Lords Sitting of 16 June 1972

Preamble
The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Exeter.

U.N. AND VIETNAM, BURUNDI AND THE MIDDLE EAST
LORD BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will activate the Security Council of the United Nations to intervene in the three major current human disasters, namely the Vietnam war, the Burundi massacre, and the Middle East confrontation reflected in the Lod killings.
THE MINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (BARONESS TWEEDSMUIR OF BELHELVIE): My Lords, we are always ready to work for Security Council intervention where this would contribute towards keeping international peace and security. The noble Lord, Lord Brockway, has referred to three very differing problems. In none of these cases does it seem likely that a meeting of the Security Council would be helpful at this time.
LORD BROCKWAY: My Lords, does this not illustrate the problem? Is it not the case that there is a dangerous, growing disillusionment with the United Nations because it cannot operate on the great calamaties in the world? Is it not time that its scope were extended from foreign relations between nations to the internal issues which are now becoming more and more devastating: undeclared wars, Burundi, with its massacre, preceded by Bangladesh and Biafra? In the case of the Middle East, is it not welcome that the tendency now, both in the U.S.A. and in U.S.S.R., is to favour this idea of a Geneva Conference of the
1242
parties concerned? Will Her Majesty's Government not do something to deal with these problems?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, with reference to the large question about whether the United Nations should reform its Charter so that it would have the right to enter into the domestic, internal affairs of every country, it has long been agreed among the nations concerned that they must reserve their position on this matter. I do not think that they would ever secure international agreement on it. So far as Vietnam is concerned, as the noble Lord knows, we have asked five times for the reconvening of the Geneva Conference, the last time in June. We hope that eventually there will be some response.
LORD DAVIES OF LEEK: My Lords, while thanking the noble Baroness for that reply, and in view of the fact that Her Majesty's Government are one of the co-Chairmen at the Geneva Conference, quite a lot of credit for which could go to the noble Earl, Lord Avon, I should like to ask whether Her Majesty's Government would courteously ask the United States of America if, when there are one-man activities like those of Mr. Henry Kissinger, we might be informed, if it is only privately and secretly, of what the United States propose. While this is difficult, it may help a better understanding and move a little faster towards peace in Vietnam.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, the United States did in fact bring the whole question of Vietnam before the Security Council in 1964 and raised it again in 1966. However, as long as North Vietnam, China and the Soviet Union do not agree that this is a matter for the Security Council, there is nothing that can be done in that way.
LORD JANNER: My Lords, in view of the terrible massacre that occurred at Lod some little time ago, where innocent men, women and children were killed by assassins, deliberately hired by murderous gangs to do the job, may I ask the noble Baroness whether she does not think the Security Council ought to take the matter up at once so as to deal with the question on the basis of peace in the world and

1243
the necessity to prevent incidents of this nature occurring again?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I am sure the whole House would agree that the massacre of these innocent people was very deeply to be regretted. I do not wish to anticipate the Question which the noble Lord, Lord Janner, has on the Order Paper.
BARONESS GAITSKELL: My Lords, would the noble Baroness agree that an unrealistic knowledge of the powers of the Security Council is a very dangerous thing when asking Questions of this kind? The Security Council is as good as the countries which make it up: and we know just how good and just how bad they are.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I should just like to say that I agree with everything the noble Baroness has said.
LORD CHALFONT: My Lords, while having a great deal of sympathy with what the noble Baroness has said, I should like to ask whether the Minister is aware that the Secretary-General of the United Nations recently issued a statement deploring the fact that the Powers concerned were not using the machinery of the United Nations in the context of the Vietnam war. If it is not profitable, which I doubt, to bring the matter to the Security Council, as Her Majesty's Government are fully competent to do, will they at least express some public support for the position of the Secretary General?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, we have always said, and publicly, in the United Nations and elsewhere, that basically the Charter of the United Nations is a good Charter, but it does depend for its effective working on every single member of it.
LORD SHEPHERD: My Lords, the Question my noble friend put to the noble Baroness was whether the Government would support the view expressed by the Secretary-General that the Security Council ought to be exercising some influence in Vietnam. That was the Question which was put to the noble Baroness. I am not suggesting that she avoided it, but perhaps she would now answer it.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, as I said in an earlier reply, we have always said that as long as China, the Soviet Union and North Vietnam do not consider that the Vietnam war comes within the jurisdiction of the Security Council, it is impossible to do anything about it. That is why, as co-Chairman with the Soviet Union of the Geneva Conference, we felt that that Conference was a better way than taking it to the Security Council in which to try to secure some progress.
LORD SEGAL: My Lords, would it not be a welcome move by the Government to activate the Security Council about anything?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, if I may say so, I think that is rather a wide question.
LORD BROCKWAY: My Lords, did I make a mistake by suggesting a Geneva Conference on Vietnam? My intention was to suggest it for the problem in the Middle East, and I thought I did. Will Her Majesty's Government support the idea proposed by the noble Lord, Lord Caradon, that there should be a Geneva Conference about the Middle East? And in view of the increasing co-operation of the U.S.A. and the U.S.S.R. on that issue, is that not now practical politics?
BARONESS TWEEDMUIR OF BELHELVIE: My Lords, as the noble Lord will know, there is the Jarring Mission and we felt that that was a good beginning We are hopeful that Dr. Jarring will be able to make some progress.

AIRCRAFT HIJACKING
11.8 a.m.
LORD JANNER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they have taken and propose to take for dealing with the hijacking of planes; and whether they will now support the proposal of Pilots' Associations that countries harbouring hijackers should be refused facilities for aircraft services.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, the International Federation of Airline Pilots Associations asked the Secretary-General of the United Nations for action to carry out previous decisions in the United Nations and the International Civil Aviation Organisation. We are supporting proposals for action of this kind in both organisations. We fully share the anxiety of the pilots for effective international co-operation to suppress hijacking and violence against civil aviation.
LORD JANNER: My Lords, while thanking the noble Baroness for that reply, may I ask whether she will now say that she will definitely support the suggestion of the Pilots' Association, that any country harbouring these criminals shall not be given air facilities? Is it not perfectly clear that this would stop conspirators in one country arranging, as they did in the case of Lod, for murderers to go to another country, which, even though it was not hijacking in the ordinary sense, nevertheless resulted in a kind of hijacking? Is the noble Baroness prepared to go to the extent of saying that this is the method by which we shall prevent hijacking, because no hijacker, or anybody conspiring or arranging to hijack, will find harbour in any country? Is it not about time that we said that the peace of the world is being endangered by the kind of action which these people are taking?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I share the noble Lord's anxiety. I am very glad to say that we shall to-day support in the ICAO Council a proposal to resume consideration of a draft convention on this subject put forward by the United States and Canada, on which work was stopped by a decision of the ICAO Assembly last year.

