HL Deb 30 November 1961 vol 235 cc1275-98

6.26 p.m.

Order of the Day for the Second Reading read.


My Lords, the purpose of this Bill is to increase the authority of the Export Credits Guarantee Department to assume risks and make loans on behalf of Her Majesty's Government. The Bill itself could hardly be shorter or simpler and the objectives are so clearly set out in the Explanatory Memorandum and, indeed, in the Long Title to the Bill that it might be said that no Second Reading speech of introduction is really necessary. But though the objective may be simple and acceptable, I hope, to noble Lords in all parts of the House, the subject itself of export guarantees is intensely complicated in detail. Therefore, I think that I must very briefly summarise what the Export Credits Guarantee Department does and how it does it, in order to show how this particular Bill will help the vital work done by our exporters.

The Department operates an insurance scheme for exporters which is intended to be self-supporting and which up to the present has proved to be self-supporting. It also provides the machinery through which are operated the development loans made by Her Majesty's Government to overseas Governments for the purchase of British goods or services. In practice, most of these loans are made to the Governments of the independent Commonwealth.

The insurance business is carried on under the authority of the Export Guarantees Act, 1949, as amended, under one or other of two sections in that Act, and statutory limits are set to the amount of liability which may be incurred under each section at any one time. Business under Section 1 of the Act is transacted after consultation with the Advisory Council", and in practice only with their approval. We are greatly indebted to these distinguished bankers and businessmen who serve on this Council in an honorary capacity. Your Lordships may be interested to be reminded that there are thirteen members at the present time, under the chairmanship of Sir Geoffrey Gibbs, and that two distinguished Members of your Lordships' House, my noble friends Lord Ridley and Lord Catto, are members of that Advisory Council.

Business under Section 2 of the Act is business done in the national interest", and without any consultation with the Advisory Council being stipulated. The Government-to-Government loans are made under Section 3, which authorises the Department to acquire and hold securities which are normally promissory notes, and the Statutes provide that the limit for Section 2 business must accommodate not only all the credit insurance business not submitted to and approved by the Advisory Council but the lending under Section 3 to overseas Governments.

If I may summarise, therefore, the Department is doing three categories of business. It is doing credit insurance which necessitates judgment of an economic and commercial character. These are the so-called commercial guarantees. The scheme under which these are done is known as the credit insurance scheme, and the advice of the Advisory Council is sought before business is done under this scheme. The second category of business is credit insurance, but credit insurance where the risks are perhaps more political than commercial—these are normally called the special guarantees, and the scheme is called the special guarantees scheme. In addition, the newly introduced financial guarantees for private loans to overseas buyers are included in Section 2. The third category of business is the Government-to-Government loans secured by purchase of securities and tied to the purchase of goods and services, known as the economic assistance scheme. As I have said, those last two categories of business are not the concern of the Advisory Council.

The Bill now before your Lordships seeks to extend the limit of liabilities under Section 2 of the Act by increasing the limit to £800 million from its present figure of £400 million. There is no intention to increase the limit under Section 1, which stands at £1,000 million, and which it is felt should be adequate for the next three years or so. It is hardly necessary for me to remind your Lordships that there is no proposal here to spend more money. This proposal is to enable the Department to do more business.

Against this existing £400 million limit, which it is proposed to increase, liabilities as at September 30 of this year stood at some £211 million, and contingent liabilities—that is to say, liabilities which the Department is committed to assume should offers which it has made be taken up—stand at a further £145 million. This, therefore, leaves an uncommitted balance under this limit of only some £44 million.

As I have indicated, Section 2 has to provide for insurance cover given on certain markets where the degree of risk rules out cover on a commercial basis, but where it is reasonable to take the risk in the interest of maintaining or restoring trade; it also has to take in certain experimental forms of cover, as, for example, the special "small exporter" scheme which was introduced earlier this year; and it also takes in all the new financial guarantees which wore announced at the same time, in April of this year. These financial guarantees are for selected cases of private lending overseas tied to capital goods exports.

As I have explained to your Lordships, the Department's liabilities under Section 3 in respect of Government-to-Government loans also rank under this statutory limit. It was £400 million, and we seek to raise it to £800 million. The United Kingdom must, of course, continue to play its part in providing economic assistance to the less developed countries, and particularly those of the Commonwealth, to the limit of what this country can afford. Since the Commonwealth Economic Conference in Montreal in 1958 it is interesting to note that the economic assistance agreements made have totalled some £153 million; and since 1949 the total is £208 million. One sees, what an acceleration there has been since Montreal. In fact, since Montreal these powers have been used as the chief instrument for the provision of development assistance to the independent Commonwealth. At present the Export Credits Guarantee Department has greater liabilities in respect of Section 3 loans than it has in respect of Section 2 insurance. In the next few years, however, it may be that liabilities in respect of these loans and of "national interest" insurance will be roughly equal, not through any diminution of the scale of economic assistance loans but if a substantial volume of business comes forward in the form of financial guarantees. These financial guarantees are very new, having been introduced only in April of this year.

