THE EXPORT CREDITS GUARANTEE DEPARTMENT (Hansard, 12 April 1961)

§ THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE)
My Lards, with your Lordships' permission, I will now make a statement about some developments in the services offered by the Export Credits Guarantee Department which is now being made in the other place by the President of the Board of Trade. Those developments can be summarised under throe headings. First, there are premium rates. The policy of the Department, and of the Advisory Council, for whose continuing help my right honourable friend feels much in their debt, is to pay its way on the average over a period. To run consistently at a loss would be tantamount to a subsidy to exports; but neither should we aim at making a consistent profit. We have made a new assessment in the light of experience of the likely level of recoveries after major defaults, and are satisfied that this justifies a substantial reduction in premium rates.
My right honourable friend has therefore approved a new scale of premiums for medium-term business which will reduce the total premiums charged by about 25 per cent. The main benefit of these reductions will be concentrated in those markets where at present we charge the highest rates. There will also be reductions in respect of comprehensive business in the more expensive markets.
Secondly, longer-term export finance. Any extension of the length of credit on which our goods are sold adds to the strain on our balance of payments. That is why we support the Berne Union and resist any general extension of the length of suppliers' credits. But in the case of very large capital projects and of oceangoing ships, where the return on any investment takes many years to mature, the buyer may need and expect credit going beyond five years from delivery and he can already obtain it in some foreign countries. We are therefore 271 introducing a new system whereby the Export Credits Guarantee Department will guarantee loans for longer periods made by financial institutions in this country to creditworthy overseas purchasers. The extent to which we can grant this facility will be limited by our balance of payments position. We shall have to be selective, therefore, in accepting individual projects and be satisfied that they will bring substantial benefit to our economy. In highly exceptional cases, where the business could not otherwise be financed and where in the opinion of the Government there are compelling reasons for regarding the project as one of outstanding economic importance to the United Kingdom, supplementary finance may be provided from the Exchequer under Section 3 of the Export Guarantees Act.
Thirdly, small exporters. In order to help small and medium sized firms with little or no experience of exporting my right honourable friend has decided to introduce a new form of E.C.G.D. cover for firms with a current export turnover of less than £10,000 a year. This will be available across the counter at all branches of the Export Credits Guarantee Department, and will cover small exporters in respect of transactions with individual approved buyers, at a flat rate of premium. The cover will be available for a limited time. This simple and easily accessible facility should encourage new firms to enter the export market and subsequently become customers of the Export Credits Guarantee Department on a normal basis.
This is of necessity no more than an outline of the new arrangements. I am circulating a more detailed explanation in the OFFICIAL REPORT, and am also taking steps to make them known as widely as possible throughout industry. I believe that these developments, taken in conjunction with the improvements we have recently made—part-period cover, "matching", the general extension of special facilities originally designed for the dollar area, and the special rates for ships—represent a major extension of the services available from the Export Credits Guarantee Department, and can stand comparison with those offered by any similar institution in the world. It is important that they should be known and used as widely as possible, and I 272 shall welcome any help that any of your Lordships can give to this end.

§ LORD LATHAM
My Lords, I am sure your Lordships will be grateful to the noble Earl for the statement that he has made, and all those in this country concerned with exports will be encouraged at the proposed (if I may use the word) liberalisation of the export credits guarantee procedure and facilities. The statement as regards premium rates would seem to justify charges which have been made by exporters that the premiums have represented an overcharge. If it is possible (as apparently is the case, because at the moment it is proposed to do so) to reduce by something in the region of 25 per cent. premiums upon medium-term transactions, it would seem, as I have said, to justify the complaint that the premiums have been too high in the past. It is also to be observed that the statement indicates that there will be reductions in respect of comprehensive business in the more expensive markets, all of which of course is desirable. But what about the position as regards the less expensive markets? Is it contemplated that there will be a reduction of premiums in respect of those markets, which are not unimportant as an element in our total global export business?
I am sure that the proposals as regards longer-term export finance will be warmly welcomed by those concerned, because it is the case that our competitors have been granting credit facilities over periods much longer than five years. It is encouraging to know that the Government now intend to recognise this fact and place our exporters in a relatively (shall I say?) less prejudicial position than they are now. I am a little disturbed, and it may well be that other noble Lords will be also, to know that this facility will be limited by our balance of payments position. I hope that the operation of these new proposals as regards longer-term export finance will not be unduly restricted by the vagabond money which plays such an unworthy part in estimating our balance of payments. I hope, also, as I am sure those concerned with the export trade do, that in cases where it is thought that supplementary finance should be provided by the Exchequer the conditions and requirements will be fairly liberally 273 interpreted. I am sure that the small exporters, who, as I have already said, together make up an important element and sector in our export trade, will welcome the more liberal proposals which are contemplated.
The noble Earl was good enough to say that details of a more comprehensive character will be published in the OFFICIAL REPORT. We shall read those with interest, and it may well be that facilities will be provided for debating the proposals. In the meantime, I again express our gratitude for the statement made by the noble Earl.

LORD HAWKE
My Lords, I greatly welcome the noble Earl's statement. But as he rightly said, this is a step that, strictly speaking, we cannot afford, because as we are not paying our way on current account by disposing of the collection of our debts we are making our position even worse than it is to-day. This extension of the credit that we can give forms no part of extending the whole basis of world credit, which is what we really need, and which can be done either by raising the price of gold or turning the International Monetary Fund into a credit-creating body. In the meantime, while those steps are under contemplation, it will be a help to our exporters to enable them to compete with the Germans and the Americans in this field.

§ LORD OGMORE
My Lords, while agreeing with the last speaker that this ought to be a help to the exporters, may I ask the noble Earl two questions? First, how will the support now to be given to the exporters compare with that given by the West German Government which, I understand, is very handsome support indeed? Secondly, with regard to the small exporters, will it be 100 per cent. guarantee, or some lesser figure?

§ LORD SHACKLETON
My Lords, might I also ask the noble Earl a point? I doubt whether his proposals will arouse much enthusiasm among the small exporters. He is aware, of course, that burying a guarantee across the counter does not in fact provide you with credit. One of the particular difficulties to which I think the Government should pay more attention is the provision of credit which covers adequately the risk, which credit may not be forthcoming even when there is a guarantee. The second point is 274 whether, in his further statement, there is to be any examination of some of the practices of export credits guarantee, particularly in regard to the pressure which is brought to bear on exporters to cover all their exports with export credit, even when they have no reason to do so from a business standpoint. I know of cases where it can make a difference as to whether orders can be obtained.

§ LORD BARNBY
My Lords, I should like to support the point made by the noble Lord, Lord Shackleton, that it is in many cases quite a handicap in the export trade that the rates that apply to all destinations necessarily include Canada. The only way that a company can avoid that cost is by making a separate company to deal with trade in that quarter, which is quite inconvenient. It is that kind of difficulty which I think it is as well the noble Earl should bear in mind in making representations.

§ THE EARL OF DUNDEE
My Lords, I am grateful to the noble Lord, Lord Latham, for the appreciative reception and comments which he has given to my right honourable friend's statement. With regard to the particular questions that your Lordships have asked, I would say that how far Germany is assisting German exporters under their export credit arrangements is a matter on which a Question would have to be put down. With regard to the amount of guarantee given to small exporters under these new facilities, I would point out that the scheme provides 90 per cent. cover against loss, and the premium will be at a fiat rate of 15s. per £100 insured, which simplifies to some extent the present arrangements. I do not want to quote at too great length from the statement which I am circulating in the OFFICIAL REPORT to-morrow, and I think it would probably be more to your Lordships' convenience to read the statement than to listen to long extracts from it.