OVERSEAS INVESTMENTS AND EXPORT GUARANTEES BILL
11.15 a.m.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK): My Lords, I beg to move that this Bill be now read a second time. I enter very readily into this debate, because the matters on which this Bill touches are close to my own
1246
interests to which I have devoted a substantial part of my working life. As your Lordships are aware, two of the purposes of the Bill were foreshadowed in the White Paper, Private Investment in Developing Countries (Cmnd. 4656), publised in April last year. These are the proposals for a scheme for insuring investment overseas to be set up with the Export Credits Guarantee Department empowered to operate it, and a scheme for the giving of grants for pre-investment studies which the Overseas Development Administration would operate. These two proposals are rather distinct from the third purpose, which is that the limits on the liability that the Export Credits Guarantee Department may assume under the Export Guarantee Acts 1968 and 1970 should be raised.
The first two measures stern from the Government's desire to encourage the flow of private investment in developing countries, and the reasons for our so doing are by now well known. It is natural and proper, for a country such as Britain where private enterprise has played, and continues to play, a major part in its economic development, that private investment should play a substantial part in our contribution to the development of the Third World. And it is in order to sustain a high level of private investment overseas that we consider it important to provide some encouragement. In doing so, we do not for one moment suggest that private investment should be regarded as superseding a developing country's need for official assistance. We fully recognise the importance of official aid in providing the developing country with help in building up its basic infrastructure.
Our record demonstrates the attention which we are continuing to pay to official aid. We have announced that the official aid programme will increase by an annual average of 7·6 per cent. at constant prices over the period between now and 1975/76, which I am sure your Lordships will agree is a significant improvement on the levels of British aid in recent years. In 1971, our official aid rose to 0·41 per cent. of gross national product, reversing the trend before that when aid was pegged at 1966 levels for balance of payments reasons.
I would go further on this question of private and official flows, and say that

1247
any increase in private investment which may result from the introduction of the investment insurance scheme, while it will be welcomed for the reasons which I shall shortly explain as contributing towards progress in the developing countries, will be regarded quite independently from this clear intention to increase official aid flows. We believe, however, that private investment is deserving of encouragement since it can, and should, play an important part in the development process complementary to that of official aid. The benefits from private investment to a developing country are numerous and important. The essential capital, advanced technology, and wide range of managerial and other skills which private investment brings with it can lead to increased production and incomes, higher employment, extra exports, greater Government revenue—in short, essential prerequisites for economic development.
The Pearson Report acknowledged the contribution that private investment could make. I should like to quote a brief passage from their Report. It said that,
"available facts do suggest that direct foreign investment has added substantially to the real income of developing countries. In doing so it has also enhanced their capacity to finance their future development."
The Report therefore recommended that measures be taken to stimulate such investment. I must emphasise that there is no question of ramming private investment down the throats of protesting developing countries. Neither do we assert that the interests of the developing country and investors always converge. It must be for each country to decide its own economic and social structure and the extent to which and the way in which it wishes to harness foreign private investment. But countries which place unnecessarily onerous restrictions on such investment will no doubt be aware of the implications these restrictions will have for their future development, since companies will find no commercial attraction where they are manifestly unwelcome. There is no shortage of areas into which financial and human resources can be channelled.
One of the problems in this field might well be a lack of mutual awareness between some investors and some
1248
developing countries of each others' requirements and objectives, and we in this country must do what we can to bring about greater mutual understanding. The introduction of this insurance scheme will facilitate the movement of the necessary private capital in the direction in which we wish to see it go.
We are one of the last major developed countries to introduce an investment insurance scheme. I think its principles are essentially uncontroversial, and during the debate on aid in this House in April last year I believe the idea of the scheme was generally welcomed. Even though we are a great trading nation and British firms have for long been investing overseas, there are signs that companies these days, faced with an ever-increasing range of investment opportunities, often tend to plump for investments in a developed country producing a lower return in preference to higher-yielding investments apparently carrying a greater risk in a developing country. Again, British investment in developing countries over the year has tended to flow to those countries with whom we have traditionally had the strongest links, and firms have tended to shy away from venturing into unfamiliar territories.
The investment insurance scheme can help to rectify these situations by leaving the companies largely free to devise their investment policy by reference to commercial considerations. The net result in our view will be to benefit the developing country and the United Kingdom at the same time. These benefits in our view justify us taking the risk that the scheme may run into loss, a possibility which despite our hope that the scheme will pay its way will always be present since political risks are by their nature unquantifiable and unpredictable.
Fifteen years is a long time in the history of a developing country and during this period the insurer has little chance to take preventive action against danger of loss. In this connection, I am pleased to be able to draw noble Lords' attention to the Amendment tabled by my right honourable friend the Chief Secretary to the Treasury to this year's Finance Bill, which provides for tax relief to be given on premiums paid under the scheme. This will reduce substantially the cost of the insurance to many investors, improve the

1249
incentive effect of the scheme, and help us in our aim to make the scheme pay its way.
Perhaps I may be forgiven for taking some personal pleasure in that statement because, before I joined the Government, I was concerned in another capacity with arguing various points on the scheme. This is one of the points that I had particularly in mind. It provides direct and welcome evidence that Governments listen to representations made to them. I hope your Lordships will share my pleasure in it.
Your Lordships will have noted that the powers proposed in the Bill in relation to the investment insurance scheme are drawn in very general terms. Given the variety and complexity of modern investment and, in consequence, of any investment insurance scheme it is desirable and indeed inevitable that this should be so. This flexibility is desirable, not for the convenience of Ministers or civil servants but in order to provide an attractive scheme responsive to the changing needs of developing countries and industry alike. We have, however, published an outline description of the scheme which has been made available in the Printed Paper Office. A revised outline version of the scheme will be published after the Bill becomes law and the scheme comes into operation, which will take account of the points made during the passage of the Bill through Parliament and arising from discussions with industry.
But again it would be premature to expect such an outline to answer at this stage every question on the eligibility of treatment of particular projects. Several of the detailed criteria can best be evolved on a case-by-case basis, and the outline therefore will gradually become more comprehensive as experience is built up of running the scheme. Since your Lordships will undoubtedly have read the outline description, I think it would be for the convenience of the House that I do not detain and weary you with its detailed provisions, but rather refer to some of the broad questions and then in summing up attempt to deal with any specific questions which are of interest to those taking part in this debate.
Some of your Lordships might wish the scheme to have stringent criteria to encourage
1250
only those investments which bring positive social and economic benefits to the developing country. All of us would agree with these general aims. However, I must sound a general note of warning that we should be chary of attempting to impose on other sovereign countries our views of the sort of investment we consider to be best for them on moral, social or economic grounds. Views vary on these matters, not only from country to country but also from time to time. It will be a condition of E.C.G.D.'s cover that the investment is acceptable to the host country, and in addition it will not have any liability for losses arising either from investors not conforming with local laws and regulations or from investors acting provocatively.
The British investor, I believe, generally shows a high sense of responsibility in his dealings with developing countries and is also concerned to ensure that his investments are in accord with the developing countries' economic and social objectives. Indeed, it is in the enlightened self-interest of British investors to behave in this way. It will be in E.C.G.D.'s interests both to encourage these responsible attitudes, and to refuse cover or limit their liability if they are not satisfied on this score. The scheme will therefore in practice be operated in a manner that will have regard to the interest of developing countries, though without seeking to impose our own standards upon them; this, we feel, would smack of paternalism. I repeat here that evidence will be required of the acceptability of proposed investments to the host Government.
E.C.G.D. was chosen to run the investment insurance scheme because technically it is more akin to credit insurance than to any other function currently undertaken by the Government. There is no inconsistency between this choice and the belief that the scheme will contribute to the development of the Third World. I am sure it will run the scheme fully attuned to the sensitivities and attitudes of developing countries towards inward investment, and of the need to encourage new and harmonious forms of relationships between foreign investors and developing countries. In the exercise of its discretion it is to be assisted by a small advisory committee, which will give its advice on an informal basis, and

