HL Deb 07 April 1970 vol 309 cc97-114

6.58 p.m.

THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)

My Lords, I beg to move the Second Reading of the Export Guarantees and Payments Bill, which has as its main object the raising of the statutory limits which are set on the liabilities of the Export Credits Guarantee Department. This Department is run as a fully viable business organisation and for over fifty years has fulfilled its mandate by providing a cheap and efficient credit insurance scheme and, taking one year with another, makes neither profit at the expense of our ex-porters nor losses at the expense of the Exchequer. The premiums which the Department charges for its guarantees have, over the years, been cut many times. Indeed, for comprehensive cover up to six months premiums have dropped from 9s. 7d. per £100 in 1959 to under 5s. for £100 in 1969.

Since this House last debated the work of E.C.G.D. in 1967, the Department has continued to expand its facilities. In 1967, it covered 30 per cent, of British exports. The figure has now risen to 35 per cent, of a very much larger total of exports. E.C.G.D. has also introduced new facilities. It has, for example, been very active in negotiating lines of credit whose purpose is to act as a spearhead to create new opportunities for British exports. E.C.G.D. has extended the technique of guaranteeing a loan by a British bank to an overseas buyer so that he can pay cash for British goods. Last May the Government announced the ex-tension of this facility to any capital goods or projects contracts over £1 million. This is therefore not a desk-bound bureaucracy but a commercially orientated virile organisation whose members are prepared to get up off their seats and go into the world market and " mix it" with their foreign competitors. What this Bill seeks to do is, first to allow E.C.G.D. to keep pace with the ever-increasing export business offered for insurance cover, and secondly, to strengthen the hand of the Department in matching foreign credit-mixte competition.

I should now like to deal with the provisions of the Bill. Clause 1 deals with the raising of the limits on E.C.G.D. liabilities. The Export Guarantees Act 1968, which consolidated previous legislation, empowers E.C.G.D. to give credit insurance cover under two headings, Section 1 and Section 2 of the Act, and these are both subject to limits on the Department's aggregate liabilities. These limits are filling up fast, and the Bill provides for appropriate increases. The bulk of E.C.G.D. business is underwritten under Section 1 on a normal commercial basis. The Department acts on the advice of the Export Guarantees Advisory Council, a body consisting of eminent bankers, businessmen and other, acting under the very able chairmanship of Sir Frederic Seebohm. Their help has proved invaluable in this field of the Department's operations.

The limit on Section 1 business was raised in 1967 from £1,500 million to £2,400 million. With the dramatic in-crease in British exports over the past few years, and the increasing proportion of them covered by E.C.G.D., this limit is fast being reached. Your Lordships will appreciate that unless the limit was raised, E.C.G.D. would soon be unable to insure further exports, except to the extent that existing liabilities ran off. This is a situation which we cannot allow to arise. We have, therefore, provided for an increase in the Section 1 limit from £2,400 million to £4,000 million, in anticipation that this will accommodate the expected rise in business over the next three to five years.

Section 2 of the Act empowers E.C.G.D. to insure export business " in the national interest". Although E.C.G.D. acts under Section 2 without the advice of the Council it still applies its normal underwriting judgment and will not undertake any unduly hazardous risks. I should like to emphasise that this is not unsound business, and E.C.G.D. has succeeded in balancing its books in this field just as it has in relation to its Section 1 business. Section 2 of the Act, when read together with Section 3, also empowers E.C.G.D. to make loans to help buyers to make payments under export contracts. These powers may at present be used only for the purpose of giving economic aid, and until responsibility for such aid was taken over by the Ministry of Overseas Development E.C.G.D. was the vehicle for providing tied aid loans to developing countries. These powers are at pre-sent used solely to administer payments and receipts under existing loans, but, as I shall explain fully later on, we propose to extend the present powers to enable E.C.G.D. to give loans to encourage trade. The Section 2 limit, which covers these loans, as well as the ordinary guarantees, was raised in 1967 from £1,300 million to £1,500 million. Business under Section 2 has also risen fast and the present limit is also rapidly being approached. We propose in the Bill to raise the limit on Section 2 business from £1,500 million to £2,500 million.