The intention of this Bill, therefore, is to provide the necessary authority for the Department's foreseeable needs over the next three years or so in respect of these development loans, financial guarantees and what we call "national interest" insurance. I think I should say that it is by design that the growth in the Department's business is subject to the scrutiny of Parliament every few years, on such occasions as the present.

I should like to make only one further point which I think is of interest. I am advised that about 75 per cent. of business insured with the Export Credits Guarantee Department is raw material and consumer goods business on credit terms of up to six months and is covered under what is termed the comprehensive guarantee. These policy holders, as your Lordships know, can ship to each buyer up to a limit set in the comprehensive guarantee without further reference to the Department. If they wish to ship in excess of the limit they must apply for a credit limit on the buyer to the Department. Your Lordships may be interested to know that there are some 2,000 applications a week for extensions of limit of that sort, and that 75 per cent. of those applications are dealt with and answered within 72 hours. The other standard Export Credits Guarantee Department facility is the specific guarantee for individual capital goods exports.

This Department offers an important service to our export trade which is quite vital to the life of this country. Its operations are shown by the published accounts to have been soundly conducted, and by steadily increasing business it has maintained its position as the world's largest organisation of this kind. I commend this Bill to your Lordships and beg to move that it be now read a second time.

Moved, That the Bill be now read 2a.—(Earl Waldegrave.)

6.20 p.m.


My Lords, I feel that the whole House is indebted to the noble Earl for the manner in which he has introduced this Bill. Particularly am I conscious that this is not his normal Department, and that he has gone to a great deal of trouble, not only to acquaint himself with the facts of the Bill, but to put it forward to the House in such a manner that we can all understand it. I must say that I have some regret that this measure has been introduced at this time of the evening and that there are so few who could have listened to what I think is an exciting story and a great achievement, particularly of the form of co-operation which we all wish to see—the co-operation of industry and commerce with a State Department.

Perhaps I might give one or two figures very briefly to underline the story the noble Earl has given. During 1960, there was a remarkable growth in the business of this Department. In fact, it was not far short of a £100 million increase. This is quite remarkable when, as the noble Earl knows, we on this side of the House repeatedly complain about our slow increase of exports. It would therefore appear that commerce and industry are making a far greater use of this Department than they have in the past. I also noted in a report that the total balance which has been built up in this Department is now £28½ million. This in some quarters is regarded as profit. I feel I should say something on this matter, because I have heard complaints that this Department was being run at a profit, and that it was not taking sufficient risks. This is the balance of premiums that have been paid over the difference against the liabilities that have been met, but it is a very small balance of departmental money when you consider the monumental potential liabilities of the Department and the State.

The noble Earl has dealt with this Bill very thoroughly. On normal occasions I would have given it my full support, and left it at that. But again this is an occasion when I think I must draw the attention of the House to the grave economic position of the country. We know the figures of 1960, when we had a United Kingdom deficit of £398 million; and the figure for January-June was a deficit of £108 million. There are some who feel that the measures which the Government took in August have met the bill, and that shortly we shall be able to advance. I am not naturally gloomy, but the indications are that 1962 will be a very critical year for this country. Production is declining, perhaps temporarily. Imports have fallen slightly. But there has been a considerable consumption and reduction of stock. I would anticipate that in the early months of next year there will be a very rapid increase in imports. I hope this rise will not outstrip our meagre growth of exports. This is a matter which will undoubtedly have to be watched carefully.

I am not concerned only with the United Kingdom's balance of payments, which is bad enough. When we consider the balance-of-payments position of the sterling area—that is, the United Kingdom and, in the main, the Commonwealth, excluding Canada—with the non-sterling area, we have, I think, a frightening figure of a deficit of well over £1,000 million during 1960. We may ourselves make some improvement in our own balance-of-payments position, but I would hazard a guess that the position of the Commonwealth will decline. Considerable imports, particularly from Germany and the United States, are going into these territories, and their own exports, their own overseas earnings, are declining, due in the main to the raw commodity prices, which I believe to-day are the lowest certainly since the war.

