parliament votes him the money.
This is not a new point. In 1933–34 it was agreed between the Public Accounts Committee and the Treasury that when a Government Department exercise continuing functions, particularly where those functions involve financial liabilities extending beyond a given financial year, statutory cover should be sought for those continuing liabilities. The Public Accounts Committee, however, accepted the view that this established practice is suspended so long as

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the Supplies and Services (Transitional Powers) Act is in operation. It was only when their attention was drawn to the arrangements for the purchase of food which might commit the Ministry of Food to the expenditure of money beyond 1950, that they questioned the authority of the Ministry to pay out of monies to be provided by Parliament sums required to fulfil the contracts extending beyond the financial year in which the contracts were made.
That is the short history of this one-clause Bill. It is an important measure, but its purpose is a very narrow one. The Bill speaks of long-term contracts for the purchase of food and feeding-stuffs, but it does not seek in any way to define the Government's long-term policy for the procurement and distribution of food, or to give statutory effect to a policy of bulk purchase. Although the authority of Parliament is not required for a Minister to buy and sell, in the Government's view it is only right and proper that if his purchasing arrangements extend beyond the current financial year statutory authority on the lines indicated by the Public Accounts Committee should be sought in regard to the provision of money for the payment of the goods in due course. I am sure your Lordships will find no ground for controversy on this point, and will agree that it is highly desirable for the established practice of Parliamentary control in these matters to be extended to cover long-term contracts for the purchase of food and feeding-stuffs.
Whilst I hope I am right in expecting that this Bill will be as welcome to your Lordships' House as it was to another place, and will receive as speedy a passage, I realise that it has a bearing on the Government's purchase policy on which there are conflicting views. I do not feel that this is an appropriate occasion for a long debate on this subject, but I have no doubt that noble Lords may wish to raise some points on bulk purchase, and I should like to make just a few general remarks on this subject. Since this Bill was given a Second Reading in another place, I have been encouraged to believe that the controversy over bulk purchase has been narrowed between the Government and the Opposition. At any rate, the Opposition appear to have come around to the view that a system of long-term contracts is essential when dealing
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with Colonial territories, in order to encourage development of food production on sound lines in those territories. I assume that the Opposition do not exclude other parts of the Commonwealth; it is equally essential, for example, to encourage the expansion of meat production in Australia and New Zealand.
In the case of Australia, this will call for a very heavy capital outlay by the Australian Government, and we cannot hope to secure this expansion unless we are prepared to buy over a long period the extra meat that will be produced, and are ready to make some arrangement in advance in regard to the fixing of prices. I think I am right in saying that there is now no opposition to the Government's policy of placing long-term contracts for the purchase of food within the Commonwealth. It may be of interest to your Lordships to know that out of our current programme of imports the Commonwealth is sending us 97 per cent. of our wheat, 55 per cent. of our meat, 87 per cent. of our cheese, and 79 per cent. of our butter. This policy has certainly been endorsed by the Opposition so far as the home farmer is concerned, as witness their support to the Agriculture Act of 1947. That Act provides, in effect, for a system of long-term contracts for the purchase of all the basic foodstuffs produced at home at prices fixed, in the case of livestock and livestock products, four years ahead.
Therefore there is left open to controversy only the Government's bulk purchase arrangements with foreign countries. These number only 21, out of about 60 separate arrangements between the Ministry of Food and overseas countries, arrangements which operate for periods ranging from one to nine years. The rest of these arrangements, and those that run for the longest period, have been entered into with Commonwealth countries. Noble Lords are aware that the systems of government in certain foreign countries, particularly the Eastern European countries, are such that trade negotiations can successfully be carried out only on a Government contract basis. But, my Lords, I hope that whatever views noble Lords may have of certain aspects of bulk buying, or of individual Government transactions, your Lordships will not allow your feelings on there matters to prejudice your reception, and

