EXPORTS AND GOVERNMENT POLICY

HL Deb 11 February 1965 vol 263 cc284-95

3.52 p.m.

Debate resumed.

THE EARL OF DUNDEE rose to move, as an Amendment to the Motion, to add at the end: "but regrets that the policies and actions of Her Majesty's Government have done much to prejudice export prospects." The noble Earl said: My Lords, I am disappointed by the delay of the Statements which has rather cruelly precipitated my own remarks on your Lordships who, I am sure, were waiting to hear the announcements on incomes policy and firearms with keen anticipation. But in the circumstances I must now immediately move the Amendment to this Motion, to add at the end: but regrets that the policies and actions of Her Majesty's Government have done much to prejudice export prospects.

But before I do so I should like just to assure the noble Lord, Lord Champion, that I am very grateful for the moderate manner in which he moved his Motion and that we most genuinely and heartily welcome everything that Her Majesty's Government are doing to promote and encourage British exports. The only purpose of my Amendment—it is not proposed to alter one word or syllable of the self-congratulatory words of the noble Lord's Motion—is to set these words in their right perspective.

The Statement which we were expecting from the Prime Minister to be made in both Houses the week before last, owing to the circumstances of that week could not be made in Parliament, and it had to be issued instead to the Press by the President of the Board of Trade. It is a Statement which I think describes some very useful advances in the help which we give to our exporters. I am particularly grateful to the noble Lord, Lord Champion, for the clear exposition which he gave of this Statement, because it is a fairly lengthy document and it contains one or two of those lucid gems of English prose which we sometimes meet with in Departmental pronouncements, such as the last paragraph of the section on export finance, which reads: Taken together, these two charges will substantially widen the field within which exporters can get finance at the fixed rate of 5½ per cent. instead of either at fluctuating overdraft rates or at the 6½ per cent. rate hitherto applied to the longer-term element of export lending, and constitute a major development in our system of export finance.

I am quite satisfied that the intentions behind this epigrammatical observation are entirely benevolent.

The growth of the work done by the Export Credits Guarantee Department has been going on very rapidly for a very long time. In the early 1950's the insurance covered about one-tenth of our export trade. Last year it covered one-quarter. That represents a value of something over £1,000 million. The premium rates have been progressively reduced. There was a reduction only last August of 10 per cent. in the premium rate; but there was a much larger reduction, I think it was two or three years ago, which amounted to as much as 50 per cent. on shipbuilding and 25 per cent. on a fairly wide range of other goods. And this was accompanied by special facilities both for the small firms and for the longer periods of insurance. I quite agree with the noble Lord, Lord Champion that they ought not to be interminable periods; but we did extend these periods of insurance.

The British Export Credits Guarantee Department is probably the largest organisation in the world doing this kind of thing, and I think that British exports are better covered in this way than those of any other country. The improved facilities for insurance given by the Department enabled the banks also to give better and more stable interest rates. It was three years ago that the clearing banks agreed that they would lend money at the rate of 5½ per cent., which would not fluctuate with the bank rate but would remain constant on contracts worth £100,000 or more guaranteed by the Export Credits Guarantee Department. Now, as the noble Lord has just told us, this minimum limit has been reduced from £100,000 to £50,000, which I think will be very helpful.

I welcome very genuinely the noble Lord's announcement (or rather the announcement of the President of the Board of Trade which the noble Lord described again) of the formation of the Commonwealth Export Council, as he said, in double harness with the British National Export Council, with Sir William McFadzean as its chairman. Both he and his colleagues whose names are published in this State- ment are men of great experience and great public spirit. I am also very glad to hear the news in the Statement that more money is to be spent on trade fairs and British Weeks. I have not been lucky enough—which probably some of your Lordships have—to be sent to a great many of the trade fairs; but in the few which I have seen—and I have no doubt in all the others too—the public money which has been put up for them has been very well spent, and I think that a little more expenditure would have paid off. Advertising in trade fairs pays the nation just as well as advertising in newspapers or on television pays a private firm.

I do not propose to make any adverse criticism of the export tax rebates scheme which the noble Lord explained, although perhaps it may be a little more open to criticism than other measures of which he spoke. It is estimated to cost £80 million and it may perhaps be doubtful whether the value to our export trade will be more than marginal.

The late Government examined this question, of course, continuously, as all Governments must do. The reason why we did not apply any tax rebate scheme of this kind was that, on the whole, we are more dependent for our living on exports than most of our competitors and we felt that if an international race in the granting of fiscal privileges in exports were once to start and get going, then, in the long run, the disadvantages which we might suffer might be greater than the gains that we should derive from it. But now that the Government have taken the risk, let us all hope that we shall get away with it.

