HL Deb 11 February 1964 vol 255 cc495-501

3.44 p.m.

Debate on Second Reading resumed.


My Lords, I should like to thank the noble Lord, Lord Stonham, for the welcome he gave to this Bill, and I certainly agree with him on its importance. I do not want in any way to detract from the achievements of the Labour Government, but in indicating that this Department was started by the Labour Government in 1949, I think it is perhaps only fair to say that the Government first entered into credit insurance in 1919. This has a fairly long history behind it.

The noble Lord raised a number of points and he put them under three headings. First of all, he wondered whether the present provisions or rules under which the Export Credits Guarantee Department work were sufficiently flexible; secondly, he wondered whether they were broad enough in scope; and, thirdly, he thought perhaps they were not sufficiently forward-looking. I think perhaps it is right to remember in dealing with the whole of this problem that what we are doing here is credit insuring. The whole object of E.C.G.D., the original and principal object of overseas credit insurance, is to insure the credit and to relieve the exporter of the risks involved in giving credit to his overseas buyers. I thought that a great many of the noble Lord's remarks were concerned rather more with pure finance than with the insurance of credit. But I would admit, of course, that finance does come into this in so far as the Government are making money available under Section 2 to overseas Governments.

First of all, the noble Lord wondered whether we were in a position to match credit terms. Well, I feel that there is a good deal of misunderstanding about this. Of course we have gone a long way in recent years to match credit terms. Before 1960 there were a large number of cases—and they were increasing—where credit exceeding five years was given by foreign Governments with the support of foreign governmental facilities. We are, of course, members of the Berne Union. He did not say so; but it is a fact that Japan is not. And members of the Berne Union agree to limit so far as possible the credit they give to five years, and to exchange information in those cases where members extend credit beyond five years.

We have always been reluctant to cover more than five years' credit; but financial guarantees, by their nature, generally—in fact, I would say invariably—exceed five years' credit. They give the freedom which foreign insurers enjoy to select appropriate projects for which more than five years' credit is clearly necessary. But, over and above that, there is a matching policy under our standard supplier credit guarantees whereby we support our policy-holders in meeting competition beyond five years. With all these facilities, our firms are fully as well placed as foreign firms to secure business on longer credit terms.


My Lords, could the noble Lord say, in that case, where we are in competition with the United States why the Leyland Company could not get insurance for credit terms that were required by the Pakistan Government?


My Lords, I was coming to that. The noble Lord raised this point later in his speech, and the information I have is that E.C.G.D. were not approached by the Leyland Company on this transaction. I understand that my right honourable friend the Minister of State has written to Mr. Jay, and I will send details to the noble Lord. But I was going on to say that matching policies always involve getting, evidence of competition, and obviously vague allegations that longer terms have been offered are not enough. We all know that in competition of this kind failure to get an order is sometimes attributed to advantages which the competitor has and which one is said not to have oneself. Obviously there are difficulties in getting evidence, but such information as I have does not suggest that it is impossible to obtain.

Obviously we are ready, through our Embassies overseas and our contacts in the Berne Union, and so on, to investigate with promptitude and as widely as possible any allegation that comes our way. I should say that we have made these investigations in some 330 cases since the introduction of matching cover in October, 1960; and also that it has been possible partly through these inquiries to establish a volume of general evidence of fairly constant longer-term credit competition in certain fields. That goes of course particularly to ocean going ships and jet aircraft. For such business, we have been able to dispense with specific evidence of competition to support longer terms. I think that, while it is often alleged that E.C.G.D. is slow to agree to matching terms, it will be found that in the period of two and a half years we have agreed to matching in a very considerable number of cases.


My Lords, before the noble Lord leaves this question of matching credit terms, could he tell the House whether the United States of America is a member of the Berne Convention to which he referred? Because I believe I am right in saying that American locomotive manufacturers are able to give fifteen years' credit through the assistance given by the United States Government. That is causing great concern to the locomotive manufacturers of this country, who are very desirous of co-operating more fully with the European manufacturers, and their feelings are shared by the European manufacturers who were members of C.E.L.T.E.


My Lords, I am sorry that I cannot answer my noble friend, but I will certainly look into this matter and let him know about it.


My Lords, could the noble Lord answer the question whether the United States is a member of the Berne Convention?


My Lords, I beg my noble friend's pardon. Of course, that is so. I am obliged to the noble Lord.