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indeed the passing, of this straightforward little Bill. I beg to move.
Moved, That the Bill be now read 2a.—(Viscount Hall.)
5.40 p.m.
LORD LLEWELLIN: My Lords, we are indebted to the noble Viscount the First Lord of the Admiralty for stepping into the breach to-day and taking charge of this measure. It is somewhat outside the ordinary run of his Department. It is clear that if it be necessary to have long-term food contracts, the Minister of Food must be covered constitutionally when he makes them. It seems equally clear that if it be necessary to make a contract extending beyond December 31, 1950, he has, without this Bill, no proper power to do so. I therefore come to the next point which was touched on by the noble Viscount—namely, whether it is necessary for the Government to make these long-term food contracts.
I admit frankly that I should be the last person to say that in some cases they were not necessary and advisable. In fact, I believe that I was the Minister of Food who made the first two—those with New Zealand and Australia. But the reasons for making those long-term arrangements with those two Dominions were just those on which the First Lord touched—we wanted to extend the production of meat, of butter and of cheese, particularly, from those Southern Dominions. As the farmers of this country like the security of a guarantee before they go in for more extended production, it seemed to me, when I was Minister of Food, reasonable that the New Zealand and Australian farmers should ask for the same condition. As your Lordships are aware, it was Mr. Hudson's policy to give those long-term guarantees to the farmers. That policy was agreed to in the days of the Coalition Government, and, if I may say so, it is perhaps the reason why Mr. Tom Williams has been more successful than some of his colleagues. He has stuck to that arrangement, and by so doing has kept the farmers fairly well satisfied.
As I have said, we made those long-term arrangements with New Zealand and Australia. There is no doubt that if we want to increase the production of certain foodstuffs in the Dominions and in the Colonial Empire it is necessary
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occasionally to take such a course, but it should be taken only in an effort to secure increased production in the sterling area. If Parliament gives the Minister of Food these powers, I think it should watch to see how he uses them. Further, Parliament should insist on the Minister giving more information than he has done hitherto in regard to a certain number of these contracts. It is quite absurd that the prices paid for produce in Demark under recent arrangements were made widely known in that country (the same applies with regard to Canada the year before) while the Minister, and the Ministry, of Food in this country were reluctant to give any similar information to the representatives of the taxpayers in the British Parliament. I think we are entitled to know what the Minister is doing, and what prices he is paying for these foodstuffs. After all, the people of this country are paying the piper, and I maintain that they ought to have some say in the tune that is being played.
That brings me to a word which I feel I must say in regard to the position in which we find ourselves to-day vis-à-vis the Canadian producers. At the end of November, 1943, when I was appointed Minister of Food, I happened to be in the United States, and I went to Ottawa before coming back here to take over the Department. Through the courtesy of Mr. Gardiner, Minister of Agriculture in Canada, I was privileged to attend the annual conference of provincial Ministers of Agriculture, officials and farmers' representatives from the whole of Canada. I then assured them that we could take all the bacon that they could breed for us, that we would take what canned fish they had to spare, and that we would take far greater quantities of apples than ever before. I assured them that after the war there would still be a very big market here for their bacon, and that we should need all that they could produce. I added, as a matter of fact, that I did not know how the finances were going to be arranged after mutual aid came to an end, but I assumed, seeing that there were hungry consumers on one side of the Atlantic and willing producers on the other, that the statesmen of the time would find a way whereby the bacon could reach the people of this country who so badly wanted it. Unfortunately, that has not been done. All of us will agree, I am sure, that we could do with