I think it ought to be added that in this matter, as a general rule, we have been far more scrupulous than most other countries. I understand that the Government's legal advisers are of the opinion that these tax rebates on indirect taxes do not contravene our obligations under GATT. If that is so, I do not really see any reason why this tax rebate scheme should be associated in any particular way with the so-called balance-of-payments crisis, which the Government claim to have discovered last autumn. I do not think that the Government have given any indication of any intention to remove these rebates if and when they should come to the conclusion that there is no longer a balance-of-payments crisis. If it should prove that they are of real value to our exports and if they are not followed by any adverse consequences, I think that they might well be continued indefinitely.

I think that all noble Lords welcomed the announcement which was made in this House last week, and to which the noble Lord referred again, that an Export Awards Committee is to be set up, under the chairmanship of the Duke of Edinburgh, to make awards, whose nature will be determined by the Committee, to units—firms or individuals; it is not necessarily defined at this stage—who have outstanding achievements in the export of goods or in technological innovations. Probably many of your Lordships took some part, as we were all asked to do, in the export drive two or three years ago, when many of us agreed to do what we could to stimulate interest among firms and local chambers of commerce in our own areas. We found, I think, a great difference between one firm and another and sometimes between one chamber of commerce and another in their outlook. There are a great many of them anxious to export more, especially small firms, but they just do not know how to begin, how to get the right information and set about it. It is the Government's job to see that they have the facilities for obtaining this information. I think that most of these bodies are not thinking mainly of simply making more profit by selling at home or abroad. I think that they are all keen to do what they can, if they had the opportunity, to help the country by a more adventurous export policy. I think that we ought not to overlook the good that can be done by a system of awards of this kind. Of course, their value cannot be measured, but they may do a great deal both to stimulate and to sustain the continuous interest in exporting more goods abroad which we must spread throughout the community if we are to achieve our aims.

The noble Lord, Lord Champion, I thought, sounded just a little hurt about this Amendment. He told us that he had been hoping so much that, in putting down this Motion, he would assist in publicising these good measures and that he would provide an opportunity for con- structive criticism and helpful suggestion. I should like to say to the noble Lord that nothing gives me more pleasure than to tell the Government when they are doing something really well. I like to do it. And I wish that my commendation of the Government for what they are doing could be entirely unrestrained. But even the most favourable comment on the most wonderful achievements must sometimes contain some qualifications—like the report of the schoolboy, who had a very bad report at the end of his first term but at the end of the second term had a much better one, which said "Now that this boy's handwriting is really beginning to improve, I have at last been able to discover that he does not know how to spell."

I am delighted, and I want to do all I can, to compliment the Government on the improvement of their handwriting but, in spite of the heartrending appeal of the noble Lord, I cannot altogether neglect my painful duty of pointing out one or two spelling mistakes. I sincerely hope it will not arouse the noble Lord's apprehensions that we are going to have anything in the nature of a "Party dogfight" about this—I think that was the phrase he used. Of course, in our political discussions, particularly about the economic situation, there are some things on which we must disagree and others on which we can agree. I would say to the noble Lord that I am always anxious to minimise as much as I can the area of disagreement and find as much agreement as is possible.

I think that we do disagree, and possibly must disagree, about our assessment of the present economic situation. I have said before, and must maintain, because I believe it to be true, that the state of our economy is both sound and strong and that it has been sound and strong during the whole of last year. I must maintain that, because I believe it to be true. I know that during the summer the rise of industrial production for several months seemed to have halted. But the latest figures in November have shown that in this November compared with last November there has been a rise of between 5 and 6 per cent. in our industrial production. That has not yet been translated into gross national products, but I should think it would be not far off a 4 per cent. increase in the gross national product, which is supposed to be our target. As for the export and import figures for December, which were published the other day, like the noble Lord, I do not think one should ever lay too much stress upon one month, but, so far as this one month goes, it seems to be implementing Mr. Maudling's estimate, which he made in advance a long time ago, that we should have a difficult period during the latter part of 1964, but that by 1965 exports would begin to rise and imports would begin to flatten out. That is a subject on which we may have to disagree.

What I think we should all agree about is that, however good the increase may have been in our exports—and it has been very great indeed over the last year: an increase of 4 per cent. in the last twelve months, and 8 per cent. in the twelve months before that—and however much satisfaction that may give us, we shall have to achieve a still greater acceleration in our exports if we are to achieve our aims of maintaining a gross national product increase of 4 per cent., and, indeed, if we are to hold our position as a leading country in the world. The reason why I have put down this Amendment is simply because I think there are certain features of the Government's foreign policy and economic policy which will prejudice our chances of being able to do this, and which will result in our exports over the next two or three years being less than they would otherwise have been. Both in foreign affairs and in economic policy I think they have damaged the future prospects of our export trade.