As I mentioned earlier, we are proposing in the Bill to extend E.C.G.D.'s powers to enable it to match foreign credit offers. Although E.C.G.D. has not taken the lead in the credit race it has refused to be left behind, although we do not, of course, set out to match straight-forward aid financing on generous terms. But E.C.G.D. has always been ready to support British exporters in their efforts to match long commercial credit terms which are offered by their foreign competitors with the support of their own credit insurance organisations. Within certain limits agreed with the Treasury, and without supporting uneconomic business, E.C.G.D. has therefore frequently stretched the terms of its cover to enable our exporters to compete for worthwhile orders on equal terms with their overseas competitors. But what we have been able to do in the past under existing powers has not been sufficient to match a new form of com-petition which has emerged. Some countries have softened the terms of their offers by mixing commercial credit with Government funds, often at concessionary interest rates, with the result that the buyer has either been able to refinance his pre-delivery payments or paid a sub-commercial rate of interest. Since it would not be appropriate to match these techniques by using Britain's aid resources, we are proposing in the Bill to extend E.C.G.D.'s powers to enable Government loans or grants to be made for this purpose.

E.C.G.D.'s existing powers under Sections 2 and 3 of the 1968 Act enable it to make loans to facilitate payments by overseas buyers, but such loans must be for the purpose of giving economic assistance to another country. These powers have not been used for new loans of this type since the Ministry of Overseas Development took over responsibility for aid. They have remained in the Act to enable E.C.G.D. to administer previous loans. But they cannot be used for trade promotion purposes. We are now putting this right, and Clause 2 of the Bill extends these powers to enable loans to be made by E.C.G.D. out of money voted by Parliament where the purpose is not economic assistance but the encouragement of trade. We have in mind that a loan under the new powers would be appropriate in order to assist in the capture of a major capital project over-seas for which the buyer is being offered concessionary terms by our competitors. For example, the buyer might be relieved of all payments until after completion of the project. In such a case, we envisage that the British contractor would negotiate on conventional terms, but an E.C.G.D. loan would be offered to enable the buyer to make the pre-completion payments.

The fixed United Kingdom interest rate for long-term export finance (at present 5½ per cent.) is competitive with that available in the other major exporting countries. But, as I mentioned earlier, in some instances in recent years the rate available to some of our competitors has been artificially lowered by the introduction of Government funds. This is something which has not, so far, been available to our exporters. We are therefore proposing, in Clause 3 of the Bill, to empower E.C.G.D. to make a grant to enable the true interest cost to the overseas buyer or borrower to be reduced to the level set by the competitive overseas offer. This could be achieved either by the finance for the project being negotiated at the normal fixed rate of interest, and for E.C.G.D. to make grants to the buyer to reduce the effective rate at the date of payment of each instalment of interest, or alternatively, the United Kingdom bank could finance at the lower rate and the E.C.G.D. grant could be paid to the bank. As with the loans under Clause 2 of the Bill, any money required will have to be voted by Parliament.

I should stress, in relation to both loans under Clause 2 and grants under Clause 3, that these powers will be used very sparingly and only to match foreign com-petition for business which is manifestly to the benefit of the British economy. Parliament will exercise control over the use of these powers, first because the money will have to be voted, and, secondly, because the amounts disbursed each year will appear in E.C.G.D. accounts and can be debated. It is not the Government's intention to use these new powers to accelerate the credit race. Indeed, if the knowledge that we can match credit-mixte offers leads to the abandonment of this technique, no-one will be better pleased than we shall.

With regard to the winding up of the Acquisition of Guaranteed Securities Fund (Clause 4), the opportunity pro-vided by this Bill has been taken to tidy up E.C.G.D.'s accounting procedures in one respect. Prior to the changes made in Government accounting by the National Loans Act 1968, E.C.G.D. drew monies direct from the Consolidated Fund for the purposes of its economic assistance loans. These monies were thus not accounted for through the normal Parliamentary accounting procedure. To enable the Department properly to account for these operations the Acquisition of Guaranteed Securities Fund was established by the Overseas Trade Guarantees Act of 1939, and has been used ever since. Now that E.C.G.D. finances its operations from monies provided by Parliament, and accounts for them accordingly, this special Fund is no longer necessary. Clause 4 of the Bill therefore proposes that it should be wound up on a day which will be fixed by the Treasury. The change will not affect the substance of E.C.G.D.'s operations and does not affect the Department's accountability, or the use of public money, in any way.

