§ 3.7 p.m.
§ The Earl of LIMERICK rose to call attention to the vital need for sustaining and improving Britain's export performance; and to move for Papers. The noble Earl said: My Lords, in contemplating this vast subject, I am encouraged by the number of speakers who are to follow me who will be able to draw on specialist knowledge based on years of experience in a wide variety of exporting industries, from the invisible to the largest and most solid. It is one of the strengths of this House that such experience can be brought to bear upon topics of national 786 importance. Consequently and by a self-denying ordinance, I shall be saying almost nothing on my favourite subject of the Middle East because I know that my noble friend Lord Denman will be plugging that gap later on.
§ I count it an achievement to have persuaded my noble friend Lord Pritchard, who made such an outstanding contribution to the British National Export Council, to be tempted to make his maiden speech in this debate. I look forward very much to these and other specialist contributions and, in the meanwhile, I shall try to set an example of what I venture to urge on others by resisting the twin temptations of seeking to cover the whole waterfront and of turning this into a general economic debate. However, there is much to say and few chances to say it, so I do not promise brevity, though if shall endeavour to remain relevant.
§ Clearly, it rests with me, having had the temerity to raise the subject, to set the scene. My qualifications for doing so, such as they are, will serve also as a declaration of interest. Since 1958, I have been employed by one of our major international merchant banks, working largely on finance for overseas trade and currently much engaged in export construction projects. From the mid-1960s I have been concerned with overseas work of the London Chamber of Commerce, of which I am a Member of Council. Also, since last year, I have been President of the Association of British Chambers of Commerce, whose interests I have represented since January on the British Overseas Trade Board. Since 1968, I have been deputy chairman of the Committee for Middle East Trade, which was then an area committee of the BNEC and now fulfills the same function in relation to the Overseas Trade Board. During the past eight years, I have been privileged, in various capacities, to lead trade missions to nine different countries. There was an interlude from April 1972 until March 1974 during which period I was perhaps even more directly concerned as Parliamentary Under-Secretary of State for Trade. I then tried the patience of my noble friend Lord St. Aldwyn unusually high by visiting 23 countries in 23 months on trade promotional visits.787
§ I shall divide my remarks this afternoon into four broad areas. These will be, what we sell, whom we sell it to, the terms on which we are paid and, perhaps most topically, the methods employed to promote or encourage further exports. First, however, it is necessary to say something about the very difficult climate in which our exporters are operating today. Mindful of my own warning about straying into general economic debate, I shall make only two preliminary points, starting with what must be acknowledged to be the vital one. It concerns the impact of the inflation which bedevils our whole industrial effort, specifically upon exports.
Speaking on 26th June at the inaugural meeting of the British Overseas Trade Advisory Council, Mr. Peter Shore pointed out that in the past year our rate of domestic inflation had far outstripped that of our industrial competitors and was still increasing while others had succeeded in lowering their rates. He ended with this warning:
This is a situation which we just cannot allow to continue. If we did, it would kill our chances of export-led growth stone dead. More than that, we should price ourselves out of world markets with disastrous consequences for lobs and wellbeing in this country.
§ Those of us who for months have been preaching this message—not, may I say, of doom, but of the necessity to avoid doom—must rejoice that it is receiving such powerful endorsement. The fundamental point which eclipses all others—and I reiterate this with all the force that I can command—is that unless we can rapidly control our domestic inflation we shall cease in many overseas markets to be price-competitive. Sales which might have been ours will go to ever eager foreign competitors, and markets once lost are never easily regained.
§ My only other preliminary point is this. Evidently, a trade imbalance may be improved either by increasing exports or by reducing imports. Voluntary import saving is a worthy objective in many cases and fuel is an obvious example. But when it is urged—sometimes by those who should know better—that arbitrary import controls, basically designed to protect uncompetitive British industry, will at least help to solve our problems, then comes the time for some protests. There is no time to develop 788 the case in full—it was put, unanswerably in my view, by Sir Frederick Catherwood, the new Chairman of the British Overseas Trade Board, in an address to the Institute of Export on 13th May—but essentially it rests on our unique vulnerability to retaliation both by importers of our goods and by foreign lenders, on the unsatisfactory nature of any mechanism, at least so far proposed, on the inhibition to exports implicit on bureaucratic control over import components; and not least on the negative reversal of the benefits of international specialisation and the denial of consumer choice. I hope that this afternoon no one will advocate such self-defeating policies.