Therefore I would make a proposal to Her Majesty's Government. If I am right that the stability of our pound of which we are the banker depends not only on our own performance but that of the Commonwealth, and we take into account the effect of the Export Credits Guarantee Department on our own trade (because I believe that much of the business that is done in exports would not be done if it were not for this Department) and if we wish to develop sterling-area business, not only with itself but within the non-sterling area, I wonder whether we could not—we certainly cannot within the terms of the Department as it now is—enlarge the Department so that Commonwealth countries, if they wished, could participate. They could take part in the liabilities and utilise the resources, the information and the invaluable experience of the Department's officers. It could then be a spearhead for the development of Commonwealth exports into the non-sterling, area. I think this is very important indeed. I would not ask the noble Earl to give me a reply, but I hope his Department will consider the suggestion.

Before I come to the Bill itself, I must say one word in regard to the bank rate. I do not want to deploy again the arguments we have had on the bank rate, but I think the Government will recognise that if the high bank rate is to restrict purchases internally, if it affects directly overseas purchases it acts in the same way. The bulk of our trade overseas is on credit. Very few of our buyers are able to put the cash on the table. Therefore, when we grant credit at present, whether it is 90 days, 120 days or five years, it is based on the bank rate. In my own experience, in my own business, when the bank rate rose by 2 per cent. my Japanese customers and my Hong Kong customers paid the increased bank rate; but they did not pay 7 per cent., but 8 to 8½ per cent., 1 or 1½ per cent. above the official bank rate, which is normally the rate for exchange.

Therefore this upsets our clients. They are taking credit, they are buying goods on credit, but they have no confidence that the price at which they have bought will in fact be the true price, because the interest rate will go up. Therefore, I wonder whether we cannot, or whether we should not, create an import-export bank which could provide credit facilities at a consistent bank rate, one in line with other countries. The United States, Belgium, Germany and France themselves are providing, through one channel or another, this credit facility at interest rates that are occasionally below their official bank rate, and if these countries are doing it I see no reason why we should not do it. I understand that we should not be breaking any of our trade agreements, particularly the G.A.T.T.

In regard to credit being available, I suspect that our commercial banks are to-day short of credit facilities for their customers. I have heard of a number of cases when possible long-term contracts could have been entered into, where an export credit guarantee was provided, but because the sum was large the banks were reluctant to provide the facilities. Therefore, again, if we had an export bank I think we should find credit more readily available to our exporters.

My Lords, in regard to the Department, I would ask the Government whether it could not produce a report in manner similar to those of B.O.A.C., B.E.A. and the Colonial Development Corporation, which have been admired and complimented on on many occasions in your Lordships' House; a report in such a form that the general public could understand it and be aware of what this Department is doing. I think this is something that should be done. At the present moment it is, first of all, very difficult to get a report and, when one does, it is very dry. I would recommend that the Department should produce a report such as those I mentioned.

I now come very briefly to the Bill. Section 1 of the Department is concerned with commercial trade, about which I have spoken, and that section is under an Advisory Council. I believe, however, that Sections 2 and 3, which this Bill is dealing with, are not controlled by the Advisory Council. It is really a weapon of the Board of Trade. I wonder whether it would not be better —it would certainly create more flexibility—if shortly you kept just Section 1 in the Export Credits Guarantee Department and had Sections 2 and 3—which are an instrument and weapon for the Board of Trade—taken out and created into an export bank or export department under a Minister of State and used, as it is to-day, as a strategic weapon for the development of our trade. The Minister of State would be answerable to Parliament; but, probably more important, would have ready access, on a comrades basis, to the Cabinet. I visualise this Department planning, assisting and encouraging exports, using its full resources in a calculated manner, because I believe this is the only way we are going to make any impression in the more difficult markets.

I think this will become more essential if we go into the Common Market. If we do so our real problem, as I see it, is that we must develop our productivity in such a way that we can make an impact in the Common Market and, at the same time, maintain our Commonwealth trade. If by going into the Common Market we merely shift our present export quota—I call it "quota" because many manufacturers regard it as a quota—from the Commonwealth into the Common Market we shall be no better off; I suspect we shall be worse off. Therefore, if we go into the Common Market undoubtedly we shall need strategic planning, and I should have thought that such a department using Sections 2 and 3 would be admirable.

My Lords, although I have spoken for longer than I intended, that is briefly what I wish to say on this Bill. The noble Earl referred to the eminent men who are on the Advisory Council of the Export Credits Guarantee Scheme. This Department would not have succeeded if it were not for the senior and junior executives, the men who deal with the paper from which the noble Earl was speaking—and a fantastic amount of paper is involved in exports. I hope that when the noble Earl sees that our words go to the Advisory Council the staff of the Export Credits Guarantee Department, wherever they may be, will be suitably congratulated.