My Lords, I apologise if my speech has strayed into some rather technical matters, but the subject of this Bill is of vital importance to our export trade and to the British economy. I have tried to illustrate the outstanding contribution made by E.C.G.D. to our export effort. In 1969 the Department insured business of over £2,500 million. It is constantly keeping its facilities under review and devising new arrangements to meet the ever-changing needs of our export trade. This Bill claims to ensure that E.C.G.D. continues to back up the very fine efforts of our exporters and to enable the Department to assist our exporters in meeting some of the new techniques devised by our competitors. We believe that we have the finest credit insurance system in the world and the Bill which is now before your Lordships will help to keep it that way. I invite you now to give this Bill a Second Reading. I beg to move.

Moved, That the Bill be now read 2a. —(Lord Brown.)

7.12 p.m.

LORD DRUMALBYN

My Lords, I should like to start by thanking the noble Lord for his explanation of this Bill. It is, I know, a subject very dear to his heart. He spends a great deal of his working days with it and so he is a real expert. It is, of course, a Bill to raise the limits of guarantees. This is a periodic exercise; indeed I have introduced such a Bill myself into your Lordships' House. There always tends to be a bit of a scramble to get the legislation through in time before the flow of guarantees dries up, but I hope the noble Lord will be able to tell us that there has been and will be no interruption of that flow. I can assure him that we shall not do any-thing whatever to delay the passage of this Bill.

It is a fact, of course, that the Bill reflects many factors, the chief of which, as the noble Lord said, is the progress of E.C.G.D. both in its coverage of total exports and in the kind of business it undertakes. Since 1957–58—and I go back a little further in the comparison because I think it is worth making—the proportion of a rising total of United Kingdom exports insured by E.C.G.D. has more than doubled, from 16 per cent. in 1957–58 to 34.7 per cent. in 1968–69. The opportunity offered by devaluation in 1967 has been taken by industry, and there has been a spurt in exports, I under-stand, of 46 per cent. in value and 28 per cent in volume up to the end of last year, taking one quarter with another. This spurt has been aided by favourable conditions of world trade on the one hand and by the sluggishness of the home market on the other. Nevertheless, British industry's achievement is considerable and well deserves all the praise it can get; the noble Lord himself bestowed praise on it.

It is worth noting, I think, that with the aid of the sound advice from the Ex-port Guarantees Advisory Council, to which the noble Lord referred, E.C.G.D. has proceeded cautiously over the years. In consequence, it has at times been criticised for not progressing fast enough in the facilities it offers. In particular, it has often been criticised for not enabling our exports of capital goods to match the terms offered by our international competitors, generally because of its insistence on obtaining proof of those terms in circumstances where conclusive proof cannot be obtained, or cannot be obtained in time to be of any use. This has been, I think, the main criticism, and I think, if I may say so, the E.C.G.D. is right to insist on proof; otherwise it would be impossible to maintain control of the exercise.

But this is not just another Export Guarantees Bill; it is an Export Guarantees and Payments Bill. The most novel and the most interesting of its provisions are those in Clauses 2, 3 and 4. I must confess that I find the clauses somewhat obscure, partly because they are by reference. That is a reflection not on the draftsman but on the technicality of the subject and my ability to comprehend it.

Under Section 2 of the 1968 Act the Board of Trade has power to give guarantees in respect of exports deemed to be in the national interest, as distinct from ordinary transactions of purely commercial significance, and such guarantees include arrangements for facilitating payments where the exports are to be made for the purpose of rendering economic assistance to other countries. The power to make arrangements to facilitate payments is now, as I understand it, to be extended by Clause 2(1) to cover the purpose of encouraging trade with other countries. The clause then goes on to deal with the acquisition of securities.

May I ask the noble Lord to confirm this point, because he is so familiar with it, and it is perhaps a little difficult to be quite certain that one is right about it. Am I right in thinking that the purpose of the clause is to facilitate payments to be made by a foreign buyer, and to do so by loans to that buyer to enable him to pay to the supplier part of what is due under the contract, and that E.C.G.D. will acquire securities against loans so made? I take it that this is the purpose of the securities provision. If I understand correctly what the noble Lord said, such loans will normally be used to finance payments under a major export contract in its early stages; that is, before delivery or up to the completion or for a time afterwards.