§ Let me now turn to the first broad topic of what we sell, and the undoubted need to sell more of it. The Prime Minister has urged us to give more credit for recent export performance. I have cheered with the best, but I can give only two cheers, having four qualifications which inhibit the third. First, although export values have risen, the volume has not—it actually fell by 2 per cent. in the three months to May, and as already recognised there is a strict competitive limit to our ability to offset static or falling volumes by higher prices. Secondly, the recent improvement in the visible trade balance is accounted for substantially by lower imports of fuel and industrial raw materials, upon which future exports themselves will depend. Thirdly, a survey published last week by the Birmingham Chamber of Industry showed that, by comparison with the previous quarter, almost one exporter in three reported export sales down. Even more seriously, these exporters said that export orders had declined even more sharply. They considered that only the depreciation of the pound kept them competitive, and over half of them believed that their profitability would not only decline, but decline faster than their level of turnover.
§ This leads squarely into my fourth and most serious reservation; namely, about the level of investment. These Birmingham exporters—and one hears the same story across the country—now express unwillingness to invest in capital projects in anticipation of the expected upturn in world trade in 1976–77. We know that there is considerable under-used capacity, in pockets, to exploit in the short term, 789 but we badly need more long term strategic investment in export industries. Are we likely to get it?
§ As a country, we are currently exporting 24 per cent. of our national product—I believe that last year the figure was even higher at 26 per cent.—to pay for our necessary imports. Incidentally, this percentage is matched by West Germany—Belgium has a higher percentage—but it is nevertheless double the percentage of national product traded overseas by Japan, and four times that of the United States. Therefore, it is to us of fundamental importance to get the balance right. During the boom of 1973 we faced the problem, perhaps for the first time since the war, of finding the capacity to make what we suddenly found the competitive value of the pound was enabling us to sell abroad, rather than struggling to sell what we made. The Government then urged in 1973as they are now urging in more difficult days in 1975, when our price advantage has disappeared—that export manufacturers should invest substantially. This is needed in order both to increase capacity and to secure some lasting benefit from the anticipated world trade revival, and to reduce unit costs by means of more efficient production.
§ I believe that the manufacturers' answer to this is quite clear and consistent. They will willingly invest when they see a reasonable prospect of doing so at a reasonable level of profit. However, expectations of profit have taken some substantial knocks in recent months—first over oil prices and escalating commodity prices; followed by controls over domestic selling prices, by increased stock and financing costs, and especially by wage inflation. For a healthy export industry, upon which a healthy economy substantially depends, it is essential that the private sector should be able to achieve a satisfactory return on invested capital. Apart from the obvious question of profits retained for reinvestment, if the level is too low there is no security for bank borrowing and no hope of raising fresh equity or loan capital from the market on terms which are not unduly onerous.
§ Whatever we seek to sell abroad, it must be at a competitive unit cost. This is the measure of productivity. And on this vital issue of industrial productivity one 790 must feel deeply concerned for the future. We rely almost entirely on imports of raw materials for our industry, but latterly the decline in our relative efficiency as converters and adders of value has been revealed by the large increase in imports of finished goods. The stock answer is that we should devote more resources to products of the higher forms of technology. The problem here is that the development costs and the risks of commercial failure are enormous, while success demands larger markets than we can readily command; witness, my Lords, the post-war history of our civil airframe and aero-engine manufacturers, most recently Concorde and the RB.211 engine. Unless my eyes deceive me, the noble Lord, Lord Beswick, is today wearing his Concorde tie; I might have thought to wear mine.
§ Our alternative is the indirect one of the export of the technology itself which, in some sense, is equivalent to selling the seed corn over the hedge. Lacking, as we do, both natural resources and the ability to generate sufficient capital to exploit our own skills of invention and conversion, we shall, unless we increase our productivity very substantially, be forced back increasingly into the role of intermediaries. The continuing contribution made to both national and international welfare by the City of London is the best example that this role is neither unworthy nor unprofitable, but it is hardly enough to provide a rising standard of living for almost 60 million people.