1251
which has Lord Seebohm as its first Chairman. To him and to the other members of the committee I should like to express my gratitude.
As your Lordships will have noted, the Bill makes provision for the publication of an annual report on the scheme. This will give a full picture of the way in which the Department has discharged its responsibility, and is an earnest of our intention to be as forthcoming to Parliament as is possible in providing information on the operation of the scheme. As the outline of the scheme makes clear, the insurance scheme will in principle be available for investments in developed as well as developing countries. We propose allowing this on the grounds that, even though the primary purpose of the scheme is to encourage investments in developing countries, there is no need to exclude investments in developed countries if investors are prepared to pay the standard flat rate premium, which obviously tends to make the cover less attractive in developed countries. This would not hinder the main purpose of the scheme, and it would help to widen the insurance base as well as bring extra commercial benefits to the United Kingdom. The availability terms and nature of our cover in respect of particular countries will depend primarily on the view E.C.G.D. takes of the political risks involved. In conclusion on this aspect, I commend the scheme to the House as being a useful and essential step in the encouragement of investment overseas, and as being a measure which will be of value to developing countries; to industry, who have for long wanted such a scheme; and to the country as a whole.
I turn now to Clause 3 of the Bill, which will enable the Government to introduce a scheme of financial support for pre-investment studies carried out by British firms contemplating investment overseas. In addition to pre-investment studies in the strict sense, the power will extend to studies to determine the feasibility of management agreements. Although such agreements do not of themselves entail investment, we believe that they deserve support, because the lack of management skills is one of the most serious brakes on development in many countries. Since your Lordships will again be aware of the salient features of
1252
the scheme from the outline description of it which has been available in the Printed Paper Office, I shall again not repeat them here at length, but will merely explain the thinking behind some of its main features.
I should perhaps first explain why our financial contribution will be made towards abortive, rather than successful, studies. The reason is that a study which leads to a positive decision to invest should pay for itself, and therefore does not require financial assistance from the Government. But it is the risk that a study may prove negative which may deter a firm from undertaking it. Therefore by providing financial assistance for studies which prove abortive, we hope to provide an incentive to British firms to consider opportunities for investment in the developing world which they might not otherwise have considered. Your Lordships will note that the reimbursement in terms of the scheme is limited to 50 per cent. of expenditure incurred, with a maximum of £25,000 in any one project, so that no firm can make a profit on such a study at public expense.
Second, the Bill itself does not limit this scheme to developing countries, simply because it is impossible to draft a suitable and enduring legal definition of these. But the scheme will in fact be available only for countries regarded for the time being as "developing" by the Development Assistance Committee of the O.E.C.D. Moreover, before agreeing to support any study the O.D.A. will satisfy itself that the study, and in principle the proposed investment, accords with the wishes of the host Government and fits in with its development plans.
The scheme will cover studies of all kinds by British firms, with one major exception. Studies relating to exploration or exploitation of oil or natural gas will not be eligible for support. There are a number of reasons for this: in particular, a scheme of this kind, and on this scale, is unlikely to have any effect on oil companies in increasing their investment overseas or in altering the direction of their investment in favour of developing countries. The scheme may, however, apply to studies directed at the exploitation of all other natural resources. The development of mineral resources is among the most important ways in

1253
which a developing country's economy may be expanded. Unlike the case of the oil industry, a relatively small incentive such as this scheme will provide may be of assistance in helping a mining company to investigate known mining prospects. Britain thus stands to benefit from the association of British firms with the development of the world's raw materials.
The Government have been criticised in another place for their proposal that the funds for this scheme should come from the Aid Programme. I believe that such criticism is misconceived. As I have already said, private investment is widely accepted as having an important role to play in development. This role is different from, but complementary to, that of official aid. The purpose of this scheme is to encourage British firms to play their part by investing in projects which, apart from their commercial benefit to Britain, are acceptable to the developing countries as contributing to their development. It is therefore both logical and right that the small amount of funds involved should come from the Aid Programme. It is indeed internationally recognised that funds provided in this way should count as official development assistance.
The Bill itself is brief and does not cover the full details of the scheme, such as its geographical scope, eligible types of study and financial limits. I should therefore like at this point to assure the House that if any modification is made in the main features of the scheme as set out in the outline description of the scheme which has been circulated, a new outline will be published and Parliament will be notified appropriately. Parliament will also be given regular information on the operation of the scheme. Details of the number, cost and geographical distribution of studies supported will be set out in our annual report to the Development Assistance Committees of O.E.C.D., which in recent years has regularly been presented to Parliament as a White Paper; and our proposed expenditure on the scheme will be set out each year in the Estimates.
I move on now to Clause 4 of the Bill. This is not about encouraging overseas investment; it provides for increases in the statutory limits on liabilities incurred by E.C.G.D. in the course of its normal export credit business. The
1254
present limits on E.C.G.D. liabilities were set in 1970 at £4,000 million for Section 1, which covers "commercial" business undertaken with the advice of the Export Guarantees Advisory Council, and £2,500 million for Section 2, which covers other business undertaken in the national interest. Since then the growth, both in our export business and in the proportion of it covered by E.C.G.D. has been rapid, and we expect this to continue. We are therefore proposing new ceilings of £6,200 million for Section 1 and £6,000 million for Section 2. The Section 2 figure allows for extra liabilities that will arise from the new arrangements for refinancing export credit provided by the banks, which the Government announced on March 15.
I know that many noble Lords are familiar with the work of E.C.G.D. For many years it has played an increasingly important part in support of our export trade. Its reputation with the exporting community and in the City is deservedly high, as I can personally testify from recent experience. However, E.C.G.D. has no intention of resting on its laurels, and in view of the very rapid growth in its organisation and business in recent years we thought that a thoroughgoing review by an independent authority was appropriate. The Government commissioned such a review last year, and were fortunate to secure the services of Mr. Scholey, a vice-chairman of S. G. Warburg and Company Limited, to lead the review team.
A summary of the review report and recommendations was published last week. The Government have already said that they accept the central recommendation, that E.C.G.D. should remain a separate executive agency within the Civil Service, having a special relationship with the Department of Trade and Industry and with the Treasury. Detailed study of the other recommendations, many of which concern the detailed management of E.C.G.D. has already been put in hand to enable the Government to take decisions about their implementation. We think that they will point the main lines of development for the Department, which the review team found to be already offering a range of service probably wider than that offered by any other export credit insurer in Europe, or perhaps in the world. My right honourable friend the