I should also like to ask the noble Lord whether I am right in thinking that such loans would be made to match terms offered by international competitors —I think he said that—and secondly, that British exporters have in the past lost contracts because they were unable to get such facilities. I did not hear the noble Lord actually say that. He did say that there were facilities of certain kinds offered, but there is no evidence that we have actually lost contracts through the inability to get such facilities. Perhaps he could confirm that.

There are one or two points I should like to refer to in particular, and one arises from the E.C.G.D. handbook called E.C.GD. Services, revised in August, 1969. At page 40 it says: Under a buyer credit guarantee the over-seas purchaser out of his own resources is normally required to pay direct to the supplier not less than 20 per cent. of the contract price including an adequate down payment on signature of the contract. What I am not clear about is exactly the need to be filled. Is it that other countries have been lending the money to cover down payments? Or is it also that credit guarantee bodies in other countries do not insist on a down payment? Or is it that banks in this country are reluctant to lend either to the exporter or to the buyer before the goods are delivered? I am not clear what the gap to be met is. It is important one should be absolutely clear, because this is a new departure—the making of loans by E.C.G.D. in transactions not necessarily connected or not connected at all with aid to underdeveloped countries. So it is a new departure. Indeed, so far as loans are concerned, is it not true that, since the setting up of the Ministry of Overseas Development, E.C.G.D. have not made loans at all, except in continuation of what is already agreed, but have merely guaranteed loans made by banks? If so, this is a totally new function for E.C.G.D.

I was not altogether happy with what the noble Lord said about the method of financing these loans. He said that they would be financed by monies voted by Parliament, and that they would subsequently be accounted for in the E.C.G.D. accounts. But is there included in this year's Estimates an estimate to cover this sort of contingency? It would seem to be rather unsatisfactory that all such contingencies should be provided each year only on Supplementary Estimates. I know how difficult it is to anticipate what kind of commitments may arise, but from the point of view of normal Parliamentary control an estimate of some sort is desirable, and if there is one included in the Estimates I should like to know what it is.

While I quite understand that the purpose of the clause is to help British exporters to match terms offered by foreign competitors, I am asking these questions because if the Government ask for powers to lend public money they really have to say in what circumstances they will spend the money, and how much money they estimate they will lend. I think the noble Lord has given a good account of how they intend to spend the money, although he will understand it when I say that I should like to read in the OFFICIAL REPORT what he said.

Clause 3 seems to empower the Board of Trade to make grants for the purpose of reducing costs which have been, or may be, incurred by persons outside the United Kingdom in making interest pay-ments—I am paraphrasing what the clause actually says. Does this mean that payments to enable interest to be reduced are made only for buyer credit and not for supplier credit? According to the E.C.G.D. Services handbook, for finance under both Buyer Credit Guarantees and Financial Guarantees, which are reserved for cases where the minimum contract value is £2 million (£1 million for ships), the fixed rate of interest which the banks have agreed to charge is 5½ per cent. This is also the rate at which the banks finance credit that is the subject of specific guarantees to banks on medium-term supplier credit. But I understand that credits covered under the Comprehensive Open Account Guarantees are evidently financed at bank rate. That is why I want to be quite clear whether this relates only to specific guarantees, and then only to supplier credit.

The Parliamentary Secretary stated in another place on February 2 (column 73), that the French and Japanese sometimes agree to credit at as low as 3½ per cent., at least for part of a transaction. I gathered from what the noble Lord said to-day that this was through Government assistance. May I ask this question, because I think it is most important? Is this not really a naked export subsidy? And is it not at variance with GATT rules? I appreciate from what the noble Lord said that the Government would like to get rid of this altogether. But am I not right in saying that the right course is to stop this kind of subsidising of exports, rather than to start doing it ourselves? I know, of course, that credit insurance is a matter for the Berne Union, and that Japan is not represented there. But rates of interest for the financing of exports are a matter which seems right outside the insurance of credit, which is what the Berne Union is concerned with.

Perhaps I could sum up my attitude to these clauses by saying that if they are indeed necessary as the only way to put our exporters on an even footing with foreign exporters, I, for one, shall welcome them. But I cannot welcome them with any great enthusiasm (and I do not think the noble Lord, did, either), for they represent not only one more way of lending the taxpayer's money but also one more distortion of trade; and the thing to do is to get away from the basic distortion of trade.