§ It is now time for me to take a look at invisible exports—the sale of services to overseas customers. Again, this is a subject dear to my heart, but I shall say very little about it because others, I know, will contribute later, and also because, happily, the record is one of steady success. We must recognise that invisible exporters benefit most from sterling devaluation, both because there is a negligible import content in what they sell—so their sterling prices gain in competitiveness—and also because such of their earnings as are payable in foreign currency become worth more in sterling terms. My sole points, therefore, are of caution. Net invisible exports are currently worth to the balance of payments £130 million a month, in excess of £1,500 million a year. It is vital that 791 these earnings be sustained, and indeed increased, and the 1974 report of the Committee on Invisible Exports—published, coincidentally, today, and recommended as the most cheerful reading on the economic scene—highlights the remarkable success of the City of London and other invisible exporters in retaining confidence during that difficult period.
§ Let me point to just one fact which I see the Financial Times has already picked up. According to Bank of England statistics, about half of the surplus of the oil countries for 1974—which amounted to between 50 and 60 billion dollars—was invested short-term in New York, London and a few other major centres. Of these deposits, London received four times as much as New York, mainly in Euro-currencies. This is a measure of what we would lose if the City of London declined as the world's main financial centre, which brings me to my caution.
§ London is a centre not only for our own financial institutions, but for branches and associates of international financial institutions across the world. Without them it cannot continue its success. There are more American banks represented in London than in New York City. Last year, the rateable value of premises within the GLC area increased by a factor of 2.5 per cent. Yet within this average the rateable value in the City of London increased no less than 4.7 times. I am not talking only of the obviously devastating effects on the profitability on domestic business but that there is nothing to stop international institutions from moving their European operations to Paris, Frankfurt, and Zurich and, faced with such penal increases, several are talking of doing so. It would be madness for the policy of the Department of the Environment—and it is their policy and not that of the City Corporation or the GLC—to drive these institutions out because the Treasury will be the chief mourner if they go. If the golden goose is too hard pressed, she will fly away and lay her eggs on the Continent.
§ Before leaving the topic of what we sell, one should ask where the scope for increase lies. Obviously, we should reinforce success by selling more of what 792 we currently sell into existing markets. It is a matter of record that 64 per cent. of our visible exports are accounted for by the 200 largest export companies and no less than 55 per cent. by only 100 companies representing an enormous variety as well as enormous volume of goods. A good deal of this volume is in areas where the competition is fiercest—major construction contracts, machine tools, automotive equipment, arms sales and so on. These are handled by specialists with generally sophisticated sales staff who have been in the game for a long time and whose success is likely to depend more on price competitiveness, the capability of their factories to give favourable deliveries and the ability to quote favourable credit rather than it is upon identification of new buyers. Thus, while the volume of these exports is naturally vulnerable to general economic conditions, there is relatively little that is new to be said about them.
§ Often, though, it is difficult for these established exporters, whose voices are naturally most often heard in trade promotion circles, to appreciate how daunting it is to get into the export business for the first time. I believe that there is considerable scope for initiating the sale overseas of products which hitherto have been sold only domestically—and I am not talking only of the small firms. It is interesting to note that large and small firms have a similar overall percentage of export to domestic sales; so that the potential exists throughout British industry. But to get into exporting demands positive commitment. Half-heartedness, or withdrawal after a few months, is damaging to Britain's overall reputation as a trading nation.
§ There is an almost infinite number of first-rate products whose manufacturers have never tried to sell them overseas for a variety of reasons; most commonly perhaps from the feeling that they lack knowledge of export procedures. Such potential exporters can be enormously helped by local chambers of commerce and export clubs as well as by regional exports officers of the Overseas Trade Board and by the central mechanism of Export House, once they take the plunge and get in touch. Nor should the scope be overlooked for selling through the medium of established export trading houses which have an overseas turnover 793 of some £2,000 million per annum and to whom the intricacies of export documentation are a matter of daily routine.
§ Once the plunge is taken, the water overseas often turns out to be more agreeable than expected. Firms wishing to expand their exports can also profit from overseas selling missions organised by chambers of commerce, trade associations, export clubs and the like. They benefit in three ways: by travelling and exchanging ideas with experienced exporters; through the aid of our overseas trade representatives in organising a programme which has their products in mind and, in approved cases, by receipt of a subsidy on their travelling costs. I should add a word of caution that it is increasingly felt that the days of the horizontal or general selling mission are over, except in exploring territories into which Britain sells relatively little. Greater impact now is made by specialised missions concentrating on areas known to fit the buying programme of the country concerned. This formula also enables local commercial staff to arrange a far more effective programme.