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a great deal more bacon than we are now getting. We receive a very tiny ration at the present time.
I am aware that Sir Stafford Cripps has said that our exports to Canada have been increased by over a half between the second half of 1947 and the second half of 1948, but Canada is now taking only about 7½ per cent. of her imports from this country, whereas, in the pre-war years, she was taking some 17½ per cent. I have a feeling that perhaps we could do more than we have hitherto been doing in the way of seeing that some of those very valuable capital goods which we are sending to Russia and Poland, and other countries—which eventually may well be put to some use against us—should go to Canada, and so assist the producers there to help our people here to get more bacon than they are getting at present.
One thing we have to remember in regard to these bulk contracts, as they are called, is that in this kind of dealing between nations, if any friction arises, it arises between country and country, rather than between an individual trader in one country and an individual trader in another country. That is an aspect of these so-called contracts which has to be closely watched, because the repercussions may be extremely widespread. The sooner we can revert to dealings between individual traders, the better it will be for the general harmony and good will of the world. At the present moment some Canadian producers are blaming this country as a whole, whereas in the old days they would have been blaming certain individual traders.
I used the term "so-called contracts" deliberately, because we must realise that none of these dealings is a contract in the legal sense of the word. There is no sanction whatever against a party who may default—except, I suppose, that of war or sending a battleship, which would, of course, be absurd. A trader who had been let down under a contract, as we have been let down on our Argentine contract, could sue the defaulter and obtain damages, but we can take no action, except to send somewhat useless Notes of protest to the Argentine Government. In cases within the British Commonwealth, the fact that there are no sanctions is not so important. Within the ordinary British family, the fewer
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legal documents there are the better, and most of us get on very well in our family life without any. So it is in the British family of nations.
These long-term guarantees to encourage an expanding production may work all right within the commonwealth, but when we come to a country like the Argentine that is a different affair. Here there is no family feeling. Here there is no question of expanding production by giving this guarantee. They have defaulted badly on the meat contract, and we have no way of bringing them to book. Of all the stupid ways of making a contract, that seemed to me to be the most foolish, because we paid for all the meat in advance. It was said at the time that we were going to eat our Argentine Railways in the course of a year or two—that investment amounted to £150,000,000, I think—and that it was a sad thing to think that we should gradually use up our capital assets in that way. I find it even sadder to think that we have paid over the money and have not even eaten the product. And because this is a contract between one country and another, we have no sanction whatever, except to send stiff little Notes to Señor Perón or to Señora Perón, or whoever is "running the show" out there. That seems to me to be a very odd way of making a contract.
Another way in which several of these contracts have been badly made is that nobody has thought of putting in delivery dates. The ordinary food trader always includes a schedule of delivery dates in his contract. When the Government made the wheat contract with Canada, we obtained our bulk supply more cheaply than other people, and there were no delivery dates in the contract. Naturally, the Canadian farmers went on supplying people who were willing to pay more before they dealt with our contracts. As the result, much of the wheat did not leave Canada before the St. Lawrence froze, and great efforts had to be made then by the Ministry of Food. Quantities of this wheat had to be taken to the Pacific Coast, at a great cost in haulage, and shipped through the Panama Canal and across the South Atlantic. And all this because nobody had thought to put delivery dates in the contract!
Even worse than that: because we were so short, we had to go to the Argentine and buy 500,000 tons of wheat at