Perhaps I may make one or two more general comments. One of the headings in the E.C.G.D. Services handbook is "Credit Insurance is Confidential"— and rightly so, so far as individual trans-actions are concerned. As the noble Lord said, credit insurance has been going now for fifty years, and I wonder whether it is not a little too confidential. I cannot help feeling that Parliament and the nation are not given as much information as might be given about the activities of E.C.G.D. E.C.G.D. is not engaged in some kind of economic warfare but on assistance to trade. I notice that the information that is given relates only to the total of business declared under Sections 1 and 2 respectively, divided into short term, extended terms and medium and long term. There is no distinction between the four categories of countries. I realise, of course, that the rating of countries, and consequently the composition of each category changes. Even so, one might have some idea of the amount of the business that is done in each of the four categories, and what proportion is covered by guarantees in the trade in each of the four categories.

Again, there is no distinction between the various headings of insurance for supplier credit, such as consumer goods, stocks endorsement, dealing in foreign goods, the small exporter policies, construction projects and services policies. Incidentally, I should like particularly to know to what extent guarantees on services are being given just now. It would be interesting to know that. Then there is no distinction between supplier credit and buyers' credit. There is no information about the countries with whom lines of credit are negotiated. Could we not have more information about these—not about the individual contracts, of course, but about the totals involved?

I should like also to know what has been the experience of the "small exporter" policies. How many policies have been issued, and how many have led on to steady growth of exports? I know that there is no duty under the 1968 Act to publish an annual report. But, after all, E.C.G.D. is not just another Department of government; it is much more akin to a trading organisation. I realise that its reserves, even though they now amount to over £56 million, are not held separately, for the very good reason that if things in the world went wrong they would be totally inadequate to meet liabilities and the Exchequer would have to foot the bill. But that only means, surely, that the Exchequer guarantees the guarantors: it underwrites the guarantees. It is not in itself a justification for a policy of restricting information.

My Lords, I think that, now that the E.C.G.D. has grown up, and is so well established as such an important body, it could give more information. After all, these are days when information from all kinds of organisations, official, semi-official and unofficial, is being required to be made public; and I think that is one reason why we might have more information from a body of this gigantic size. And it is gigantic. Here we are, increasing the total permitted guarantees to £6,500 million, and all we get are quarterly returns of the total of guarantees given respectively under Sections 1 and 2 since the last returns, and an annual Press notice, plus occasional announcements by Ministers in Parliament.

This sounds somewhat critical, I know. But it is only because we have so much admiration for E.C.G.D., and we genuinely want to know more about what it is doing. I yield to nobody in my admiration for the work of E.C.G.D. It entirely justifies its claim that it provides the exporter with a climate of security and so performs a great service for the nation. The business it does has steadily increased; and, as the noble Lord has said, the premiums that it charges have steadily diminished. That is a good record. But why hide its light under a bushel? The real difficulty is no longer the cost of guaranteeing credit but the cost of credit itself. If the Government had not completely mishandled their incomes policy so that we now have the incomes explosion, which the Government were warned on all sides would happen, the Chancellor of the Exchequer would now already have been in a position further to reduce the bank rate and so help to make British exports more competitive. As it is, we are certain to have a prices explosion to follow the incomes explosion; and whatever the E.C.G.D. may do to help will do British exports no good at all. And I do not envy the noble Lord in his job when that starts to happen.

7.30 p.m.

LORD INGLEWOOD

My Lords, while we all welcome this Bill, not only because of its importance but also because of its brevity—so many Bills introduced into your Lordships' House are far too long—at the same time I think we can regret that a Bill of this importance is drafted in such complicated terms, with so many references to other legislation that it is virtually unintelligible. I would say not only to us here who are fairly familiar with the language employed in Statutes but also to those who will be expected to operate it.