§ Naturally, we supply the highest percentage of the import needs of these countries with which we have the closest past associations where the bonds of language, education and sentiment give us a natural selling advantage. Conversely, we find the going is harder in areas such as in Francophone Africa where these advantages are enjoyed by others. Increasingly the destination of orders is governed purely by commercial criteria sometimes reinforced by a positive desire to diversify away from overdependence on a single national source of supply. There are many success stories of British products penetrating unlikely territories against the trends, given a good product and an enterprising sales approach. There are some lovely stories.
§ Your Lordships may have seen a few weeks ago the announcement of the incredible export award for 1974. Selling sand to Arabia is old hat. The 1974 award went to a firm who is selling tom-toms to West Africa and maraccas to Caraccas. In the same vein, in March I was asked to give the awards to the smaller exporters and there were some beautiful instances of what I mean. Chatting afterwards to the entrepreneur behind one of these companies I asked what was 794 the total of his staff and he said: "Including the driver and the gardener, there are seven; and they are all in it."
§ My Lords, I wish to make two quick points under this heading. The first is that the more unfamiliar the territory the greater must be the initial reliance of the British exporter on official information and guidance, especially on the ground, from commercial officers. The need for such services is in some way inverse to the past British success. Secondly, there is no need to have a sales organisation covering the world in order to export successfully. Many success stories have arisen from specialisation, from building really good outlets in only one or two territories. This theme of concentration of sales effort was recently highlighted in a detailed report for the BETRO Trust suggesting that in many cases total sales overseas would benefit from coverage of few markets in greater depth.
§ Of course, the relative attraction of different markets changes. Currently, the major new potential lies with the oil-producing countries and in triangular deals matching their surplus funds with British technology and knowledge of third markets. To the OPEC countries, Britain's exports increased, 1974 over 1973, by 46 per cent. During that same year, the USA was up by 86 per cent., Japan by 100 per cent. and Germany by 79 per cent. Our main rivals were forging ahead faster than we. Japan and the USA were already well ahead. We were overtaken last year by France and Germany; and Italy is closing the gap. But I want to bring this up to date and to pay tribute to efforts subsequently; because if we compare the first quarter of 1975 with the first quarter of 1974, the picture is this. British exports to OPEC countries are up by 120 per cent. which—although exceeded by 131 per cent. for Japan—is now fully abreast with and, indeed, overtakes the 104 per cent. for USA and the 105 per cent. for Germany.
§ My Lords, so far I have looked at questions of commercial opportunity and judgment. As soon as we turn to questions of payment terms, however, we tend to find that Government policy is increasingly important. The first and obvious area is export credit. I should here like to say roundly that, however much it may be criticised when it fails to 795 meet the full expectation of exporters, undoubtedly we have in the Export Credit Guarantee Department the best credit agency in the world. Certainly this is the view of those of our foreign competitors who should know something about the competition. For almost 50 years it has built up an armoury of new instruments, after leading the field, and has maintained its commercial underwriting integrity.
§ We have to remember that export credit cover beyond providing insurance against default in payment by the foreign buyer, is the key to special medium-term financing arrangements from banks. These credits are provided at a fixed rate of interest. Nowadays it is also a subsidised interest rate. The importance of this mechanism is of course that the Government control the rate at which banks may make medium-term export finance available under ECGD guarantee. The Government thus are also in a position, through restriction or withdrawal of credit insurance on political rather than commercial underwriting grounds, to control the availability of such credit even though there is no export/import bank which provides the funds direct. It is of fundamental importance that both exporters and our foreign customers should retain confidence that cover will not be restricted on political grounds.
