§ 3.20 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION) rose to move, That this House welcomes the initiatives taken by Her Majesty's Government to encourage the export of British goods. The noble Lord said: My Lords, the Government's measures to encourage exports, which are being discussed to-day, must be seen against the wider background of our economic problems and the steps we are taking to deal with them. The House has already debated the measures which the Government had to take immediately on taking office. Your Lordships will recall that in October last we found a situation in which there was every prospect of a balance-of-payments deficit in 1964 far exceeding those of 1955 and 1960, whilst at home industrial production had been flat for many months. The Government did not feel able to let matters drift any further. Long-term measures were needed to get the economy moving again and in a direction which did not involve periodic balance-of-payments crises. But immediate and even drastic measures also were needed to rectify the situation and to provide a breathing space in which the longer-term measures could get under way. On October 26 we introduced the temporary charge on imports to check the substantial rise in our imports which has been a feature of the last two years. I need not dwell on this measure, which has been fully debated, but I would reiterate the Government's determination to reduce, review and finally abolish the charge as soon as it is possible.
§ We have passed through a difficult period for sterling, but the Government's determination to discharge its responsibilities for maintaining the strength of the pound, as evidence by the increase in bank rate, together with the massive support in the form of credits from overseas Central Banks, have enabled us to withstand the crisis. We now have a period in which our constructive measures 275 can begin to take effect. The measures to encourage exports are one part of these.
§ Last year, 1964, was a disappointing year for our trade. The deficit on the "visible" account was very substantial. Exports at the beginning of the year were growing quite strongly, but imports were rising even more quickly. In the first quarter of the year, imports averaged 21 per cent. more a month than in the first quarter of the previous year. By October, imports still seemed to be growing, although less strongly, but exports after the first quarter had been drifting down. This was the situation we faced: imports at a high level, and exports hesitant.
§ The picture has improved in more recent months. The fourth quarter of 1964 showed exports recording a good rise over the third quarter, and that trend appeared to be more buoyant. However, it would be wrong to read too much into the record December figure alone—the monthly variations are an inherent feature of these figures. Taking the year as a whole, exports rose by just over 4 per cent., compared with 1963. Imports, on the other hand, rose by 15 per cent. in 1964, and it is the disparity between these rates of growth which added so greatly to our difficulties on taking office. It is true that much of the unevenness in our exports in 1964 can be explained by the slower rate of growth of our exports to Europe. Our exports to Western Europe were 6 per cent. higher in 1964 than in 1963, but this is the smallest increase for five years, and it includes a fall of 21 per cent. in our exports to Italy.
§ With the large import bill which we have to meet, of some £5½ million a year, we cannot afford these setbacks, even though they may be temporary. We must look for a sustained effort to secure the steady growth in exports which we need, and we should not have to rely on an excessive growth of imports with every sharp rise in economic activity.
§ LORD BOOTHBY
My Lords, could the noble Lord give us any figures in relation to our exports to Eastern Europe?
§ LORD CHAMPION
My Lords, I have not those figures available, and I hope that my noble friend who is to reply to 276 the debate at the end will be able to let the House have them.
We are confident that orderly planning and the abandonment of "Stop—Go" will bring us to a situation in which we can achieve a higher rate of growth than hitherto without the development of a damaging dependence on imports or a weakening in the persistence of our export effort. No one pretends that this will be either easy or painless.
The Government have reacted promptly and vigorously to this situation by making a thorough-going review of the whole range of Government services to exporters and by introducing a series of new and important measures which have been carefully designed to stimulate and help the efforts of British industry in overseas markets. Far be it from me to denigrate the efforts already being made by many British firms in the export field. As my right honourable friend the President of the Board of Trade rightly said, these efforts are already considerable. And some firms have done magnificently. But the time has come to pull out all the stops and to ask exporters, in the national interest—and we hope also in their own ultimate interest—to make every effort within their power to increase their sales abroad. There is room for all—whether the firm be large, medium or small—to make an added contribution to the export drive.