There is so much that is important in this Bill that I think it is a pity—and here I agree with my noble friend—that the opportunities in this House for discussing the thinking behind it and the implications should appear to be so curtailed. For instance, there was one phrase in the noble Lord's speech which I thought very important. He said that part of the thinking behind this Bill was to enable us to match foreign credit offers—and we all know the difficulties that exporters suffer, or claim that they suffer, because their competitors abroad enjoy wider credit opportunities than they themselves can draw on here. I am not expressing any views on the merits, I am simply saying what is reported, and I should have thought that we ought to have been given an opportunity to go into greater detail on this point and similar points. Then we could see whether in fact we agree with the noble Lord that they have drawn the line in the right place and that their thinking is leading to the conclusion that he has claimed.

But where and when are we to have this opportunity? Will this evening be the only chance? Surely this is not a Money Bill in the sense that a charge is being laid on the public which they are never going to see back? As I understand it, this is money which, by and large, the public are going to see come back, and I cannot therefore see why your Lordships should be deprived of the chance of discussing this Bill and going into its merits. We do not want to waste a great deal of time on it, but this House has very great experience (although it is not obvious here to-night on the Benches opposite or on the Cross Benches, with respect to the one noble Lord who is sitting there, yet many of his fellow Cross Benchers have great experience in this field) and I should have thought it would be valuable to hear more views on this Bill. Short debates on the Question whether the clause stand part—and there are not so many clauses —would not take a great deal of time, and could be extremely valuable not just for us here, the Members of your Lord-ships' House, but also for the business world and all those who are going to operate the Bill and will stand to benefit under it.

I do not want to criticise the noble Lord or his speech—and I am sure he will take that from me—but he admitted the complication, and all of us who have held office, however junior, know that to try to make the introduction of a technical Bill sound different from a 3.30 p.m. Statement is extremely difficult. That is another reason why we ought to have a wider opportunity than this short Second Reading debate, a wider opportunity than the few arid minutes of exchanges be-tween—again I say this without offence— Board of Trade Ministers present and previous. They have commanded my admiration, but I do not think that this goes far enough.

We have a duty in this House, and I hope that the Government this evening will change their mind and give us an opportunity to consider this Bill during another stage. I believe it is their intention to deny us the chance of such short debates on the Question whether the clause stands part, but I think it would be very valuable if, at this hour, they could change their mind and allow this. If they did so, we should not take up a great deal of Parliamentary time, and the business world would be grateful.

7.35 p.m.

LORD BROWN

My Lords, may I deal first with the points raised by the noble Lord, Lord Inglewood, and then proceed to those raised by the noble Lord, Lord Drumalbyn. I personally find that the lack of debating time expended in this House on the subject of exports and export credits slightly deplorable, as I have always felt it to be such an important subject. Perhaps I am a little biased, but I should have been happier, too, if there had been more debate. On this Bill I am afraid there is a technical difficulty; it has been certified to be a Money Bill. I cannot support the argument for or against its being a Money Bill, as I am not sufficiently aware of the technical processes involved in arriving at these conclusions. However, there it is, and I shall shortly move that the Bill be not committed. I am sorry about it, but that is the situation. There are other opportunities, and I seize the opportunity of mentioning E.C.G.D. and ex-ports in almost every debate I take part in as the liberality of this House allows—and I did so quite recently, as the noble Lord will remember.

There were a number of points raised by the noble Lord, Lord Drumalbyn, and it may take me a little time to deal with all of them. I am glad that to begin with he raised the feeling in industry that E.C.G.D. insists on exporters obtaining proof of credit offers that are better than those offered by E.C.G.D., because it gives me the opportunity of making a statement here which I hope will gain general currency. E.C.G.D. does insist that an exporter who wants it to examine a foreign country's competitive credit offer presents some sort of superficial evidence that some superior credit offer has been made, but it does not seek to lay the onus of getting proof on our exporters because we know they cannot get such proof and we have means, through the Berne Union, of get-ting details of what foreign Government credit insurers are prepared to back. We can virtually insist on getting these, and we do get them. The Department has been trying to make it clear in the last year or two that all we want is prima facie evidence and not proof. Many companies have now realised this, but the fact needs advertising that we do not expect them to give proof. It is important that they should realise this.

The noble Lord touched upon a part of the Bill that I must admit is very difficult to understand. I could not under-stand it when I first read it, and it is this business of acquisition of securities. This is not a reference to the current operations of E.C.G.D., but is a reference back to the days when, under Section 3, they were responsible for administering aid to developing countries overseas, and they did it largely by a technique of acquiring securities. They no longer require these securities for that purpose, except in any residual matters of aid which arose before the Ministry of Over-seas Development took over that responsibility.