1255
Minister for Trade has already expressed to Mr. Scholey and his team the Government's thanks for their thorough and constructive work.
Export credit, my Lords, is a vital factor in to-day's trading conditions, and E.C.G.D. has a leading part to play in maintaining the competitiveness of British exports. I believe that we already have a first-class export credit insurance system, and we hope to make it even better with the help of Mr. Scholey's recommendations. These increased limits will enable E.C.G.D. to continue its important work. The Bill, as I have explained, thus makes three separate and distinct proposals for making our international trade more effective. I commend it to the House.
Moved, That the Bill be now read 2a.—(The Earl of Limerick.)
11.39 a.m.
LORD GREENWOOD OF ROSSENDALE: My Lords, I am sure that the happy band of enthusiasts present in your Lordships' House this morning will wish to thank the noble Earl for his lucid and painstaking explanation of what the Bill provides. His explanation is, I think, the more commendable because the subject itself is so esoteric and in many respects very complicated. Fortunately, in April of last year, all of us who are interested in development problems had the opportunity, to which the noble Earl referred, to discuss the philosophy of private investment. More recently we had an opportunity to talk about the target for aid when we debated UNCTAD III, so I hope that we can discuss the Bill more briefly than would otherwise be the case—and that, I am sure, is something which should be appreciated by a Government whose legislative programme is in a bigger mess than I can remember in 26 years of Parliamentary experience.
Of course we welcome the Bill. In the other place it was given an unopposed Second Reading, and an unopposed Third Reading as well, but only after what was I think a very hard-fought Committee stage. I wish that we could have had a similar opportunity of discussing the details of the Bill in this House but the advice I have been able to obtain, for which I am grateful, is that this is a Money Bill and that it would be unusual,
1256
and perhaps undesirable from the point of view of relations between the two Houses, if we were to seek to amend it. I hope that the noble Earl will be able to confirm my interpretation of the situation, and I hope, too, that he will accept that the fact that there is an absence of Opposition Amendments is not to be regarded as meaning that we give wholehearted and uncritical support to the Bill.
Nevertheless, my welcome, although qualified, is still a welcome. I welcomed the proposal when the Government brought forward the White Paper and to-day I welcome the Bill. I do so because I think it is impossible to argue against the contention that private investment has an indispensable part to play in the developing countries. I believe that it is equally difficult to contest the argument that, without an insurance scheme, that investment will not be forthcoming in areas of either political or economic instability. My Lords, it is necessary to have overseas investment if there is to be local saving which in turn will generate local investment. Subject to what I say later, therefore, I think the Government have been wise to follow the example of other countries which have initiated schemes of this kind. Belgium, Holland, Germany and Sweden are examples that come readily to mind. I say that I welcome this although I am getting increasingly worried at the very heavy strain on the developing countries of meeting profits and interest on loans which they have received.
My first objection, or perhaps my first doubt, about this Bill is on the subject of the political repercussions that it may have. In the past it has been quite easy to distinguish between private investment and British Government aid; and in the past any shortcomings on the part of British investors have not been laid at the door of the Government of this country. But I am a little worried, now that both the Government and private investors are to be involved in schemes of this kind. Frances Stewart argued an interesting case in the March issue of Venture, the publication of the Fabian Society. In her article she pointed out that if the Government have to fork out to bail out private investors in the event of any major expropriation, the Government may react strongly to that situation.

1257
We all know that no Government in any country likes paying out money; and the example that Mrs. Stewart gave us in the article to which I have referred was that of Chile and the U.S.A. I understand that after Chile had decided to nationalise the copper mines, she presented the American Government with a bill for about £158 million, for what she alleged had been excess profits taken out and for other acts of dereliction on the part of the copper companies. The effect of that on the insurance scheme was catastrophic and the United States Government, in its irritation, cut off all aid to Chile. I hope that in such a situation we should be more prudent and would show more wisdom than I think the Americans showed on that occasion. But I cannot help looking back a little ruefully to the days when I was subjected to great pressure from the Conservative Party to cut off aid to Tanzania because we were having certain difficulties in our relationship with them at that time.
My next objection relates to what I think is the Government's unsatisfactory interpretation of their obligations under the 1 per cent. target. I still regret very much that the Government have refused to accept, even in principle, the 0·7 per cent. as a separate target for official aid within the 1 per cent. We discussed this in the debate on UNCTAD and I will not go into it in too much detail to-day. But I should explain that I am worried on two counts. First, I think the Bill marks a further blurring of the distinction between official development policy and British business interests. It does so not only by stressing the role of British private investment in our efforts, which I fully accept, but by putting O.D.A. in charge of a scheme to finance abortive feasibility studies carried out by private investors. It may be logical for O.D.A. to be responsible for that but I think it could lead to abuse.
The second count on which I am worried is that if the Bill has the desired effect of stimulating more British investment, can we be absolutely certain that that will not mean a reduction in official aid? I listened with great care to what was said by the noble Earl. I think that he was giving a re-assurance on that; but should he when he replies say firmly that if British investment goes up in the developing countries there will be no
1258
reduction at the same time in the percentage of official aid, he would be giving a great deal of re-assurance to noble Lords on this side of the House and, I think, to many people in the country who are worried about the progress of our development programme. I must emphasise that private investment and official aid are not alternatives; they must be complementary, and one must not be substituted for the other.
To pass on, my Lords, my next objection is that I believe the Bill falls seriously short of what the Select Committee itself recommended. Perhaps I might quote from paragraph 170 of the main Report, in which the Select Committee said:
"Britain should unilaterally insure private overseas investments in developing countries against non-commercial risks, provided that this facility only applies to projects mutually beneficial to the investor and the host country."
I cannot understand the extraordinary reluctance of Her Majesty's Ministers to give that assurance in the Bill itself. It is, I know, difficult to write into a Bill of this kind too strict regulations and controls. But it is, in my view, so basic to the proper operation of the aid programme that everyone should see that it is the developmental aid which is important, and I feel that the Government might have been a little more flexible about it.
There is, of course, no question of imposing investment on other countries, any more than there is any question of imposing aid on other countries. Obviously, it has to be welcomed by the host country. But the Overseas Development Association administration frequently turns down requests for development aid because it does not believe that a project would be an expenditure of public money which would be sufficiently valuable to the receiving country to justify expenditure on our part when there may be more beneficial schemes in other parts of the world, or indeed in the receiving country itself.
After all, my Lords, other Governments in other countries have done exactly what we have tried to persuade Her Majesty's Government to do in this country. I cannot quote the admirable speeches of Mrs. Hart in another place, but I think I can summarise the case put by my right honourable and honourable friends there,

1259
in saying that if a private firm is to be helped by the Government, the Government should satisfy themselves that the scheme will be beneficial to the receiving country and not just to ourselves. The fact that the host country wants the investment is not necessarily the right test of whether the investment should go there. I can conceive of countries like Angola and Mozambique which might have some pretty odd ideas of the form investment should take.
I think we are perfectly entitled to say that the developmental value to the country must be the determining factor. I find the Government's obduracy surprising, because countries like Holland, for example, have covered this point perfectly adequately. Holland insists that investment should have a substantial developmental value and should contribute in a meaningful way to the economic and social advance of the host country. Holland found it possible to do it; Denmark has found it possible, and so has Sweden, Belgium and Germany; and surely, we, with our greater flexibility, and our genius for getting round difficult situations, are not going to be defeated by something which the Danes, the Belgians and the Germans find perfectly possible.
My dislike of this absence of a reference to developmental value is reinforced by the fact that apparently the Overseas Development Association administration is going to find it perfectly possible to apply this criterion when deciding whether to help with exploratory work at the request of private investment. So if the Overseas Development Administration can do it I cannot see why the Export Credits Guarantee Department should not be able to do it, with the help and advice of the Minister for Overseas Development. As it is we have to fall back on what Mr. Grant said on Second Reading in another place on February 9:
"…the E.C.G. will have to look at the circumstances of the particular case—whether it is in the interests of the developing country that the investment should be made"—
clearly, my Lords, implying that it is possible to do that—
"whether it is an acceptable risk, having regard to the national interest; and what degree of insurance cover should be given."—[OFFICIAL REPORT, Commons, 9/2/72; col. 1524.]
1260
So it is possible to give this assurance, and I hope that the assurance will in fact be repeated by the noble Earl to-day. But it would have been much more satisfactory had it been possible to include them in the Bill. I hope that the noble Lord will be able to give us the confidence that the Overseas Development Administration will always be consulted by the Export Credits Guarantee Department and that developmental value will always be a factor in taking a decision.
I find it equally surprising chat the Government should reject the Opposition's proposal that one of the conditions of insurance should be that the investing firm should observe a proper code of conduct in the developing country. There is nothing paternalistic about this. The sort of thing that we should like to see them undertake is to agree that there should be adequate safeguards for the environment. Developing countries have not the experience that we have built up over the last 150 years of dealing with smoke pollution, or with the pollution caused by industrial effluent. Their town planning provisions are, at any rate, primitive, and I should have thought that this was the sort of field where we ought to carry a banner and try to lead the way. One of the best ways of doing it would be for British investors to set the sort of standard which the developing countries, we hope, will set for themselves in the not too distant future.
I do not see why it should he wrong to insist that an investor would not get aid if he was proposing to invest in a country where racial discrimination is blatantly practised and where, were he to operate there, he would have to subscribe to the racialist laws of the country. I do not see why we should not insist on investors agreeing to pay decent wages and provide good working conditions of the kind that the I.L.O. want to see in the developing countries. These are all reasonable requests, and the only concession that the Government made was that they would not insure a scheme involving racial discrimination in hotels and restaurants.
Having studied the previous discussions on the Bill carefully, my Lords, I am disappointed at the inflexibility of the Government. I do not question their intentions. I am sure that they want to ensure that the developmental value to a