§ Hitherto, those arranging to use export credit have not had to concern themselves unduly with the quality of their credit. "How much can I have?" "For how lone?" "At what price?". These have been the basic questions. The question of quality now has a new meaning. The buyer is concerned about the currency in which he is being asked to pay. It is a sad fact that, "You can pay in sterling", is currently one of our major selling points where substantial credit periods are involved, and many of us have a lingering suspicion that for the past ten years, during which our export interest rates have been relatively low, we have often been selling credit as much as selling goods. It is evident from a national point of view that to offer credit for five years and more at a subsidised rate in terms of currency likely to depreciate relative to that of the buyer represents a massive discount on a cash selling price before even considering any 796 further subsidy implicit in an indemnity for cost escalation. As one who has been engaged in assisting British exports by arranging such credits, I am naturally reluctant to suggest a restriction when competition demands that we match fully the terms offered by our rivals, but obviously there is a limit to what nationally we can afford to do. May I draw attention to another option, which is that of invoicing sales in the buyer's currency rather than in sterling. In the case of strong currencies, for which a forward exchange market exists, it can assure the exporter of a fixed benefit.
§ I turn finally to export promotion and the methods which may be employed to promote or encourage further exports. Let me say at once that I am making no demand for complicated, costly or contorted new Government services. Indeed, I have some concern, despite the current British inflationary problem in securing longer-term business in the face of fixed price competition, that we have already gone too far, especially in devising that subsidy to major foreign buyers which is politely described as "cost escalation insurance". Before I am accused of disloyalty or worse, may I make it clear that the advice given to and accepted by the Government to adopt this scheme was formulated before I joined the Trade Board, and I have never disguised my personal dislike of the scheme on two grounds. The first is that just as one can subsidise the price of bread and then declare that the rising cost of living matters less, so one can subsidise exports, and having also removed the discipline of a fixed parity by floating the currency, can then be persuaded that there is less urgency in dealing with the fundamental problem of an inflation rate higher than that of competing countries. It cannot be too strongly stated that such a form of export promotion is merely a palliative, whereas if the inflationary disease were cured the need for the subsidy would disappear as exporters pursued their profitable opportunities unassisted.
§ Secondly, I am uneasy because, for the first time since the introduction of this scheme, along with other recent proposals for insuring pre-shipment finance and also recourse liabilities on major contracts, ECGD is being asked to administer policies written other than on sound underwriting criteria and its commercial 797 independence is thereby diminished. Difficult times demand stern measures, so I shall say no more on that; but we must beware of going too far. I am glad to learn at least that it is proposed to keep the accounting for these new schemes quite separate from ECGD's traditional commercial underwriting.
§ Before I sit down I must say something about the function of the work of the British Overseas Trade Board. It is, I believe, winning more friends, but it still has critics. The first group consists of those who gave their time to the predecessor body, the British National Export Council, who disliked the fact and the manner of its demise, and who find it hard to think well of the successor body. Being myself an old BNEC man, as are many others on the BOTB, I sympathise but can only affirm that now the new regime has settled down we find our new involvement equally worth while.
§ The second group criticises the Board for sitting somewhere between Whitehall and private industry, yet belonging to neither. In so far as it may still be failing to relate effectively to either, then the criticism must be accepted. But the very concept of the Board is to operate as the link between the two and the criticism betrays a misunderstanding. The BNEC gave advice to Government on matters needing action by Government. The BOTB can give advice no less forthright, but based on direct Whitehall briefing as to facts and options. And unlike BNEC, the Board is an executive body concerned with making the best use of budgeted Government spending of £13.4 million on direct export services, which rises to over £38 million a year if all related salaries are included. BNEC never claimed perfection, but it was very good, thanks largely to those like my noble friend Lord Pritchard, who devoted so much time and effort to it and made it work so well. The Trade Board is different and may arguably be more effective in today's conditions. At least it is now attracting comparable support.
§ The last group of critics considers the Board to be simply irrelevant to exporting. I suspect that few of them are aware of what it does. This in itself is valid criticism and I can now confess my own misgivings about the original "low profile". The Board is now raising its profile consciously and considerably, 798 being determined (and eschewing exhortation) to make its many and varied services better known. Its own membership has been strengthened, and a primary purpose of the creation of the British Overseas Trade Advisory Council, which held its initial meeting a fortnight ago, is to strengthen links with the Board's own area advisory committees and with other representative bodies themselves active in the export field, such as the Institute of Export.
§ Here is a challenge. At the other end of this bridge of communication about export services and export opportunities lie the companies, substantially private but public sector also, which must win and execute the export orders. I believe that all of us with responsibility for industrial management or the provision of export services have a duty to explain much more clearly than hitherto to all concerned—and I mean all, including shop floor packers, typists and documentary clerks, any of whom can frustrate promising business—just what is involved, personally for them as well as for the country, when export business is secured. And perhaps even more, to explain what is involved if it is consistently lost. We need a much broader commitment to succeed. This could be the foundation for confidence to make vital investment.