6.58 p.m.


My Lords, I feel that my noble friend is being dragged from his more bucolic activities to report on what, in effect, has become an economic debate. I only hope his study of these particular subjects will lead him to encourage the growth of agricultural exports from this country to the Continent, which I have always felt ought to take place but do not. The noble Lord, Lord Shepherd, I am glad to say, has supported my speech before I have made it. I will not follow him on our old friend, the bank rate. I used to believe in a high bank rate, but I believe that after a short period it outwore its usefulness and I no longer believe that a high bank rate does any good to any body at all. But I share the grave anxiety of the noble Lord at the low commodity prices of this world which are impoverishing our markets; and something is very wrong with the economic thought of the world that we should be slipping back to the days of pre-war when there was a world of plenty, which to-day we do not seem to be able to find a way of consuming without inflation: and I suggest that if the late Lord Keynes were alive he would probably be able to guide us to-day.

The figures of exports to-day and the exports of capital goods represent the orders of anything from one to three years ago. As a nation we are always very slow in our reactions and we are sometimes over-sanguine. When we were lulled by the figures of the exports to the United States to dismantle our dollar controls we set up for ourselves a bigger import bill to meet in the future, and we did not initiate in time the measures we are now attempting to take to boost up our exports. The measures we are taking now, of course, are too late to affect the figures in the near future. We only hope that they will affect the figures in a year or two's time.

The world is changing very rapidly and this is particularly true of sterling area trade and especially the trade in capital goods of the new post-war Commonwealth members. So long as British officers were in charge of their ledgers and British engineers in charge of their utilities, one could expect that, given competitive prices, orders would tend to come to Britain, and, moreover, that these orders would be paid for in cash. This applied not only in the Empire but in all those other parts of the world where British capital had set up the utilities that is all changed. South America and India went, and the rest of the old Colonial Empire is going too. The pawky Scot will no longer be in charge of the finance department of the emergent territories; the British engineer if he remains will have less influence. We must expect régimes to be set up with much more extravagant ideas than those that we carried on. The idea of saving up to pay cash on the nail is outmoded in this sort of world.

Moreover, floating of loans in the money markets based on prudent financial policy of the past will soon be a long forgotten dream in nearly all these countries. If we want to forecast the future from our study of the past we shall not have to look to the history of the Colonial Empire in the Victorian era but rather to the history of the Spanish Empire after liberation. To sell capital goods, except on many years' credit, is going to be exceptional anywhere in Africa and Asia and we shall have to adapt ourselves to the new conditions.

Last April, after years of pressure, Her Majesty's Government created a new role for the Export Credits Guarantee Department—namely, to guarantee loans made to overseas buyers by British financial institutions, with which to buy British goods. We must all welcome these steps so far as they go. But the new arrangement is something of a stop gap. There is still ultimate Treasury control and I do not believe that the Treasury yet realise that long-term credit will have to be the rule rather than the exception. The formalities tend to show that that thought is not yet in their minds. The exporter has to give evidence of the credit the foreigners offer, and, strangely enough, he must also show that it is being offered through the foreigners opposite number institution to the E.C.G.D. I think the formalities show that the thought is related to the old idea that credit was an exception, whereas to-day, of course, it is the rule. There is no single authority to which an exporter can go and which can not only finance the buyer or the seller for the right number of years but also give a guarantee at the same time that the buyer will pay, leaving the exporter to do nothing except to get on with the business of producing and shipping the goods.

We badly need something like the Export-Import Bank—and in that I agree with the noble Lord, Lord Shepherd; that Bank in the United States gives tied credit for the purchase of American goods—somewhere where decisions can be got swiftly and the whole operation conducted under one roof without detailed Treasury control. The Trade Association of one of our classic exporting industries, the Locomotive and Allied Manufacturers, made representation to the Radcliffe Commission on these lines and I think they made an overwhelming case. It does not seem to me that their case has been properly answered by this creation of a new role for the E.C.G.D. That industry particularly suffers from the changes in world affairs which I have outlined. They ought to be one of our most flourishing export industries. It is an industry in which we used to lead the world.

Its exports of locomotives of all sorts to-day are running at half the rate they were six or seven years ago, although output has doubled in the meantime. Why? A very large part of the answer is competitors' credit, much of it from the United States Export-Import Bank, providing for repayment by instalments over five, ten, fifteen or even more years; also, of course, the United States Development Loans, which are for 20 years—but that is a slightly different type of thing; also, the Japanese Export-Import Bank's offering of up to 10 years' credit, and it is believed it has offered longer in South America. Continentals are also in the long-term credit field, and Canada has sold 70 locomotives to the Argentine on 9£ years' credit, and I believe some similar transaction has been conducted with Brazil. I could go on; I have lists of foreign orders based on long-term credit in this type of goods.