1261
country will be one of the main considerations. But unless they stress it more strongly than it has been stressed so far, there will be the suspicion that we are more interested in promoting our own trade interests—and there is nothing disreputable in that—more interested in our own advantage than the benefit we are bringing to the people who need our help. I think it a pity that the Government have not been more forthcoming. But, in spite of that, as a Party we welcome the Bill. We have supported it, we have tried to improve it, and I regret that the Government refuse to make it a better Bill and one which would be politically less worrying than the one we have before us this morning. I regret that deeply, my Lords. But we are promised an annual report on how the Bill works, and in the meantime, until we get the first annual report following the passing of the Act, I will rest my case.
11.58 a.m.
LORD TANLAW: My Lords, I wish to follow the noble Lord, Lord Greenwood of Rossendale, in expressing my pleasure in listening to the noble Earl. Lord Limerick, present the background to this Bill. It think it especially pleasing that he could speak with such authority and personal involvement in a well-intentioned, if slightly tardy, scheme as was put forward by him this morning. The noble Lord, Lord Greenwood of Rossendale, has expressed the objections that we have on these Benches in a most polite and reasonable way; and at the same time he welcomes this Bill, as I do, with the reservations that he has made. The services of the E.C.G.D., and the back-up assistance offered in this Bill, are only necessary since the change over from the British Empire to independent nations within the Commonwealth.
The noble Earl touched on the back history of aid-giving and trade to overseas developing countries. If noble Lords will bear with me, I should like to take this one stage further as I have had some experience of working in such countries. The traditional traders and merchant venturers of the past have given way to the developing industries of the Third World which are growing up to satisfy their own home markets and their own new export markets. Continuing capital investment and know-how from
1262
the industrial nations is essential for the health of these newly formed centres of commerce and trade. British industry inventiveness and the trader instinct which are the foundations of our economy can be used with enormous effect to benefit these areas. British overseas investment has always played an essential part in its contribution to the home economy and it is encouraging that Her Majesty's Government recognise this by adding strength to the Export Credits Guarantee Department with this Bill.
There is another facet which is worth a mention which was not touched on by the noble Lord, Lord Greenwood. Any country that has achieved independence is likely to choose its own trading partners, and if British trading relationships are to be maintained for the future in developing countries—I would prefer not to call them developing countries but growth areas as we are talking about trade—they must be in a position to stand up to world competition perhaps for the first time. The increasing power and influence of Japan has been quick to take advantage of these new challenges and the noble Lord, Lord Greenwood, has mentioned other nations who have recognised the need for maintaining a commercial interest in these countries. To go back to Japan, whatever the risks, it has been the policy of the Japanese Government since the war to support and encourage any enterprise which instigates long-term projects in these areas to capture the market to establish a take-off for exports. This Bill will assist British interests on the same basis as other competitor countries have done up until now.
The role of the host countries has been mentioned in both Parts of this Bill and I hope they will welcome the intentions and principles behind it, perhaps with the reservations that we have also made about it as well. The local tax and remittance regulations of the host countries, as well as their policy of local participation in foreign enterprises, should not put off but rather encourage British overseas investment. I speak from experience when I say that it is essential for any commercial entity operating in a developing country to identify its interests so far as practicable with that of the host country. No end of harm or misunderstanding can be created by giving the impression that foreign investments in a growth

1263
area is of a fly-by-night nature and there are regrettably some nations who move in to take the benefits and then move out again. Many Third World countries are in the formative stage of political development which often brings about sudden upheavals that are very disruptive to business interests and the movement of goods. Sudden withdrawals of capital or the shutting down of enterprises because of the risk element can only undermine the general stability of the country as a whole. It is to be hoped the Bill will encourage investors to hold on during these periods of unrest and not pull out if it gets too hot. I understand from the noble Earl, Lord Limerick, that this is exactly what this insurance scheme is intending to do and this is one of the main reasons why I offer it my support.
Before touching briefly on the detail of the Bill I should like to pay a real tribute, as the noble Earl, Lord Limerick has done, to the work of the E.C.G. Department. Anyone who has dealt with it will know that it has a record of solid achievement in assisting exporters and traders based on understanding and appreciation of the difficulties of businessmen operating in difficult or risky areas. The Government Department has shown its sympathy and understanding for something non-governmental which is exceptional, and I think it is worth a special mention. In the course of his speech the noble Earl, Lord Limerick, mentioned enlightened self-interest. Enlightened self-interest is the Government principle behind the work of E.C.G. and this Bill. The Government should not be embarrassed by this because it is in the interests of the host countries who have investors encouraged in this way because of the contribution that new industry can make to their economies.
But having said that I feel that the point made by the noble Lord, Lord Greenwood, on official aid and private investment is an extremely fine one and I wish to underline it. This very practical assistance to overseas investors, enlightened self-interest—call it what you like—should not be classified by the Government as official aid to developing countries. There is a distinction here and I think the Government might undo a lot of good intentions behind this Bill if
1264
they try to suggest that this is part of official aid simply because the noble Earl, Lord Limerick, says that it counts as aid. This Bill is about enlightened self-interest—let us call it that and let us keep official aid in the channels where it belongs.
I should now like to touch briefly on some of the details of the Bill. I should like to ask the noble Earl, Lord Limerick, for one clarification; that is, the definition of developing countries. I asked for and received a very comprehensive list of developing countries including Rhodesia. What is the position if an investor wishes to set up investment in Rhodesia? In the list which I have Rhodesia is mentioned and will be eligible. The noble Earl, Lord Limerick, and the noble Lord, Lord Greenwood, mentioned other countries. Some clarification on this could be helpful. There are also a number of tax havens included in this list and I should like to think that when consideration is given to insurance or study groups to do preparatory work for investments some areas given in this list are much more attractive in terms of tax, in terms of safety, if you like, than others. I should like to think that not all the money is going to go to the easy countries because I do not believe that is the noble Earl's intention and it certainly is not, I believe, the spirit of this Bill. There is one other factor. One would like to think that the Department concerned will give some preference to projects that involve local participation, and should not encourage just 100 per cent. subsidiaries of a corporation or company in this country.
I feel this to be an important element and it is difficult, I agree, to satisfy in terms of the Bill; but this is the spirit of the Bill and I think we are all agreed what the spirit of the Bill is. I am sure that the Department concerned will appreciate this as well. The projects themselves, I feel, should also have a labour intensive element as far as possible. I discussed this element in the UNCTAD III debate. Low cost technology was the subject that I was emphasising in these countries which have massive unemployment problems—far greater than even this country. It is really important that a project does create employment. Quite often a lot of money can be made by putting up a project with a very small labour content in a developing country.