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3 dollars a bushel, compared with 1.55 dollars which we were paying the Canadian farmers. On those 500,000 tons we were paying £30–£33 a ton to the Argentine, as compared with £14 9s. to the Canadian farmers and £16 4s. to our own farmers. That was all due to the fact that this contract had not been settled in the way in which the ordinary exporting trader would have settled it. We have these two cases, and I have no doubt there are many more cases which will come to light, like the potato case and the onion case and various other little contracts which are being entered into by the Ministry of Food. I think it is bad to buy 50,000 tons of potatoes in Ireland and then have to give the Irish farmers £6 a ton to keep them. That was a business I would have been extremely ashamed of, had I been Minister of Food. Indeed, I do not think it would have happened, because when I was Minister I kept a pretty good watch on the Potato Division. When we see this kind of thing going on, we question how far these arrangements are necessary.
When I went to the Ministry of Food and had to apply my mind to these food problems, I found out many of the ramifications of the food trade. First, I realised to the full what a wonderful job our food importers, our food merchants and our food distributors and shopkeepers have done for this country over all the past years. They ship the goods to time, they distribute them evenly over the country, and they supply them at a reasonable price to the consumers. Let us, as soon as possible, be rid of these arrangements, necessary as some of them were during war time. Let us be rid of them unless they fulfil the test: Is it necessary to give a Government guarantee (because that is what these long-term contracts amount to) to take more of a particular foodstuff, so as to ensure that such a foodstuff is produced in greater quantities in the sterling area? If that test be applied, and if that object is to be achieved, then by all means let the Government give that guarantee. But if not, I say, let the food traders be given back as soon as possible the job which they have done so well for the people of this country all these past years.
To-day we shall, of course, give a Second Reading to this measure. In one
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or two exceptional cases, no doubt, its provisions ought to be used by the Ministry of Food. But let us as soon as possible get away from this kind of contract which has not the sanction lying behind a contract made by a private trader—that he is losing his own money if he makes a mistake. It is easy to run into these huge losses when you are not dealing with your own money, when you have only the somewhat remote control of the incentive to save the taxpayers' money—and that in days when our Budgets are still running into far more millions than, in my view, they ought to do.
6.3 p.m.
LORD RENNELL: My Lords, I do not propose to detain your Lordships on this subject, except to add my agreement with what the noble Lord, Lord Llewellin, said about trying to restore conditions in the food trade to something rather more normal than they have been during the last few years. I accept fully that, where a Government trading organisation is the sole seller of a commodity, the counterpart in purchase should probably be the Government or someone acting directly as agent for the Government. In all these contractual arrangements it is almost essential that people should deal as it were among equals. In other words, we should not have individual traders in this country dealing with Mr. Miranda, and we should not have the Government here dealing with individual traders.
That is not to say that there ought not to be any bulk buying. We all accept that where there are long-term commitments—moral commitments, or even financial commitments—taken by either party to produce year by year more food or more of other commodities than they were doing, a long-term bulk contract must be made, and it probably can only be made by the Government. But what the noble Lord, Lord Llewellin, and a great many people all over the country feel is that there has been more bulk buying by the Government than has been strictly necessary. In other words, it is felt that the Government have gone in to buy when traders could have done it, in our view, very much better; and also that, when they have gone in to buy they have, in many cases, been what can only be described by everybody concerned as not very competent.

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The story which came out in the debate in another place on transactions in potatoes over the course of last year is something almost incredible. Your Lordships have no doubt read the debate which took place on February 8. We received information of prices paid for potatoes. Even if we accept as a fact that there was a danger of a potato famine, to meet which it was necessary to import potatoes which had to be obtained at the last moment, can your Lordships imagine that any private trader in the potato market, whether at home or abroad, would have paid the fantastic prices which the Potato and Carrot Division of the Ministry of Food succeeded in paying? I say "succeeded in paying," because they must have worked very hard to succeed in paying an average price of £18 14s. 6d. a ton, which was the figure quoted in another place, I believe from official sources.
What happened to those purchases we all know. What has happened to the potato crop in England this year we all know, also. Noble Lords who are farmers probably have large quantities of potatoes lying on their farms to-day, as I have—potatoes which have been bought but which I have no doubt we shall shortly be told are not wanted, and we shall be asked to take them away or throw them somewhere. Many people have nowhere to throw them. I do not know where I should throw the fifty tons of potatoes which the Ministry of Food have bought from me. I wish they would take them away, but I am sure they will not; I shall have to cart them away. All one gets as the result of complaining about these things is: "We are sorry, but it was very difficult. We are sorry, but we have lost a lot of money." The same thing can be said with regard to the onions. The only comment, at the end of the long debate in which that subject was discussed, was that a lot of onions had been bought. The honourable lady who was replying said:
"It just happens that we did make a contract to import onions"—
rather like rain from heaven!
"We asked the exporters to delay sending them here until about the end of December, but it was quite impossible, of course, to cancel the whole contract. Again, nature intervened"—
I do not quite know why, in regard to this particular contract.
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".… That is why many farmers, I am afraid, have been left with onions on their hands."
In effect, the right honourable lady was saying: "It is just too bad!" And that is after the farmers were asked to plant onions. All they get is a reply from a representative of the Government saying: "It is just too bad! They are left with a lot of onions on their hands. It is rather bad luck, isn't it?" Is that the way to encourage people to do what they are asked to do? They have never been compelled to do it; they have for years now done what they have been asked to do, and that is all they get. Is that a courteous or even reasonable way to treat people?
There is something at the back of this which makes one feel that there are certain departments in the Ministry of Food which are, quite frankly, not working very well, although I have no doubt that within their own lights they are very efficient. Your Lordships know, in particular, that there is the Potato and Carrot Division, which I suppose was responsible for the bulk buying of the potatoes. I do not know whether your Lordships are aware of many of the other interesting activities of that Division, like the provision about not washing carrots. Your Lordships are probably aware that there is an order in force which says:
"A person shall not, far the purposes of sale, wash or cause to be washed any carrots, provided that this provision shall not apply to bunched carrots or to the washing of carrots by any person for sale by him by retail."
Frankly, I cannot make out what the order means. But that is the sort of way in which this Division is apparently occupying its time. A much more amusing one than that is the order prohibiting the selling of carrots with more than twelve inches of foliage on them. Your Lordships appear not to be aware of that one.
LORD HAWKE: We have that every year.
LORD RENNELL: I think we are all satisfied that something has gone badly wrong. Yet there has never been an expression of regret or an indication that where bulk buying has led us into these difficulties a change is envisaged. If the Government would tell us that after this season there will be no more of this type