The Treasury must realise that payment by instalments over a long period is the only method by which most of the primary producing countries of the world will be able to buy capital goods from us in the future, and our arrangements must be tailored to fit this situation. It may be argued that these are unrequited exports and we cannot afford them. I do not accept that this is a valid argument unless those resources that go to make the goods could be employed on making similar goods which could be exported for cash, or the manufacture involved a seriously large quantity of imported material. In any case, if we had started earlier, as we should have done, we should now be getting payments in return for long-term credits which would have been called the unrequited exports of those years.

Then again it is said: how can we get foreign exchange to lend to the buyers in order to buy our goods? The answer is we do not lend money; we lend goods. In effect our bankers pay the manufacturers on behalf of the buyer and receive their money back by instalments while the buyers use the goods. It is only a longer form of our old friend the "never-never" in this country. The credit required is internal credit, and goodness knows we have been able to produce enough of that in the last few years. I know we are a free country, but we pride ourselves on the direction of our economy by self-discipline. We know how a year or two ago the banks and other institutions tumbled over themselves to lend money for hire purchase on the home market, and if a small part of that credit had been diverted to the hire purchase of capital goods on the export markets it would be showing results in our trade returns to-day.

Things are not right when one of our traditional heavy industries shows declining exports in a field where world demand is active. I have mentioned only one industry, but I think there may be others faced with the problem of impoverished buyers and a new world attuned to buying on credit. We shall not get the business unless our credit arrangements are up to date and competitive, and I hope that Her Majesty's Government will again look into the question of setting up some counterpart of the Export-Import Bank, a thing which has been pressed upon them from many quarters for a long time.

7.10 p.m.


My Lords, in his speech the noble Earl made reference to the fact that both sides of the House would welcome this Bill. There is no doubt at all about that. I personally would join with him in paying tribute to the great work that has been undertaken by the Export Credits Guarantee Department. I know from personal experience in the organisation with which I am associated of the high level of efficiency with which that Department is conducted, and it is good to be able to place on record a tribute of that kind when it is deserved. It is not possible to measure the exact contribution that this Department has made towards encouraging exports, but, as has already been suggested, it is considerable, and I believe it is capable of great extension and expansion. The lifting of the limit from £400 million to £800 million in Clause 2 covering the guarantees, and Clause 3 covering the loans, will certainly widen the scope and range of operation.

Reference has been made this evening to the need to increase exports. We know that businessmen, industrialists, economists and politicians all agree on the need for this country substantially to increase its export trade. But these exhortations have been like beating the air—easily done, but leaving no visible impression. I believe there is need for a practical effort to co-ordinate our export activities. I know that this Department makes a contribution. I know also that it could make an even greater contribution. It has already been indicated that it operates on a profitable basis, or at least on a basis of no cost to the State, and I think one is justified in underlining and emphasising that point. But one might ask: can the present rates of premium be reduced?

I am not going to suggest that the rates of premium or the rates of interest, or lower rates, would act like a magician's wand, for the effect of rates of interest as a deterrent or stimulant to trade in exports will vary according to the product, the conditions of trade and the area of sale. But there is no doubt at all that many countries are offering better credit facilities than this country has been able to offer. Apparently many of our competitors do not suffer any great restrictions which are imposed by their obligations under international agreements. Perhaps it will be possible for there to be some comment made upon that.

I feel there is need for steps to encourage exports beyond those offered by credit guarantees. There are many small firms in this country producing high quality goods for the home market. Collectively they could make a considerable impact upon foreign markets, but individually they lack the know-how and the confidence to sail these uncharted seas: the relatively high cost of overseas sales promotion weighs too heavily upon the restricted volume of goods produced by the small producer. I would ask, is it possible for the Government to conduct a survey of such firms and their products, and relate these to overseas requirements based upon information which I know is available from commercial counsellors and the like?

Unfortunately, there is a tendency on the part of too many of us to look upon the province of exports as being that of the giant industries. Of course, such a thing is not so. There are tremendous opportunities for increasing the level of our exports by greater encouragement of the small producer. I am aware of the contribution that the small exporter guarantee scheme has made; but its impact to date, with contracts declared which I believe are a little more than £250,000, does not match the proposal of a private bank. Perhaps noble Lords saw in the Press recently a statement made by a private bank which offered a package deal to small exporters. They offered to survey the markets, to introduce a buyer and to provide the money; and they made the claim that the cost of their services would be less than the charge made by the Government's Export Credits Guarantee Department. I should point out that this related only to selected markets, but it would be worth while ascertaining how far the Department can go in meeting this challenge.