1265
This should not be encouraged. Another preference which I feel the Department might give is to projects that are designed to operate from the agricultural regions of a developing country. These may be very small and very simple projects, but ones which would be labour intensive and bring benefits to those regions. I should like to think that this again is something which is going to be given some preference by the Department.
Clause 3 is a very sensible and practical way to go about these early surveys. I would only suggest that I hone that all the applicants are not management consultants. Having read the very helpful pamphlet on this Bill, it seems to me a complete Godsend for every management consultant in this country to have a free trip to a warm climate in the rougher part of the British year. I am sure again that discrimination and distinction will be made by people who look after the applications to see that this does not occur. Clause 3 is particularly suitable to these small, intermediate, low-cost technology projects which need only the sending out of one expert to one specific area to provide one industrial unit. I hope that Clause 3 and the assistance given in it will be used for concepts of this sort.
I will not detain your Lordships much longer, because the other points have been adequately covered by the noble Lord, Lord Greenwood of Rossendale. We welcome this Bill from these Benches; we welcome the thinking behind it and the principles that have given it the light of day. I would only add this final word, to which I referred earlier: that the distinction between enlightened self-interest, which this Bill is, and official aid should he clarified before we finish this morning.
12.11 p.m.
LORD WALSTON: My Lords, I should like to echo the support which has been given by other speakers to the principle behind this Bill, and also to the way in which it is trying to carry it out. I am glad that this is being done. I think it could be improved; but at least good marks to the Government for having introduced it, and good luck to those who are going to carry it out! I agree strongly with the noble Lord, Lord Tan-law, when he says that we must keep in our minds a clear distinction between
1266
what is aid and what is private investment. We have talked about this frequently, and I will not labour the point. There is no doubt that private investment is good for the country in which the investment is made, but its primary object is the profit of the investor. Therefore from the point of view of straight thinking, it is misleading to call such investment "aid".
The suggestions embodied in this Bill are clearly intended to be aid rather than private profit. That is the point of the Bill. It is not left to private individuals and insurance companies to carry out this form of insurance; it is a Government project which it is expected will cost the Government money, and they are doing it in order to fulfil their undertaking to help developing countries. It is good when it is possible to kill two birds with one stone, but it is important always to remember what is the primary bird and that one aims at that bird and is not deflected by others which may come into the line of fire. I reiterate what the noble Lord, Lord Tanlaw, has said: that we must be clear that the whole operation of the Bill and the aim of those who carry it out must be directed towards the primary bird; that is towards aid rather than towards profit. Secondly I would emphasise what my noble friend Lord Greenwood of Rossendale said: that this must in no way detract from the direct aid that we are giving and are going to give to developing countries. We must not sit back and say that, because of this Bill and this help, we need not take so much of our national revenue and devote it to direct aid. Those are two caveats that I think should be entered at this stage.
There are two points, one of which again has been touched on by my noble friend Lord Greenwood, which I should like to some extent to amplify. But, before I come to that, I suggest to your Lordships that there is a fundamental difference between investment in extractive industries and investment in constructive industries. An investment, whatever its immediate benefits or medium-term benefits may be, which finishes up by leaving the country in which the investment has taken place with fewer natural resources—in other words, mining—cannot be such a desirable investment as one which at the

1267
end of a similar period of time leaves the country richer and more able to produce, such as agriculture, drainage, irrigation and things of that sort. I hope that there will be some differentiation in the treatment of these two different types of industry which will be of real benefit to the receiving countries.
Following on from that trend of thought, we come to the point which my noble friend Lord Greenwood mentioned; that is, the value of the actual investment to the country concerned, which is not always the same as the welcome which is given to it by the country concerned. My noble friend mentioned Angola and Mozambique. There could be many types of investment there which would be welcomed by the present Governments of Angola and Mozambique though they are not necessarily the sort of investments for which the majority of the inhabitants of Angola and Mozambique would wish. And an even more difficult question arises when it applies to the neighbouring territory of Namibia. What will be the position (I am sorry that I have not given the noble Earl notice of this question, but it came into my mind only as I was listening to the debate) of a British company which applies for a grant towards prospecting in Namibia for natural resources of an extractive industry? Such aid, if the present situation is anything to go by, will result, it is true, in greater employment of people there, but employment under such conditions that none of us would willingly agree to it: because we know what is going on there and in the neighbouring territories of South Africa. People are herded together under contract labour systems, indigenous to the particular territory; they are paid minimal and derisory wages, and are kept away from their families: in other words, they live a life which is abhorrent to all of us and which results in the depletion in that country of some of the very sparse natural resources. What is our position if a company comes along and asks for aid under such conditions? I hope that there will be power in this Bill for the authorities to say, "No; we will not give you help for this", even though the country which claims to have government over it—and that is a very moot point—says that it welcomes it and would like it.
1268
The only other point that I wish to make is the importance of small industries for small countries—even for big countries, but more particularly for the small countries. It is my experience—not very widespread, I grant, because it is confined primarily to the small islands of the Caribbean—that there are many small industries which could well be established in these areas with enormous benefit to the population as a whole, but which, because of the small size, are not attractive to the normal enterprises in this country who are thinking in terms of overseas development. If they are prepared to think in terms of several millions of pounds of investment, it is then worth their while to engage their experts, carry out their surveys and all the rest of it. But when it is an investment involving possibly only £10,000 or £20,000, in the first place, that will appeal only to small firms in this country who do not have the overseas service or the expertise. However, they can play a vital part in the development of many developing countries and particularly, as I say, the smaller countries. I hope that special encouragement will be given to such small firms to develop small industries in these small countries, or even to the larger firms to pay attention to the opportunities open to them in small investments overseas.
With these provisos I will say once more that I think this is a move in the right direction. We must differentiate between the primary "bird" of aid and the secondary "bird" of a good investment for our own people. I believe that E.C.G.D. on its past record will be an admirable agency for this—I have the greatest admiration for the way in which they have worked in the past—and I think that as the years go by and the reports come in we shall be able to modify the Scheme and it will achieve what all of us in this House wish it to do.
12.22 p.m.
LORD DAVIES OF LEEK: My Lords, I will not detain the House for very long, but I should like to support the proposal made by the noble Lord in his interesting and constructive speech just now of encouraging, small enterprise. Particularly would this be helpful in the mining industry. It is extractive and it