The Government's first obligation was to state the problem in clear and comprehensible terms. We have done this, and I believe that our exporters will rise to the challenge. We recognise, however, that exhortation is not enough, and it is for this reason that the Government directed that a thorough examination should be made of the ways in which the Government itself can be of direct service to exporters within the framework of our international obligations in GATT and to our EFTA partners. Our object is to help firms that are already exporting to do more, and to encourage firms that do not at present export, but have the potential to do so, to make a contribution in this field.
The House will by now be familiar with the measures which the President of the Board of Trade announced two weeks ago. I do not propose to go over these again in detail. They are divided broadly into three parts. First, 277 there are the arrangements for which the focus and motive power will be provided by industry itself, through the British National Export Council, whose scope we have complemented by inspiring the establishment, alongside of, and, so to speak, in double harness with, the B.N.E.C., of the Commonwealth Export Council.
These Councils which are sponsored by all the leading national industrial and commercial organisations, as well as by the T.U.C., include in their membership businessmen of high standing, with long experience in the practice and art of exporting, who are giving their services on a voluntary basis to guide and inspire the national export effort. With the aid of their associated area committees the B.N.E.C. and the C.E.C. are charged with keeping under review our exports in most of our vital markets and are acting to reinforce and stimulate the efforts of our exporters.
We are working with the B.N.E.C. on ways and means of organising collective selling efforts and joint export-promotions activities—on the one hand by giving a fillip to old ideas, such as the so-called "piggy-backing" arrangements through which experienced exporters give a helping hand in export markets to small firms—and on the other hand by investigating, through a working party, the feasibility of setting up a new form of collective selling organisation, to mobilise the export potential of small and medium-sized firms who at present export little or nothing at all. Our aim is to find some practical scheme of collective selling that will co-ordinate the efforts of every firm that may have something to contribute to exports. Let me hasten to add that we want to complement, and not to supplant, the services already provided by export merchants.
We have equipped the B.N.E.C. with two new measures which enable them to offer financial assistance towards the cost of trade missions and collective market research. We are confident that these facilities will encourage more businessmen to go overseas in search of markets for their products and will ensure that more potential buyers are brought to see our wares in Britain. It is open to any trade association or chamber of commerce to seek out opportunities for useful missions and market research and to put forward their proposals, and I have no 278 doubt that they will not be slow to take advantage of the facilities now offered by the Government.
We are indebted to our predecessors in office for having created the B.N.E.C., though I think we may fairly claim not only to have grasped but to have positively developed the usefulness and importance of the functions which this body is eminently qualified to perform. Perhaps I may be permitted to take this opportunity to express once again the Government's appreciation of the valuable services which Sir William McFadzean and his colleagues on the B.N.E.C. and the C.E.C., with their area committees, are giving to British exports. We are extremely grateful to these gentlemen.
The second leg of the Government's efforts to help exporters is the review, to which I have already referred, of the Government's existing wide range of services at home and overseas. These are superior to anything provided by any of our competitors, and we shall see not only that this remains true but that they are improved in every possible way. The export officers attached to the staffs of Board of Trade Regional Controllers already make well nigh 20,000 visits a year to firms on matters of export business. Overseas officers of the Diplomatic Service are anxious to help exporters in every possible way and to give priority to such work. Their advice and willing assistance are freely available to exporters.
The Government provide a service which is highly thought of by industry in the provision of facilities for participation in overseas fairs, trade weeks and the like. These services are being extended and provision is being made for a substantial increase in expenditure to meet the increasing demands that it is expected and hoped will be made on them. There is already plenty of evidence of appreciation by industry of the export services provided by the Government. However, we shall in the next few weeks be launching a publicity campaign in a renewed effort to ensure a greater general awareness in the country of the vital need to increase exports, and more particularly as wide a knowledge as possible in industry of the services offered by the Government at home and overseas to those who are keen to increase 279 their exports. We want to see firms throughout industry making the fullest possible use of Government facilities for exporters.