The problem of exports is basically the problem of price and cost of production. What contribution have we seen made in terms of policy? Towards the end of reducing that cost of production and the consequent export price, in terms of Government policy we have seen the credit squeeze, the wage pause and the like—negative factors which have led to unrest and to a psychological atmosphere with a consequential fall in production. This is reflected in the recent index of industrial production figures, which shows a fall from 125 in July to 122 in September; and the index of production in manufacturing industry fell from 127 in July to 123 in September. To my mind, that is not unexpected, for all too frequently we have had the position where the captain has been calling for full steam ahead in the economic sense and signalling "Reverse engines" at the same time, and then complaining that the ship is making no headway. I think we need to concern ourselves with these matters because they have a basic, fundamental influence upon the ultimate volume of our export trade. We need also to concern ourselves with the changing pattern of employment in this country, which I believe could have some bearing upon Britain's overall industrial costs, and, consequently, an effect upon our competitive strength.

Quite recently, I saw the Ministry of Labour figures relating to employment, and I conducted a little exercise in trying to deal with these figures and to express them as a percentage change in types of employment. This is what I found, and it is something which I think is of considerable significance. From 1951 to 1961, based upon the figures that are published by the Ministry of Labour, the increase of employment in all manufacturing industries in Britain during that period of time was about 2 per cent. The increase in the number of employees in the distributive trades was about 32 per cent. During that same period of ten years, agriculture and mining declined by 18 per cent. and, at the same time, financial, professional and miscellaneous services, whatever that may mean, increased by 28 per cent.

Now we cannot expect, nor would it be desirable, to have the pattern of our industrial effort remaining constant. There is always a measure of change. But it does appear, at least to me, that the present trend is not giving emphasis to those activities upon which the economic strength of the country is more dependent. That, I think, is a matter of considerable importance. It is important to the topic that we are considering to-night, the question of this country's ability to compete in markets that are available, whether they are Common or "Uncommon"; and also in matters with which I believe the Government should concern themselves in a most urgent manner, because the claims that I have described are of such a character as, to my mind, is not conducive to the swift economic development of this country.

I have made some comments on the general economic position relative to the export business. I have no intention of repeating many of the admirable points that have been made by noble Lords in this debate. What I have had to say so far does not detract in any way from the complimentary comments that I made regarding the Department's operations. In conclusion I would point out that over the past forty years, over the period during which the Department has been functioning, its activity has demonstrated quite clearly in a society that, at least theoretically, accepts the principle of free enterprise economy, what a valuable contribution the State and State agencies can make to the development of Britain's export trade.

7.23 p.m.


My Lords, I do not want to detain your Lordships for more than a moment, but I wonder whether, before the noble Earl replies, he would mind if I asked for one assurance: that is, that no political prejudice shall be allowed to influence Government Departments or the Export Credits Guarantee Department in respect to our trade with Eastern Europe and the countries on the other side of the Iron Curtain. I attach considerable importance to this. I spent five weeks this summer visiting four of those countries—namely, Poland, Czechoslovakia, Hungary and Roumania. I am quite certain that the possibilities for an expanding trade there for this country are very great indeed.

Now I was disquieted, because I had already heard that considerable political pressure had been brought to bear upon this country by West Germany to stop us from doing trade, particularly with East Germany, but also generally East of the Iron Curtain. I found, however, somewhat to my surprise, when I got there, that West Germany was in fact doing about three times as much trade with all those countries as was any other country, and that the French and the Italians were both moving gaily in.

Our system of open general licences has been operating pretty sharply against them. I think it is rather unfortunate that we refuse to take any of the refined oil products of Roumania, because I am sure that they will be reaching us very shortly through Common Market countries if we do not take them ourselves. If we would take just one or two per cent. of our oil imports from there, I am equally convinced that our exports to Roumania could rise enormously.

The only point I want to make to the noble Earl is this. Wherever I went I found that we had better goodwill in all those countries than any other country had, and the West Germans had the trade. They all told us that if there was any problem, if there was any trouble, all they had to do was to ring up Dusseldorf and the boys were there next morning by aeroplane, with a lot of contracts and a lot of typists. There were no difficulties about credits, and the job was done. I simply want an assurance from the Minister, if he can give it, and I think perhaps he can, that there is no political prejudice operating in this field, because I believe the expansion of trade with those countries is probably the best immediate hope of improving relations in the future—much better than politics. I hope he will do all he can, and so will the Export Credits Guarantee Department, to develop trade with those countries, which I think not only would be good politically, but would be extremely valuable economically for this country.