§ I am reinforced in this comment by the knowledge that my noble friend Lord Redmayne, had he not been obliged to withdraw from the debate for very topical reasons, would have stressed it also. Some firms already send shop stewards on visits to their export markets. It is the intention of the Trade Board to seek substantial shop-floor involvement in its forthcoming regional export conferences. And at the national level, bodies like the Overseas Trade Board (whose new chairman Sir Fred Catherwood has self-evident credentials) and the Association of British Chambers of Commerce could and should contribute to longer-term constructive planning through membership of NEDC.
§ I have one final question, my Lords. What innovations could or should the Government undertake to bring about export growth? Organically, some would advocate an Export-Import Bank rather on the lines of the United States model. Personally, I am unconvinced that Government involvement in the provision of 799 export credit would offer any new benefit and perhaps the implications for public borrowing are unlikely to be appealing just now. Then there are advocates of sweeping change in Ministerial responsibility for export, particularly for the creation of a Ministry of International Trade, as in Japan. The noble Lord, Lord Kissin, has been kind enough to write to me putting a detailed case about this, and, lacking time to do it justice, I should like to send the letter to the noble Lord, Lord Beswick, for his consideration. This is an option which should clearly be kept in mind, but my own verdict currently would be "not proven".
§ What Government alone can initiate—and I make no apology for stressing this—and what Government must do urgently, with the broadest possible support from all responsible groups, is to push through the tough measures necessary to control inflation and create confidence associated with a steadily, albeit slowly, expanding economy so that exports become self-promoting. No task is more important today. My Lords, I beg to move for Papers.
§ 3.41 p.m.
§ Lord BESWICK
My Lords, the noble Earl was good enough to remind us of his exceptionally wide experience in the export business, and his knowledge puts us additionally in his debt. He made some most useful and constructive suggestions in the course of his speech. They certainly must be considered by the Department, and I imagine that they could be profitably studied by potential exporters. I am grateful to the noble Earl for moving this Motion, because it gives me an opportunity of paying tribute to British exporters for the contribution they are making to the national economy. The noble Earl at the outset was, I thought, inclined to be a little gloomy, but the exporters have helped us to achieve a major and welcome improvement in the current account deficit.
The noble Earl was concerned to put the story, as he said, in perspective, and since it is an encouraging story in perspective perhaps I may start a little earlier. In 1974, in the aftermath of the three-day week and the burden imposed by the rise in oil prices, the visible trade deficit soared to over £5 billion. Nearly half this deficit was the direct result of the 800 deterioration in the oil trade deficit, but rather more than half was a deficit on trade in other goods. The 1974 deficit resulted from a 17 per cent. worsening in the terms of trade, only partly offset by a 7 per cent. rise in export volume, as compared with a 1 per cent. rise in import volume. But during 1974 there was a marked slow-down in the rates of increase in import prices as the growth in world commodity prices abated, and a lower level of domestic activity resulted in a gradual decline in the volume of deliveries. Export prices, on the other hand, continued to surge ahead, leading to an improvement in the terms of trade from around the middle of the year.
In 1975 the picture has further improved. In the three months to May, the lower oil deficit and a much improved position in non-oil products helped cut the overall deficit on visible trade to £424 million, less than half the deficit in the previous three months and well under a third of the deficit in the final quarter of 1974. This trend in the volume of exports has held relatively level, despite the general recession in world demand, while the volume of imports has fallen away rapidly. Coupled with this has been an improvement in the terms of trade: export prices have risen by 4½ per cent. against an increase of only 1½ per cent. in import prices.
As the noble Earl said, our export trading pattern in recent months has been marked by the lack of growth in deliveries to the developed countries. This reflects not a lessening of effort on our part but a depression in most of those markets. But a turn-round has been achieved in our trade with the oil exporting countries where, in the first five months of this year, our exports covered nearly two-thirds of our imports. This has been partly due to a fall in oil imports but also to a very welcome rise in the value of exports of more than 120 per cent., as compared with a year earlier. I think the noble Earl said that the Germans had done even better, but if we take the quarter upon quarter position he will see that in the first quarter this year we have just surged ahead of the Germans in percentage growth.