At the end of July, in almost the last debate we had in the old Parliament, we debated Foreign Affairs, and I had the duty of speaking for the Government. I then spent a little time dealing with the position of our exports to South Africa. Although it was in another Parliament, I do not want to repeat anything that I said then, but I must make our position clear in this matter. The Government's decision to stop the export of arms to South Africa has been represented to us as a moral issue, a question of right and wrong, which I cannot accept, and I must repeat to your Lordships the substance of what I said in our debate last July. There had been in the previous December, on December 4, a vote in the Security Council of the United Nations asking Members not to send arms to South Africa. The Motion was supported by the United States and by many of our friends in the Security Council. We believed that it was an entirely false and mistaken idea, and just as mistaken as the American idea that it was immoral for us to send any goods of any kind to Cuba when all the American countries had decided not to trade with them. We thought that was an entirely false policy which would not achieve the results that were desired to be achieved. We also thought that the policy of the majority in the Security Council in favour of stopping arms being sent to South Africa was mistaken and wrong.

We could have easily safeguarded our own position in the eyes of the world by vetoing this resolution, and perhaps it might have been better if we had vetoed it, but we did not do so, because it was not necessary. It was not a mandatory resolution under the Charter. We made a statement, as I told your Lordships last July—it was made by our representative Sir Patrick Dean—which plainly said to the world that we should go on with what we are then doing. We had already decided to stop sending to South Africa anything which would most probably be used for the purpose of civil repression, but not weapons which were necessary for the defence of South Africa against aggression. We stated to the world then that we were going to interpret the resolution in this way, and nobody had any doubt about our attitude.

You may say, if you like, that we erred in perhaps pandering to false and irrational emotion on this. And if you said that, I dare say there might be something in it. There is a general convention that you do not veto a resolution in the Security Council unless you are the Russian delegate, or unless it is a very exceptional case of necessity, and we felt that it was unnecessary to veto this if we made our position clear. Therefore, we were in my submission under no kind of moral obligation to take the action which the Government have now taken in banning all arms to South Africa.

Let me remind your Lordships of this. It is very easy to indulge in false emotionalism of this kind if you do not have a very large trade with South Africa, which most of the nations who passed the resolution had not got. It does not hurt them if we bear all the burden of applying this Resolution of stopping sending arms to Africa and reducing our own trade. I think it is wrong and foolish of us to do it. I think it is a shameful surrender to irrational emotionalism which we should have been in a position to stand up against, because, in my submission, it will not have the slightest effect on the South African Government's policy. It will not cause them to move further away from apartheid, a policy which we deplore and abominate. It will not make them in the least more liberal; if anything, it will make them rather more obstinate.

I feel that some people are somewhat selective in their ideas about this. Nobody ever suggests that by putting a ban on the export of arms to Ghana you will prevent President Nkrumah from sacking all his judges when they acquit an accused person he wants to be convicted, and then, having sacked the judges, insisting on the execution of the accused persons who have been legally acquitted of the crime with which they were accused. That is just as much an interference with basic human rights as apartheid in South Africa. But nobody suggests that the proper remedy would be a trade boycott. In the case of Cuba, of course, lots of people have suggested it. But we do not agree with the suggestion. We do not think that the right way of persuading other countries to change their domestic policies is to stop trading with them, unless, of course, you are going to war, in which event it would be a case of blockade.

Therefore, I greatly deplore that the new Government have made this false and foolish concession to what I regard as unreasonable emotionalism by those who voted for the Motion in the United Nations Security Council. And the cost to us will be very heavy. Our total trade with South Africa last year was £200 million of exports, against only £120 million of imports. We had a very large trade balance. How much of that was due to arms I have not the figures for, but it has been estimated that over the next three years we may lose at least £150 million of exports by having foolishly and unnecessarily thrown away this large and valuable market so particularly valuable to our aircraft industry, which is now in such difficulties. In return, we shall have gained precisely nothing. We will not improve the position in South Africa one jot or one tittle by this suicidal policy of refusing to export.

I think there is even less excuse for the deliberate affronts to Spain by the present Prime Minister, which have first of all cost us the contract, which was almost "in the bag", of £11 million for frigates, and which will probably cost us three or four times as much, which we should have received as a supplier to Spain of the material for her new programme of military expansion, if we had not first offended the Spaniards, who are a very proud and sensitive people, and then refused to have our usual annual exercises with them. I am afraid the consequence is that these contracts have now gone elsewhere, and it will be a very great loss to our export prospects for the next three years. These injurious things which we have inflicted on our own exports in South Africa and in Spain, I hope are not irreparable. But they may be, and I am afraid the Government are not particularly concerned about repairing them.