7.26 p.m.


We have had, as one would have expected, an extremely interesting, short debate on this very important Bill. It is only one more example of how in this House you can get no subject so erudite or complex that you do not find that there are experts to speak to it. Unfortunately, I am not one of them, so that was a compliment to others and not to myself. It is some thirty years since I was actually involved in this kind of business in the City of London, and then I am afraid I was far more involved in seeing that the stamps were stuck on the letters the right way up than in doing acceptance credit business. It was a long time ago. But it has been interesting to go back to this business again from my more recent bucolic occupations. I welcome the general support that has been given to this Bill. I also welcome the way in which the subject has been broadened, and the fact that we have spoken this afternoon to the whole complex of the export trade and economic affairs. I do not object to that at all.

As to the speech which we heard from the noble Lord, Lord Shepherd, I think that there were many interesting points that he raised. I am sure that my right honourable friend is going to read his speech with the greatest care. Perhaps the most important point he raised, and the point he stressed most of all, was the question of the general deficit in the whole sterling area, and whether these facilities, which the Export Credits Guarantee Department provides for United Kingdom exporters, could not by some method be made available to all the Commonwealth exporters. This is a very big subject and a very big thought. I am sure the noble Lord realises that this would be a major enlargement of the present Statute. The Export Credits Guarantee Department, of course, is now limited to giving guarantees only to or for the benefit of persons carrying on business in the United Kingdom. We are able under that definition to deal to a certain extent with persons who have subsidiaries overseas. But I am afraid that, as the noble Lord no doubt knows, it would be ultra vires at this moment, and with the Statute that we have at this moment, for the industrial exports of overseas countries, even though they were in the Commonwealth, to receive these facilities. There are, I am advised, ministerial undertakings which have been given quite recently that no such facilities from the Export Credits Guarantee Department will be used to support external trade in competition with our own United Kingdom trade.

Finally, I would say—because the noble Lord was good enough to give me notice that he was going to mention this point—that, as a matter of fact, organisations similar to the Export Credits Guarantee Department for credit insurance are already growing up in the countries of the Commonwealth. I understand that in Canada, Australia and India there are already credit insurance organisations rather on the lines of our own, and that Pakistan is at the moment working on this. The noble Lord used the phrase in his speech, "Could we not be the spearhead of helping along this Commonwealth export trade?" My Lords, I think that, in a sense, we are, because I understand that these credit insurance organisations which are being set up in these Commonwealth countries are being set up with the advice of, and sometimes with the actual secondment of staff from, the Export Credits Guarantee Department here. So, while I in no way want to qualify that, or say that there is no further development that could be done on those lines, I thought it right to point out the limitations which exist to-day, and what is in fact being done in those matters.

The noble Lord raised a number of most interesting points, and I was glad to see that he did not accuse this Department of making a profit and therefore keeping the rates too high. This came out also in the speeches from other noble Lords in the debate. It is a fact that, over the years, this has been a self-balancing Department, not making an undue profit—although, I might mention, this is not in the Statute, but it is a convention which has grown up ever since Export Credits Guarantee Department has been in existence. I think it is a very good convention that it should make neither a profit nor a loss. Over the term of years premium rates have been reduced. I think that in 1954 they were something like 12s. per £100. Now they are under 8s.—something in the nature of 7s. 10.—for short-term business.

The noble Lord raised the question of having an attractive Report like B.O.A.C. I do not know whether the Export Credits Guarantee Department's Report is got out in an attractive format or not. Probably it is not. But there is a tremendous lot of publicity done. I do not want to weary your Lordships with the details, but I have a note of it here. All sorts of pamphlets are issued, one of which I have here. It is an attractive pamphlet.


My Lords, may I suggest that we have it in the Printed Paper Office? I am basing my comments on trying to get something out of the Printed Paper Office.


I do not want to delay the House now, but I have notes here of how many of these things are distributed, and they are very large numbers. There were 44,300 copies of publicity literature issued in 1960, 36 brokers' notes issued in 1960, and 19,680 calls made on firms in the year ended February, 1961. There is a very large amount of Press publicity done. I am sure my right honourable friend will cause the Report to be looked at to see whether it cannot be made more attractive. But a great deal of publicity is being done, and I should like to make that point quite clear.