I cannot conclude a review of export performance without paying my tribute to our invisible exporters. As the noble 801 Earl said, it is a record of steady success. In 1974 there was a surplus on invisibles of nearly £1,500 million, as compared with the £1,200 million in 1973. Despite difficult trading conditions, the surplus this year is estimated to be running at around £120 million a month. These efforts, in which the noble Earl has himself taken part, deserve to be recognised and applauded.
The trend, therefore, is satisfactory. Last year our current account deficit was nearly £3,800 million and in the last quarter of the year it was just over £1,000 million. In the first five months of 1975, the deficit was just over £400 million—less than a quarter of the total for the same months of 1974. This is a substantial achievement, but I absolutely agree with the noble Earl that whatever satisfaction we might get from this recent achievement, we cannot afford complacency about the future. In the period ahead, the growth of our exports will turn critically on the recovery in world trade. Given the scale of the reflationary measures taken in the United States, the recovery there should shortly be under way. The expansionary measures taken in West Germany. France and Japan, though fairly modest, should also help.
§ Lord HARMAR-NICHOLLS
My Lords, may I intervene to make a point regarding our export potential. The noble Lord has just paid a very deserving public tribute to the invisible income in terms of our earnings. Could he use the influence of his Department to try to persuade the Treasury not to put so many obstacles in the way of what they call "unearned incomers"?—because it is they who provide the invisible exports to which we are now paying tribute.
§ Lord BESWICK
My Lords, I shall certainly note what the noble Lord says. I was going on to say that there is reason to expect that the growth in world trade, in our view, will begin to be rapid after about the turn of the year. There is no doubt about the potential capacity of manufacturing countries, but we can also expect the imports of the oil producing countries to remain the fastest growing element in world trade for some time yet. Our ability to take advantage of these opportunities will depend, as ever, on the design production and marketing of competitive goods and ser- 802 vices. There will be a particular need to adjust further to the substantial shift in the pattern of world trade, though this must not involve a lessening of effort in major traditional markets, including the rest of the European Community. All will agree with the noble Earl that there is much to be done at home before we can be properly equipped to meet this challenge ahead.
I agree with the noble Earl unreservedly that the overriding need is to curb inflation. This is central to all our economic problems. It undermines business confidence, affects investment and employment, has a direct and damaging impact on our competitiveness, and constitutes the most important single threat to our export business. Our customers have no wish to import inflation and generally have the remedy of buying from alternative sources. There are limits to the possibilities of offsetting the effects of inflation by escalation insurance schemes which, welcome as they may be to some, are, as the noble Earl said, essentially palliatives.
Even continued depreciation of sterling, were it tolerable on other grounds, is not a satisfactory answer for exports. It adds to the uncertainty about forward prospects and directly increases the cost of many essential materials and components. We all have a duty to support and share in the fight against inflation. Accepting the inescapable need to stem inflation, what more has to be done? If we are to exploit the trade recovery, we must also ensure that the necessary physical capacity is available to deliver the goods quickly. We have not done this in the past. Now is the time to make selective investment if future opportunities are to be used to the full.
Our case for the Industry Bill, for which I shall invite a Second Reading tomorrow, is that the National Enterprise Board and the operation of planning agreements will help get our industrial effort on to a more competitive base.
My Lords, may I ask the noble Lord one question? The noble Lord is anticipating a trade boom in a year or so. In previous trade booms we have always been caught napping, because the raw materials were not in this country; they were abroad, and as the boom progressed we had to pay higher 803 and higher prices for our raw materials. Is there any method of anticipating the trade boom by buying the raw materials which are now at rather low prices?
§ Lord BESWICK
My Lords, I know there are companies in the country which are not unaware of the difficulty to which the noble Lord refers. I was going to say what I thought ought to be done, but I am bound to tell him that I do not have a special note of that. It is a useful point and I will see that it is considered.
In the meantime, the Chancellor has recognised the difficulties facing companies and has taken practical measures to alleviate them. In part, this is an answer to the point put to me by the noble Lord, Lord Hawke. For example, the stock appreciation relief scheme, which will involve total transfers to industry of about £3.8 billion, of which £1.3 billion will be available in this financial year, will be helpful. In his April Budget, the Chancellor also announced that £100 million would be made available for selected industrial investment projects and this measure should generate additional investment by industry of some £500 million to £600 million. But as well as the volume of investment, higher additional output for each increment of resources devoted to manufacturing investment is both possible and necessary. I hope to say something more about that when we consider the Industry Bill tomorrow.