When we come to EFTA, there I have more hope. Not only do I hope that we may be able to repair the damage that has been done to our relations with EFTA last autumn, but I hope and believe that the Government are anxious, as we are, to put them right. It is most essential to our future as a trading country that this should be done. What we want in order to get a really big increase in our export trade is a much larger home market—a much larger free market. The rejection of our application to join the Common Market two years ago may be final, or it may not—we do not know. But for the moment there is no prospect of our joining. But we have this partnership with these other six European countries—seven or eight, with the associates. Their population is only half that of the European Economic Community, but their wealth, their income, is considerably more than half; it is more like three-quarters. Not only is EFTA an extremely valuable base for common free market production in itself, but our association with these other EFTA countries, and our retention of their confidence, will be an enormous help to us in overcoming the obstruction to the Kennedy Round, which is another of the great export problems, far more vital to the future of our trade and of world trade than anything which was mentioned in the speech of the President of the Board of Trade the week before last.

If we can keep the confidence of EFTA, which was very nearly lost, and certainly gravely lowered, by the precipitate action of the Government in imposing these import surcharges last October, we shall be making the best use of the best hope we have of achieving a real major breakthrough in world trade. I think that the failure to get into the Common Market was a blow, not so much to our exports as to the prosperity of the whole Free World. I think that our association with EFTA is one of the most hopeful instruments for the future in repairing that misfortune.

I think the Government have also prejudiced the future of our export trade by lowering our competitive power and by raising prices. I do not think it was necessary to have this autumn Budget putting an additional 6d. on petrol and 6d. on income tax. I know that it is justified by the Government on the ground that they needed the money to pay improved pensions next year. But I was one of those who believed Mr. Callaghan only two days before the Ejection on October 14 when he said at Cardiff that the Labour Party would be able to pay for all its improved social services out of economic growth. One reason why I believed that was that we ourselves had done so for the last thirteen years. We had raised pensions for a married couple from 40s.-odd to 109s. but not by increasing taxation—we had actually reduced taxation considerably during the whole of that period. We thought the Labour Party would be able to do the same thing.

I think it is a big error at this time to raise our cost of production, as must be done if you put up the price of a commodity like petrol and if you raise direct taxation. We do not yet know what the corporation tax is going to be like, although it looks very much as if it is going to be a form of double taxation—taxation on the profits of companies, with income tax paid all over again on anything over that which the companies distribute in dividends. All these things are bound to put up our costs of production and to lower our competitive power in the markets of the world. What we need is more competition and lower prices.

I was glad to notice that in the debate in another place the other day the Prime Minister indicated that the Government were preparing a Bill dealing with monopolies and restrictive practices. That is a measure to which we should have given first priority, if we had been in office now, having already dealt with retail price maintenance. I am very glad that the present Government are preparing this measure. We need more competition. I will not argue about the bank rate, because I know that the Government are as anxious to bring it down as we are to see it brought down. I will only say that in my view it need never have been raised if the Government had not needlessly created an atmosphere of crisis in the economic situation. That may be a matter about which we disagree, but I think it is true, and I am bound to say it. What we want is more competition and more friendship with foreign countries, even those with whose internal structure or policies the Government disagree. Do not throw way trade for the moral satisfaction of abusing a country whose domestic policy you do not like. We want more readiness to trade with other countries, in spite of political disapproval, and we want to do more to promote freer world trade.

If I may very humbly submit to the Government the advice which I would give to them, it is this. Rescind your mistaken decision to stop sending arms to South Africa; try to make friends with countries who will be good customers, like Spain; try to repair the damage to confidence which has been inflicted upon EFTA; and abolish the extra taxes which were put on in the Budget last autumn. I know that we cannot expect taxation to be heavily reduced, but at least it ought not to have been increased. Abolish those taxes, take off the import surcharge, bring down the bank rate, advance the date for the Bill dealing with monopolies and restrictive practices, and, if you find your timetable is too overcrowded, then make room by throwing overboard the out-of-date and foolish Bill for creating a national monopoly in steel which would, in my view, inflict greater loss on our future export trade than anything that may be gained by all the measures which the noble Lord, Lord Champion, has so clearly explained to us. When the Government have done these things, but not before, we shall then be willing to give them our unqualified congratulations on encouraging the export of British goods. I beg to move.

Amendment moved—

At the end of the Motion to add: but regrets that the policies and actions of Her Majesty's Government have done much to prejudice exports prospects."—(The Earl of Dundee.)