1269
does not need any huge technological process to open small coalmining enterprises, with the drift systems and the small levels; so here even a few people with an investment as low as £10,000 or £15,000 could give benefit and employment to a small number of people.
I am grateful to your Lordships' House for allowing me the privilege of making these small points. I would emphasise the point made by the noble Lord, Lord Greenwood, about comparison of private enterprise vis-à-vis aid. The Pearson Report referred to this. A question was asked of the noble Earl, and it may be unfair to plunge it upon him now, but may I ask whether we may be assured that as private enterprise investment increases national aid will not be proportionately diminished? That is all I wish to say because the House will be well aware of the many other points that have been raised. However, I should be grateful for an answer to the two points which I have raised.
12.24 p.m.
THE EARL OF LIMERICK: My Lords, I am grateful, as I am sure the whole House will be, for the contributions of those who have taken part in this debate. We are fortunate in having among us a number of noble Lords with great experience either in their own lives or in the Ministerial sense. The contributions they have made are therefore the more welcome and will be most carefully considered. I will do my best to answer the points that were raised in a way which I hope will satisfy the House.
The noble Lord, Lord Greenwood of Rossendale, raised the question of the possible odium attaching to the Government on account of the doings, or the misdoings, of the private investor and their possible effect on international relations. This is indeed a risk which we have recognised. When there is an insurance scheme which is Government-backed, I think it is idle to deny that such situations might occur. This point was carefully taken into account. However, the Government have concluded, as a number of other Governments have also concluded—I am speaking of Governments of developed nations—that this is the right approach. One hopes that if and when such conflicts arise they will be recognised as being legitimate conflicts which can he settled in a sensible and orderly way.
1270
The Government's policy on the expropriation of investments by developing countries is unchanged. We do not dispute that there are many Governments who expropriate foreign property, but provided such expropriations are nondiscriminatory and are for a public purpose related to the internal needs of the taking State, and provided that there is prompt, adequate and effective compensation, this position is fully in keeping with international law; and we think it to be fair and reasonable. The introduction of the investment insurance scheme will not alter this policy one way or the other, since successive Governments have always taken seriously their duties in respect of their nationals or companies abroad who are treated unfairly.
The second point raised by the noble Lord concerned the one per cent. target. There are strongly-held views on this subject and I do not think he will expect me to go into general discussion on the desirability or otherwise of accepting this target, since the matter has been very well ventilated. But lie went on to suggest that it led to a blurring of the distinction between private and public funds—which I do not believe will be the case. The public aid flows are matters on which carefully-considered targets are set, and if I may take that point, together with the point which he made later when he asked me to confirm what our attitude was regarding the relationship between these two figures, I would say that I did my best to make it clear in my opening remarks. However, I am quite willing to return to it. I was asked for an assurance that increases in private investment would not lead to some decreases in official aid. The public expenditure White Paper has announced increases in official aid over the next four years, and I can state that this firm commitment will not be affected by any increase in private flows. We welcome these for other reasons but they will have no bearing on the intention to meet the targets we have set ourselves for the next four years. I hope that the noble Lord will find that reassuring.
LORD HALE: My Lords, would the noble Earl allow me to intervene? The use of the word "target", which I could well understand in view of the fact that we have not vet reached the figure, is

1271
something of a misnomer for something which was originally stated as a minimum figure. We were to give a minimum of one per cent. and hope to build on that. Now it seems we are still hoping to raise it to one per cent.
THE EARL OF LIMERICK: Yes, my Lords. The one per cent. figure is a combination of public and private flows and this target has been attained in each of the last three years. In a quite separate sense, the subsidiary target for the official aid flows is the one to which I think the noble Lord's question is directed. In our move in that direction we have increased and shall continue to increase. Of course one can predict the level of our aid flows. What we cannot predict is the level of the gross national product to which it will be related year by year. But we are moving purposefully in this direction. The assurance I gave was that this move will not be affected by any increase in private investment such as we hope will be brought about by the provision of this insurance scheme.
The noble Lord next raised the point that the O.D.A. scheme might be open to abuse: that is the scheme for pre-investment studies. I think that will not be the case, because anyone who is proposing to make such a study will first of all have quite consciously to commit his funds to do it. He has no right of claim under this scheme until his study is completed and shown to be satisfactory; and the amount he can then recover is limited to 50 per cent., with an overriding limit of £25,000 sterling. This he recovers only if his investment is not successful. I do not think it is very likely that people will be embarking on studies in the expectation that they will not prove successful. Even if they did, the limit of their recovery is 50 per cent., and therefore I think we can be assured that nobody is going to use this scheme recklessly, wildly or in a way which is detrimental to its purpose.
I turn now to the tests of acceptability and the Report of the Select Committee to which the noble Lord, Lord Greenwood, referred. He accused us of a lack of flexibility here, and I think I can take him up on this fundamental point. We are talking now about an enabling Bill, and what the Government have resisted is
1272
an attempt to write into this Bill provisions which would materially limit its flexibility. The way in which it is used is a matter of the business which is done under the schemes, and here we have stated our criteria quite clearly. What we have not thought it right to do is to limit in the Bill itself the way in which this can be done. This is rather a fundamental point which I should like to stress. The desire is to retain the flexibility, and this accounts for the attitude. I think there was also some small misunderstanding in that the test of acceptability applied by O.D.A., which was referred to, is closely similar to the test which will be applied by E.C.G.D. in determining what business it is prepared to cover under the investment insurance scheme. Reference will be made to O.D.A. for their views on these cases.
The noble Lord stated his understanding of the position regarding the nature of the Bill and I should like to refer him to page 129 of the Companion to Standing Orders, paragraph 1. I would not wish to go further than the Standing Orders. The position, as I am informed, is that in this House we can amend a Money Bill but that it is a most ususual course. If we so amend it when it returns to the other place they are not obliged to consider our Amendment. In general, as the noble Lord said, it is not desirable to have a Committee stage on a Money Bill in your Lordships' House. A Committee stage might lead to some difficulty between the two Houses.
My Lords, I turn now to the code of conduct which received a great deal of attention at the Committee stage in another place. The noble Lord referred particularly to the lead we have in matters of anti-pollution which we readily acknowledge. There is some difficulty here in that, on the whole, anti-pollution measures are taken because they are made necessary by densities of population, by the effects of effluent from the industrial society; and therefore by their nature these measures are extremely expensive. They are undertaken only because we find it necessary to undertake them for the protection of a very compact society. While I have every sympathy with the view expressed, the particular difficulty is that if we were to be too dogmatic on what should be done we would find that the proposals we put up in following