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of buying, or that a new system will be adopted, I think we should all have a great deal more confidence than most of us possess in the régime of which the noble Lord, Lord Llewellin, and others have been complaining.
6.10 p.m.
VISCOUNT HALL: My Lords, I am sure that your Lordships will not expect me to deal with all the points which have been raised by the two noble Lords, but I was rather interested in the speech by the noble Lord, Lord Llewellin, particularly in the latter part of it, because the sting was in the tail. To be sure of the position I would like to ask him whether he and his colleagues of his Party believe that the time has arrived when we should discontinue bulk buying. He said that, so far as he was concerned, we ought to rid ourselves of this method of buying, irrespective of where we are purchasing. It would be interesting to know where the noble Lord stands in relation to this matter, because it aims at the very principle in which His Majesty's Government believe, and also in which his own colleagues in another place believe. After all, as I have pointed out, some three-fifths of the contracts which have been entered into by the Ministry of Food have been entered into with the Colonies and with the Commonwealth countries for the purposes which I mentioned in the course of my speech. I assume that the noble Lord is still of the opinion that we should rid ourselves of this system of bulk buying as soon as possible.
LORD LLEWELLIN: No. What I said was that where we are trying to secure extra produce from the sterling area—which of course includes the greater part of the British Empire, Canada, unfortunately, being outside it—it was right for the Government to give a guarantee in order to get increased production, just as our policy has always been to give a guarantee to the British farmer so as to persuade him to go ahead with his greater production. What I said was that I was in favour of this system if it was necessary for that purpose.
VISCOUNT HALL: That is entirely different from the attitude taken up by Mr. Peake in another place, when this Bill was debated there. He went so far as to say:
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"At the same time, of course, we must recognise that some system of long-term contract is an indispensable element in any effective policy for Colonial development. It is quite clear that though the contracts may be for fixed prices over long terms, some form of undertaking to purchase on minimum quantity contracts and at prices subject to annual review must be an indispensable element in the development of the production of various foodstuffs in our own Colonies."
LORD LLEWELLIN: My Lords, we do not usually take cognisance of what anybody but a Government speaker says in another place, but what Mr. Peake said means exactly the same as I have been saying, except that he used longer words than I did.
VISCOUNT HALL: I took down the words of the noble Lord, and what he said was this: "Let us get away from this kind of contract, and let us leave it to the private trader." Those were the very words with which he concluded his speech. They indicated to me that what the noble Lord was anxious to do was to hand back the trade to the private trader, irrespective of whether the contract was made with the Colonies or the Commonwealth countries. I think it is right that we should know just where we stand in relation to this matter.
VISCOUNT SWINTON: My Lords, I wonder whether I might say this. There is really nothing of the antithesis which the noble Viscount is trying to suggest. Everybody agrees that it is right to make long-term arrangements with the Dominions and the Colonies to get increased food production. That means inevitably that you are going to take a minimum amount, and may mean that you have to give a minimum price. There are two ways of doing that. It can be done by price, or by preference. But that does not mean in the least that even where that kind of contract has to be entered into the whole operation has to be carried out by an incompetent department inside the Ministry of Food, instead of through the ordinary trade channels. May I take a specific example of what I myself had to operate in the war? At the beginning of the war I was asked to form a company called The United Kingdom Corporation, which had a turnover of over £150,000,000 a year. I was using entirely Government money; the Treasury was my sole shareholder. I formed a board of the ablest business men in the country. But the