In addition, Government Departments will now organise, directly or through the appropriate Economic Development Committee, a programme of meetings with industries to pursue in detailed discussion the problems which each industry encounters in promoting and exporting its products. The E.D.C.s will take a special interest in problems of production and in action to increase the supply of goods available for export. The purpose of these meetings with industry is to ensure that full use is made of the new export facilities; to explore all practicable methods by which exports may be increased, including the establishment of export groups where these do not now exist; and to discuss ways and means of financing export promotion development councils.
Thirdly, I should like to turn to the new developments in the field of export finance. With the growing volume of exports sold on credit terms, we fully recognise how important it is that finance for exports should be readily available at a reasonable cost. With the full cooperation of the clearing banks, two measures have been introduced which will provide significant improvements in the present arrangements. First, the Export Credits Guarantee Department have made their bank guarantees, hitherto confined to capital goods contracts of not less than £100,000, available for all manufactured goods contracts over £50,000 involving credit of at least three years. As part of these arrangements, the clearing banks have agreed that the fixed rate of 5½ per cent. for advances covered by a bank guarantee will similarly be extended.
The provision of bank finance at the fixed rate of 5½ per cent. has also been extended, as announced by the Bank of England, to cover the longer-term element of loans covered by E.C.G.D.'s financial guarantees. These are loans of ten years or more duration made directly to overseas purchasers to finance the supply by British firms of large capital projects and ships for which long-term credit is appropriate. Under these arrangements, it will no longer be necessary to call on the insurance company and other City money at 6½ per cent. which previously financed 280 the longer element in these loans. This will reduce the average interest rate payable by between ½ per cent. and ¾ per cent. a year, depending on length. This new facility offered by the clearing banks, which the Government welcomed warmly, will also simplify the procedures under which the money is provided.
These measures will make our exports more competitive in the medium and long term credit field where the cost of finance forms a substantial element in total costs, and where it is important that there should be certainty about the availability of credit at a fixed rate throughout the period of credit. While we hope that this will increase our sales, I must stress that we do not intend that it should lead to a lengthening of the credit terms which E.C.G.D. are willing to cover. It is in nobody's interest to encourage a credit race, and we have to bear in mind in these cases the desirability of our getting paid for our exports as quickly as possible. The measures that I have outlined have been widely welcomed by industry.
I should also like to refer to, and of course must, the Government's new export tax rebate scheme which has now been successfully launched. The first claim period for rebates has just ended, and I expect British industry to take full advantage of this measure. It has rightly been described as a positive and practical token that the Government are prepared to support export endeavours with more than exhortation. The figure of about £80 million which the Government estimate they will repay in the course of a full year is a substantial one. Those industries with the best export record will, of course, derive the maximum benefit. Cars alone are likely to receive over £5 million, and the motor industry as a whole £10 million; the electrical manufacturers some £5½ million; the agricultural and horticultural machinery producers £2½ million, and so on. Properly applied, sums of this order must have a significant effect on the position of British products in overseas markets.
In removing the encumbrance of the indirect taxes which are now being rebated, I believe that the Government have taken a positive and useful step. There has. I believe, been some criticism that it does not go far enough; that larger rebates are available, for example, to 281 German and Italian exporters. This criticism misunderstands the position. In Germany and Italy there are turnover taxes which, broadly, are levied at all stages of production and distribution when goods change hands. German and Italian exporters can claim a rebate of these taxes on the goods they export. Similarly, French exporters are exempted from the added value tax. The nearest counterpart we have in Britain to these taxes is the purchase tax; and this, of course, is not charged on exported goods. Our own scheme affords relief in respect of the duty on hydrocarbon oil, the vehicle Excise duly and the small element of purchase tax which enters into the costs of production, manufacture or carriage of goods exported from this country. The amount of the relief is determined by calculations of the taxes borne in the course of production of general categories of goods. Remissions of more than these amounts, or certain other types of relief—for example, the remission on exports of direct taxes, such as income and profits tax and social welfare charges—are ruled out by our international obligations in respect of export subsidies.