1273
such a code would be so expensive that it would be very unlikely that any business would follow. Unless the whole world adopted such a code there would be somebody who would be prepared to do the job without insisting on these criteria.
May I now turn to the points raised by the noble Lord, Lord Tanlaw? I very much agree with virtually every word he said, but I should like to refer to particular points that he made: he has experience, again, in these matters which we acknowledge. He said that he thought it was most important for newly independent nations to be free to choose their own trading partners. One aim of the insurance scheme is to encourage investors to invest in the needier countries where investors may consider the position to be too risky and must be supported in some way. In that sense it adds to the freedom of these countries to negotiate with their chosen partners. It has removed a constraint whereby the partners may feel that political risks of expropriation or convertibility risks are so high that they could not undertake such investments without reassurance. This is not an answer to his point but it is a comment on what he said.
The noble Lord also referred to local conditions and the identifying of the interests of the investor with the host nation and the way in which this insurance might encourage investors to sit tight in bad times. This is an extremely valid point and would certainly lead us to welcome the scheme. He then paid a tribute to the work of the Export Credit Guarantees Department, which was later echoed by the noble Lord, Lord Walston. I should like to acknowledge these tributes which I know will be appreciated by those who provide this service and do it with such dedication. I agree that we should not be embarrassed on the matter of enlightened self-interest. This Bill is a facilitating measure; we are seeking to remove inhibitions which may have existed on the free movement of funds, and funds in the private sector will follow the interests of the investor. We wish to see removed or reduced the reasons why the funds have not flowed in the directions of the countries to which we would wish them to flow.
The noble Lord, Lord Tanlaw, went on to ask me to clarify one question on
1274
the definition of developing countries; and he mentioned particularly Rhodesia. I can do this quite simply. In the investment insurance scheme there is no restriction on the countries which may be covered. There is a practical working restriction imposed by the scheme—not by the Bill—in the case of the pre-investment studies where these will be limited to the countries which are from time to time defined by the O.E.C.D. as developing countries. The noble Lord referred to tax havens. Countries which operate as tax havens are not those to which normally we would develop our aid effort. This will be borne very much in mind when schemes are coming forward.
LORD SHEPHERD: My Lords, could the noble Earl qualify that remark? There are one or two small colonial islands of ours in the West Indies which are developing a type of tax haven system: Caicos Island, and also the Cayman Islands. I should not like it going out from the noble Lord that because they are providing a type of service for economic advantage they will not be getting economic aid from the British Government.
THE EARL OF LIMERICK: My Lords, I am grateful to the noble Lord: I take his point. He is, of course, absolutely correct. What I was implying was that we would not direct funds there because they were tax havens; equally we would not refrain from approving investments there because they were tax havens. We would look at the situation of the country, and this is one factor which will be known at the time that the assessment is made.
The noble Lord, Lord Tanlaw, also referred to local participations, and here it is impossible to have preconceived ideas, largely because other countries will have their own ideas about the correct level of local participation. As it varies now from country to country, it will no doubt vary from time to time. What we have sought to do is to leave it open that cover may be sought for any form of sensible association, subject to the limitations set out in the scheme. The noble Lord referred to the desirability of having investment projects which are labour-intensive, and I am wholeheartedly in agreement with him. In many countries

1275
these are the most desirable form of investment, and one hopes that one of the main and major effects of this Bill will be to encourage such schemes. But it is a facilitating Bill and it cannot be the purpose of the Bill itself to bring this about.
To turn to the very interesting comments of the noble Lord Lord Walston, he said that we should recognise that the aim of the measure was not private profit. This is true, in the sense that what we wish to do is to encourage the movement of private funds, particularly to the developing countries. This movement will be supplementary to our official aid flows and will also, we hope, be for the benefit of the countries concerned. The funds are going to go to these countries only if a possibility of profit is seen. As the noble Lord, Lord Tanlaw, said—and I agree with him completely—one must recognise that this has been the dominant motive of private investment. We have to see that it is done on a sensible basis, and one which is never offensive to the host country.
LORD HALE: My Lords, I apologise for making a second interruption. Subsection (6) of Clause 1 was added in another place at a very late stage on Report and almost immediately thereafter the Third Reading was taken "on the nod". The Minister tried to explain the nature of the report and the kind of details that would be given. I understood him to say that it would be on a regional basis. If we cannot have the names of the companies (and the reasons for that one can understand) may we at least have an assurance about the nature of that report and the details that will be given; and, for instance, that if there arc operations in Rhodesia it will be said to be Rhodesia, and so on?
THE EARL OF LIMERICK: My Lords, I am afraid that the noble Lord has caught me a little on the hop.
LORD HALE: My Lords, may I explain? I refer to subsection (6) of Clause 1, which states:
"As soon as may be after 31st March in 1973 and in each subsequent year the Secretary of State shall prepare a report on the discharge of his functions under this section, and shall lay the report before Parliament."
That is a very welcome addition, but there was a good deal of vagueness about
1276
the nature of the report, the details that could be given or the information that would be available to Parliament in that report. I wonder whether it would be possible to have more information. If I have taken the noble Earl by surprise, well, presumably we shall have a Third Reading, even if we do not have a Committee stage (I gather that we are not going to have a Committee stage), and the matter can be raised again then.
THE EARL OF LIMERICK: My Lords, as regards the pre-investment study scheme, I think this will be a matter of report to the Development Committee of the O.E.C.D., which has been our practice in recent years. The report, which is laid before Parliament each year, will contain details of liabilities, by countries and in industrial categories. It does not go into a finer scope than that, because otherwise it would be getting down to detailing cases, which in a report of this kind, I think the House would agree, would not be appropriate. I hope that that is the information the noble Lord is seeking.
LORD HALE: And the nature of the project, my Lords?
THE EARL OF LIMERICK: By countries and by industrial categories.
LORD HALE: My Lords, I am much obliged.
THE EARL OF LIMERICK: My Lords, the noble Lord, Lord Walston, then went on to draw a distinction which I am sure the whole House will recognise between extractive and constructive projects in developing countries. This is indeed a most valid point and one which must be in all our minds. One of the unfortunate facts is that the source of foreign exchange for developing countries frequently lies most in the exploitation of their natural resources, and although one may feel that investment of other kinds would, long term, be more desirable, perhaps such projects have to take their place in the scheme of development of these countries. Provided that the extraction is reasonably managed, it would be a very legitimate purpose of this Bill to facilitate such investment, which can be of great benefit to the developing countries at a certain stage of their development.

1277
This is of course an enabling Bill, and our criterion is an enabling one. What we seek to do in the Bill is to ensure that investments which are made, which pass through the screens which are later applied to them by the O.D.A. and E.C.G.D., are those which are in the interests of the investor and of the country in which they are made; and, as has been said earlier in this debate, that they are of a nature which is acceptable to the host nation. There is here a clear basis on which this will be looked at. Information will be coming back from the local posts and there will be consultation with the O.D.A. to establish that this criterion is fulfilled.
The noble Lord then referred to the small industries, and this point was later echoed by the noble Lord, Lord Davies of Leek. It is an extremely important point, but I would say from my personal experience that I do not think the position is quite so bleak at the moment as has been suggested. There are a great many small firms which make small investments overseas. We should like to sec more; and that of course is the object of this whole exercise. We want them to have the confidence to make these small investments which, by their nature, by their very smallness, are often more welcome to the countries in which they are made. They set up something which produces on a small scale a management skill; they produce training; they produce good relations, and there is not this feeling of domination which may come from the larger investments. So I certainly welcome that comment and share the hope that one of the outstanding results of this exercise will be to increase the flow of the small investments in the developing countries. I think I have detained your Lordships long enough. I hope I have dealt with the points that were raised, my Lords; I have tried to do so.
LORD WALSTON: My Lords, before the noble Earl sits down, there is one point I mentioned which he did not deal with and that is the specific case of Namibia.
THE EARL OF LIMERICK: My Lords, I beg the noble Lord's pardon; I meant to do so but overlooked it. It is a case in which one cannot and should not be dogmatic. This is an enabling Bill and
1278
any scheme would have to be looked at on its merits. The points which the noble Lord made will of course be borne very much in mind in making an assessment of the investment project. We can refuse insurance in any case, and the decision to do so is one for which the Secretary of State concerned is ultimately responsible to Parliament. So there is no particular problem in Namibia which may not be found in a different way in other countries and which will not be dealt with by this machinery and receive the particular consideration it clearly deserves in the light of the circumstances then prevailing.
On Question, Bill read 2a: Committee negatived.

CRIMINAL JUSTICE BILL
Brought from the Commons; read 1a, and to be printed.