I come now to the question of smaller exporters. The Small Exporter special experimental scheme has been, as I think I indicated, under Section 2 rather than Section 1. I thought that the noble Lord was particularly concerned with the contention of the F.B.I. that we should do something more to meet competition in ranges of £100,000 and under. So far as small exports are concerned, most of these arrangements are in the ordinary supplier way, where the normal credit given is for six months and an extension cover can be given for up to five years. In larger contracts and transactions this becomes a much more difficult matter to arrange, but I can assure the noble Lord that every application is considered on its merits and that in this connection the question of the credit that competition has given is also taken into account. I do not think I can carry the matter further to-day, but I shall be glad to go into it further and consider what the noble Lord has said.

The next point the noble Lord raised was that of the financing of expanding business. Perhaps I have already answered that by saying that we were really concerned here with credit insurance and not with the financial operation itself. It is true, of course, in the normal way that a bank guarantee applies from the time of the acceptance of the goods by the importer who is being supplied. On the question that the noble Lord raised regarding coverage for international consortium interests, I may say that we are in touch with the suppliers of credit facilities in other countries and so far as possible cover these arrangements. There are many highly complex problems arising from this side of export business. This is undoubtedly an increasingly important form of contracting, and it would be quite wrong not to do the best we could in order to support British industry in this field. We have reached satisfactory arrangements to collaborate with other credit insurers so that our cover and theirs may be properly interlocked in supporting our respective firms.

Of course, we are not able under the terms of the Act as it now is to insure people other than British suppliers, so I think the proposal the noble Lord made, that we should try to cover the entire transaction—that is, all parties to the contract, no matter from what country they come—would not be practicable as things are, nor, according to the information I have, would it normally be necessary, because each member of a consortium would be able to get credit facilities from his own country. Therefore it is a question of interlocking these provisions rather than having one single organisation to provide for all of them. Perhaps one of these days we shall have such an organisation, but certainly we are not there yet.

I thought that my noble friend Lord Hawke was a little pessimistic in his general approach to the whole of this matter. After all, one of the main functions is to ensure the credit of the importer, and we all know that even without the world being in too great a state of disarray, countries do get out of balance in their payments and have to put restrictions on the transfer of payments or intervene in one way or another, making life difficult for the exporter. It is to cover all these various risks that we have this kind of legislation.


My Lords, may I appeal to the Minister of State to be as gentle as he can with the noble Lord, Lord Hawke? After all he was speaking as a true Conservative. He does not like State activity of any sort. In fact, he is a sort of Tory anarchist. I respect Tories who are really Tories. What worries me are the Tories who are running away from their principles.


My Lords, as my name has been mentioned, may I rise to say that I spoke because I happen to be one of the people engaged in world trade, in which I believe Ministers of the Board of Trade have not usually been engaged. I do not mind State enterprise at all in its place.


My Lords, I cannot say touché on that one, because I myself was engaged in world trade at one time. But I really do not understand the point that the noble Lord, Lord Morrison of Lambeth, has taken, because, as I have made very plain, this is a field which it has long been recognised is outside the scope of private enterprise. This is essentially a field in which it has long been seen that the Government must intervene, and we on this side of the House are all for ensuring that the Government do their job where there is a job for the Government to do. This, I believe, is one of them. I hope I have dealt with most of the points that have been raised.


My Lords, that means that in this case the Government are taking the place of private enterprise because private enterprise is not able to cope with this matter.


My Lords, we are here concerned not only with the question of insuring credit for private individuals—that is, where the private individuals fall down on their obligations—but also with cases where the Government intervene so that the private individual is not able to carry out his obligations, whether he wants to or not. It seems to me that if a foreign Government is intervening in this way it is not unreasonable that the home Government should step in and help to ensure that our exporters are paid for the goods they export and the services they render abroad.


My Lords, is it not merely a question of taking an insurance payment from the exporters in order to guarantee the loans advanced by private enterprise banks, and the Government then make payment to insure it, and the Government make a profit on it? But they step in where there was no one else in private enterprise who will do the job. Is not that it?


I thought I had made it plain that this was a proper function for Governments to perform. The function of banks is insuring in normal circumstances.


The noble Lord is still qualified to come over.


Here we have a Government that is intervening in order to insure not only ordinary credit but the results of Government interventions of one kind and another all over the world. This is the assurance that can be given to exporters: that, no matter what goes wrong in the world, they can be assured of getting, not all their money, because we ask the exporter himself to bear part of the risk, but a large proportion of it. As I have said, I think this is not only a proper function for Governments, but is a function that was one of the arrows in the quiver of Government, so to speak, before we ever had a Labour Government in this country.

On Question, Bill read 2a: Committee negatived.