The figure of £80 million is a large sum of money for the Exchequer to forgo, and we hope that it will be used by firms in a manner best calculated to increase the value of their exports. In some cases it may be applied to reducing prices; in others it may enable previously unprofitable export business to be undertaken; or, again, it may be used to improve the service which the British exporter can offer to his overseas customers, or to develop new markets. The choice of method will vary according to the circumstances, and we are happy to leave it to the experience of those engaged in the trade, bearing in mind the national interest as well as their own.
I realise that, in the last resort, it is the efforts and enterprise of industry, and the competitiveness of its products, that win and hold export markets. The Government are anxious to give public recognition to outstanding achievements in the export field, both by individual and particular industrial units. The New Year's Honours List included for the first time a new citation, "For Services to Exports", and the House will remember that a week ago the Leader of the House announced that, with the approval of Her Majesty the Queen, the 282 Government propose to introduce arrangements for awards to industry. Prince Philip has graciously consented to act as Chairman of the Committee which will work out this scheme. This announcement has been warmly welcomed on all sides.
My Lords, at this point in my speech I must say a word or two about the Amendment which appears on the Order Paper. When I put my Motion down, my purpose was twofold. One purpose was to try to assist in publicising the measures the Government have announced. The other, and even more important purpose, was to initiate a debate in which noble Lords who have wide knowledge in the general economic and export field would participate. I have been a Member of your Lordships' House for only three years, but during that period I have come to realise that, on its best days, it has no rival for the outstanding contributions that are brought to a debate by the knowledgeable Members, many of whom can come only when their particular subject is under discussion. I had hoped that this debate would have been such an occasion, for I had in mind many noble Lords from both sides of the House, and from both sides of industry (although that is a term I do not like to use when thinking of the overriding national interest), and I was looking for constructive criticism but, even more, for helpful suggestions—suggestions that would arise out of practical experience in this vital matter of export stimulation.
In parentheses, may I say how much I welcome on the list of speakers the names of the noble Lords, Lord Erroll of Hale and Lord Byers, both of whom are old Commons colleagues of mine? The one comes to us with all the knowledge acquired in high ministerial position. Although he was introduced here only yesterday, I would not say that his is too hasty a maiden. The other, I know from experience, can lay about him with great vigour—indeed, he castigates so often, equally, both of the major Parties. I would say, too, that his speeches always contain a constructive element, and I hope that the more constructive element will predominate in his speech this afternoon. I very much look forward to the speeches of both the noble Lords whom I have mentioned.
283 I can assure the House that when I put down the Motion I was not trailing my Party coat. When I saw the Amendment on the Order Paper, my first reaction was to say, "Ah! A good old Party dogfight!", and to dig up the failures of past Administrations—and they are not hard to find, for the incontrovertible figures of proof are there. But then, on reflection, it seemed to me that, on this matter of exports, on which the whole future of this nation depends, we want a united national effort. We want the nation to pull together, forgetting for this purpose Party differences and those elements of class warfare such as still exist in our society. This is the spirit of the agreement by the Trades Union Congress and the four employers' organisations on prices and incomes, which will be announced later this afternoon.
As an old hand at this political game, I do not shrink from Party controversy, and, having so often listened to the noble Earl, Lord Dundee, I know that he does not, either. But I also know that he recognises that the national interest transcends Party issues, and I am confident that he will join me to-day in hoping that the initiatives taken by the Government in this matter of exports will be of real help in solving our balance-of-trade problem.
My Lords, I end by saying that the study of the measures to stimulate exports will be a continuing process. This debate to-day will be carefully read; and, in consultation with the British National Exports Council and other organisations, we shall continue to consider ways and means of increasing exports. In the meantime, I invite the House to endorse the Motion which I now move.
§ Moved, That this House welcomes the initiatives taken by Her Majesty's Government to encourage the export of British goods.—(Lord Champion.)