I assure the noble Lord that these new clauses concerned with grants and loans are entirely intended to match offers to competitors by other countries and with no other circumstances. Indeed, I would go further than this and suggest that what we are really doing is arming our-selves with a sword in order to challenge our competitors, in the hope that it will never be drawn from its scabbard; and to the extent that we are able, through legislation, to take action similar to that which has been taken by other countries, it may have the result that other countries will cease these unfortunate practices. I hope I have given adequate assurance on those grounds. We have lost contracts in the past as a result of Government funds from one or two other countries being made available to reduce the rate of interest, or to allow buyers in overseas countries to borrow money from their supplier countries in order to pay the initial down payments and thus wait until some great plant has gone into operation before the crunch of the repayment of the loans or credit has begun to bite.

The noble Lord, Lord Drumalbyn, referred to a matter arising from page 40 of the E.C.G.D. handbook. He asked whether other countries have been lending money to cover down payments. I think I have just answered that question. He also asked what is the gap to be met. The gap that we are meeting with these two new clauses about loans and grants is simply the gap created in our competitive armoury of credit by other Governments giving funds, possibly aid funds, and mixing them with commercial credit to put us in an unfortunate position. It is not a very extensive problem and it is not used over a broad front, but it has been used and it has lost us large contracts. So we want to be in a position to retaliate, if necessary, although I hope that we shall not have to do so and that the existence of these powers will cause others to think twice.

The noble Lord asked whether these practices were GATT-worthy. He will know that it is sometimes not easy to interpret exactly what GATT means in the face of circumstances, when there has not been an actual test case raised in front of GATT. The question of whether the practices against which we now wish to defend ourselves are GATT-worthy is a very open one. Were this matter to be taken to GATT, I should be very happy if GATT turned round and said that it is against the General Agreement on Tariffs and Trade, and abolished the whole thing. But although a great many discussions go on, and indeed are going on now, in O.E.C.D. towards a proper limitation of credit, this subject has not yet arisen. Other subjects have arisen and there has been some limitation, and we hope to pursue this matter further in order that we can get credit back on to a more sensible basis than is some-times now the case. The noble Lord, Lord Drumalbyn, asked whether these grants and loans were available to help the terms of supplier credit as well as buyer credit. The answer is, yes, they are, although I think, by the nature of things and the technicalities involved, most of the cases which will arise will probably be in terms of buyer credit. But there is nothing to prevent funds' being used on supplier credit as well.

The noble Lord raised the question of the French and Japanese being purported to have financed credit at the rate of 3½ per cent. with the aid of Government funds. There have been cases of this, and although interest rates in both of those countries have been rising in recent times, this mixing of credit may still be going on. I hope we now have some-thing with which to retaliate. I entirely agreed with the noble Lord when he said that we ought to get away from the basic distortions of trade caused by these un-fortunate practices of mixing up aid, which is very essential in the developing world, with these credit terms. It is a bad practice. We do not condone it by introducing these clauses into this Bill, and we hope that they will tend to diminish it rather than otherwise. We have no intention of taking part in a credit race. I have noted the noble Lord's series of comments on the amount of information given in the E.C.G.D.'s accounts. The E.C.G.D. is secretive about its commercial transactions with its own customers, if I may put it that way, but it does not wish to be secretive about its accounts I take due note of this point and will discuss it with the E.C.G.D. to see whether anything can be done to satisfy the noble Lord on some of the points he raised.

I am sorry that after making a very interesting speech the noble Lord ended on a slightly waspish note and drew attention to the current level of bank interest and so on. I think he has the position completely wrong. World interest rates have for some time been at a peak, and the cause of our present high interest rates has nothing to do with our domestic economy. It is a world problem, and I think the noble Lord fully realises that. The problem will be solved internationally, not by particular circumstances in this country, and it has been debated at great length in another place. I must declare, here and now, that the noble Lord is not right in his contention that the problem is due to Government policies; it is a world problem. I do not wish to end on a waspish note myself, and I must say that I am grateful for the comments which the noble Lord made. I am sure that the E.C.G.D. will be delighted with some of the remarks he has made about their efficiency as an organisation.

On Question, Bill read 2a: Committee negatived.