Another point the noble Lord made was whether we could not take sections 2 and 3 out of the Department altogether and make this, as he called it, a strategic weapon. My Lords, that really raises some very big points. It is an interesting idea, but I wonder whether the functions which the noble Lord envisages should be undertaken by a separate Department are not being sensibly and adequately discharged by the Board of Trade and the E.C.G.D. jointly already. There would be great dislocation and there might be great disadvantages in splintering off these functions. We will certainly look at this point, but I should have thought that perhaps things are not quite so bad as they are made out.

The noble Lord, Lord Hawke, does not like a high bank rate and he does not like inflation. I agree with him on one of these points. He made some Cassandra-like utterances, and I think he was being a little less than fair when he referred to the dead hand of Treasury control and the old-fashioned idea of the Department that credit was the exception. I should have thought that the whole conception of this Department is that credit and the insurance of credit is the rule and not the exception. As to long-term credit figures, I have some figures of what has been done on the financial guarantees since they were introduced in April of this year. I think that, for a start, they are quite impressive. I have figures here showing that, by October 11, 1961, there had been applications involving contract values totalling over £75 million. These have been approved in principle and continue to be the subject of negotiation. A further number of applications are currently under consideration, involving contract values totalling £260 million. Of course, I cannot say how many of these will fail on the test of eligibility when they come to be examined, but I should have thought that that was a fairly large volume of business to be in negotiation within six months of a brand new piece of business being put forward. I should hope that the noble Lord, Lord Hawke, would feel that this, in a sense, is an answer to his complaint or fear that long-term credit (because this is long-term credit) was not given due priority in the Department.

The noble Lord, Lord Peddie, said—and with this we all agree—that kind words butter no parsnips: that exhortations go so far but that we must get down to hard tacks. I should have thought—and I think he would really agree, too—that the amazing success record of this Department, the way that the value of business has increased year by year and the high standard that it has is an answer, at least in part, to his own question. He, again, mentioned rates of premiums and wondered whether they were too high. I have tried to deal with that point already, and the noble Lord will know that over the years they have come down very substantially indeed. He mentioned the small exporters scheme, and here again I think that the figures are very encouraging. This scheme also was started only recently, and by October of this year there were some 446 guarantees issued under the small exporters scheme involving a liability of £574,380. Inasmuch as each guarantee is valid for an ultimate overall maximum of £20,000 of business—it is for £20,000 of business or for two years—there is a potential liability, if you do the arithmetic right (I have tried to do it upstairs, and this is what I think it comes out to), of over £8 million. I should have thought that the small exporter (who is, I would agree with the noble Lord, Lord Peddie, vital) is being cared for and looked after and assisted under this legislation.

Bank charges, which most noble Lords mentioned, are a very difficult matter, as is the whole question of an Import-Export Bank or a Credit Finance Corporation. Noble Lords who are greater experts than I would know, I am sure, that the Minister of State, when introducing the Bill in another place, said that the Chancellor of the Exchequer and the President of the Board of Trade have these matters under most careful review. He said: This subject is under the most active review by the Chancellor of the Exchequer and the President of the Board of Trade, and I am not in a position to say more at the moment. I think we must give attention to those words. I am advised that the matters of an. Export-Import Bank, of a financial institution, of financial credit and of varying rates for export finance and internal finance, are very much under review at this moment and in the light of what other countries are doing.

All I would say is that there must be a balance between the obvious advantage of low rates for exports and the fact that from time to time high internal rates are one of the weapons against inflation. Ultimately exports are promoted by high quality and low cost. The chief enemy of exports and the chief enemy of so much else is inflation. No two people agree perhaps all the time what the best weapons against inflation are, but the objective must be to keep costs down and quality up.

I hope I have covered most of the points raised. I have not yet covered the matter raised by the noble Lord, Lord Boothby, who made (as one would expect) a most interesting intervention at the end of the debate. He said that we have the goodwill and the West Germans have the trade. That is a situation which I am sure must not be allowed to continue. He would be the first to agree that his speech, even under the rules of order in this House, was fairly wide of the mark on this particular Bill. I do not mind that at all. His words will be studied and given attention. I should like simply to say that I cannot believe that there are prejudices. There are risks, but I hope there are not prejudices. I, in my own Department, know how much trade with the Iron Curtain is being sought, because it is often my own Department that is asked if it could not accept food imports to pay for this trade. This matter is not at all foreign to me. There are difficulties of all sorts; there are certainly departmental difficulties from time to time. But I do not believe that this matter is being held back. I do not believe that the noble Lord would really accuse the Government of holding it back by prejudice. But there are real difficulties. My Lords, I hope I have covered most of the points which have been raised, and I ask you now to give the Bill a Second Reading.

On Question, Bill read 2a Committee negatived.