1181
cardinal principle adopted was to use the ordinary trade channels at its instrument, and as a result the Corporation made a profit and not a loss. When I was the responsible Minister in West Africa I had not the least difficulty in seeing that the right price was paid to the African, even the small producer, and that the full amount he had to supply was bought (incidentally, no ground-nuts were left lying up at Kano on the ground); and for that purpose I used the direct trading organisations.
VISCOUNT HALL: That does not alter the point which I put and, indeed, it is a question of using the trading organisations. The trading organisations were used at the end of the First World War, and the Government of which the noble Viscount was then a member withdrew the guarantees which were given. What happened, not only to the foreign trade but indeed to trade with the Colonies and Dominions? What was the position of the agricultural industry in this country?
VISCOUNT SWINTON: That is because Mr. Lloyd George broke his word. That has nothing to do with how you trade.
VISCOUNT HALL: Mr. Lloyd George was the Prime Minister of a Government the majority of whom were Conservatives. Really, noble Lords cannot help themselves by saying that the Department is an incompetent one because of what happened in relation to potatoes, or because it is suggested there is a stupid order in relation to carrots, when the Ministry of Food's purchases amount, I suppose, to some hundreds of millions a year. Indeed, the very morale and the life of this country has been sustained as a result of the work of the Ministry of Food. I have no doubt that the noble Lord himself who served in the Ministry, and with very great distinction, may be the father of some of the orders to which the noble Lord, Lord Rennell, has referred.
LORD LLEWELLIN: My Lords, may I interrupt for a moment? It is not, and never will be, my policy, or the policy of those for whom I speak, in any way to take away these guaranteed prices from the British farmer. Let us be quite clear about that. It was Mr. Hudson's policy, firmly backed up by myself. We
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carried it on when we were in office, and I am glad to think that the present Government are still carrying it on. When you want an increased production and you give security to the Dominion farmers or the Colonial farmers, I am equally in favour of giving them those guaranteed prices. I started it with the New Zealand and Australian contracts. If the noble Viscount will read my speech as a whole, he will see that I completely excepted that large range of contracts from all my criticisms.
VISCOUNT HALL: I will certainly read the noble Lord's speech, but the impression left upon me at the end of his remarks was that he wanted as soon as possible to hand back the trade to ordinary trade channels.
LORD LLEWELLIN: I hope that the noble Viscount will read the whole of my speech.
VISCOUNT HALL: That is what the noble Lord was anxious to do. Actually, whatever guarantee may be given to agriculture in this country, if this country is to be used as a dumping ground for the surpluses of primary products from abroad, whatever may be the intention of the Government, it would be difficult to continue guaranteed prices to agriculture in this country. That was one of the reasons why agriculture was in the doldrums right from the time that the guarantees were withdrawn in 1920 and 1921. It was after the First World War that we saw the downward slide of agriculture, which neither noble Lords opposite nor we ourselves want to see happen in the future. That is why I am anxious that we should be quite clear about the intention of the Opposition, in relation to this controlled purchase from abroad. We are determined to see that it does not undermine the agricultural guarantees which have been given in this country. I do not want to follow that matter any further, but I thought it was necessary that we should clear the position, particularly in view of my impression of the latter part of the noble Lord's speech.
Reference was also made by the noble Lord, Lord Llewellin, to the defaulting of the Argentine in relation to meat. None of us likes it; let us be quite frank about it. We want contracts to be entered into freely between one side and the other, and we desire that they should be carried

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out, whatever their terms. I am not excusing the Argentine for what she has done; it is true that, of the 400,000 tons of meat which she contracted to deliver to this country in the course of the year, there will be a deficiency of something like 65,000 tons. But I hope that there will be sufficient honour in the Argentine, and in the Argentine Government, to see that that contract is fulfilled. The noble Lord asked why it is that prices are not published. The Minister is not at all averse from publishing prices where it can be done without prejudice to his commercial activities, but I am sure the noble Lord would not ask that there should be a disclosure of the prices where prejudice would be caused.
LORD LLEWELLIN: I made the point that, where they are freely published in other countries, surely we ought to have them published here.
VISCOUNT HALL: That is so. I cannot give any reason why they are not published. It would be useless for me to attempt to do so.
Without keeping your Lordships too long, may I deal with this difficulty of potatoes, which was referred to by two noble Lords? The Ministry of Food have a great responsibility. They have to find food for 50,000,000 people in this country, and they must not "slip up" if they can possibly avoid it. I have no doubt that the Ministry of Food rather misjudged the position in relation to the potato crop, but it must be remembered that nature has been at work in that regard. Take the average yield of potatoes per acre. Over the last ten years, it was about 7.1 tons per acre. The year before last, it was reduced to 5.9 tons per acre. This last year nature has been very efficient; it has given the Minister more potatoes than he expected, because the yield is well above the average. Last year is was nearly 8 tons per acre. The Minister was playing for safety; unfortunately, he has been caught. But this is only one of very many deals into which the Minister has had to enter. On the whole, I think it can be said that the work of the Ministry has not been so bad as noble Lords have suggested. I am not going to say for a moment that the Ministry are incompetent. Indeed, I think it is unfair to make a charge of that nature against the Ministry. I have no doubt
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that, in all the circumstances, the nation has every reason to be pleased in many ways with the work that has been done.
I am afraid that I have taken up too much of your Lordships' time, but I was most anxious to cover the points that have been raised. If I have misjudged the noble Lord opposite, then I will certainly see that ample amends are made. I wanted the position made quite clear, because the impression which was left upon me was that he wanted to go back and hand over to the private trader. Whatever may be the complaints against the Minister of Food at present, I am convinced that private traders could not do the work nearly as efficiently as the Ministry are doing it.
On Question, Bill read 2a; Committee negatived.

NATIONAL THEATRE BILL
6.29 p.m.
House in Committee (according to Order): Bill reported without amendment.

BUSINESS OF THE HOUSE
LORD AMMON: My Lords, before the House adjourns, I am asked to say, in response to questions put by noble Lords and for their convenience, that the House will meet at 4 o'clock on Thursday of next week.

WANDSWORTH AND DISTRICT GAS BILL [H.L.]
LONDON COUNTY COUNCIL (GENERAL POWERS) BILL
PEOPLE'S DISPENSARY FOR SICK ANIMALS BILL
Reports from His Majesty's Attorney-General: Received and ordered to lie on the Table.

HUDDERSFIELD CORPORATION BILL [H.L.]
GRIMSBY CORPORATION BILL [H.L.]
Report from the Committee of Selection, That the Viscount St. Davids be proposed to the House as a member of the Select Committee on the said Bills in place of the Lord Douglas of Kirtleside: Read and agreed to.

PRIVATE LEGISLATION PROCEDURE (SCOTLAND) ACT, 1936
Report from the Committee of Selection, That the Lords following be proposed to the House as Members of the Panel of Lords to act as Commissioners under the Act during the present Session—namely,

E. Iddesleigh,

L. Wolverton:

agreed to; and the said Lords appointed accordingly.