Another requirement is that output should not again be limited in vital industries by shortages of skilled labour. This is a point to which my attention has been drawn more than once as I have travelled about the country. There is a tendency for firms to reduce training levels during a recession, and in his April Budget the Chancellor therefore allocated an additional £20 million in 1975–76 and r30 million in 1976–77 to the Manpower Services Commission, for the purpose of accelerating the growth of the training programmes of industry and of the Training Services Agency. Overall the best form of assistance to exporters is the creation of a healthy industrial and commercial sector, but there is a valuable contribution to be had from Government sponsored export promotion services. In certain markets, as I think the noble 804 Earl recognised, including the oil producing countries, official assistance to exporters has become particularly important.
The British Overseas Trade Board, of which the noble Earl is a member, directs a very wide range of services and overseas promotions for exporters provided by the Department of Trade. It ensures that in the development and management of its services, officials of that Department, whose task it is to administer the services, have the backing of an experienced body of businessmen. It is able, too, to draw on the experience of a large number of other businessmen who serve on the Board's area advisory groups which cover virtually all the markets in the world where Britain trades. Much store is set by the two-way traffic of information and ideas between Government and industry.
The Secretary of State for Trade has recently extended this area of consultation and discussion by the creation of an Advisory Council, which consists not only of members of the Board and the Chairmen of its area advisory groups, but also representatives of various other bodies concerned with our export performance. The TUC, the CBI, the ABCC, export clubs and a number of other national and regional bodies are among those represented on the Council. In addition to holding regular meetings, members of the council will be available to the Department of Trade and the Board to give advice on a day-to-day basis and to take part in various export promotion activities from time to time.
In the current financial year, the BOTB's direct budget will total just over £14 million, over 85 per cent. of which is on support for industry in overseas promotions. Last year, the Board's staff were in contact with some 15,000 British exporters and answered over a quarter of a million inquiries about overseas marketing conditions. This year demand has risen strongly, and is running at some 50 per cent. above the level of a year ago. This appears to confirm what the noble Earl said and is convincing evidence that industry attaches value to BOTB services, and of industry's current determination to seek and obtain additional export business.
The Export Credits Guarantee Department's support to exporters is equally 805 well known and valued. It remains Gov ernment policy that the general package of facilities available from the ECGD should stand comparison with that avail able to exporters in our competitor countries from their credit insurers. The ECGD currently provides credit insur ance for some 36 per cent, of United Kingdom exports. During 1974–75, the ECGD insured exports to a total value of £6,535 million. This was an increase of 36 per cent, over the level of exports insured in the previous financial year. More satisfactory still was the 42 per cent, increase in insured exports on cash or short credit terms.
It remains our intention that the sup port offered by the ECGD should be flexible and that, where this can sensibly be done, it should be adapted to reflect changes in the competitive world of exporting. In the last few months, the ECGD has introduced two new facilities; first, a form of protection against the effects of high and unpredictable cost escalation; and, secondly, cover to support performance bonds for cash or near cash contracts. While accepting what the noble Earl said, that these schemes are no substitute for con trolling inflation, they provide a welcome form of assistance to exporters. This has been amply shown by the demand from exporters for these facilities. Both schemes will be kept under review and the contract value guideline for ECGD support for performance bonds was re cently reduced from £20 million to £2 million.
The introduction of these schemes has especial relevance to major overseas con tracts in oil producing countries. Much of this business is under Government control or influence and inter-govern mental co-operation is of the utmost importance to the business effort. The Secretary of State for Trade has him self travelled widely in these markets to inform himself at first hand of the range of opportunities and the scope for Government help. We have also regarded as a priority the strengthening of inter governmental relationships. In appropriate cases we have set up joint com mission arrangements, on the lines of those which have operated successfully in recent years with the USSR and Eastern Europe, with Iran and Egypt, 806 and we are negotiating similar instruments with a number of other countries. By close relations with other Governments and joint working between our own Government and industry, we aim to identify and create new opportunities for British industry and to monitor closely the progress of projects in hand or which we hope to develop.
Changes have also been made at home. A new division specifically for the Middle East has been created in the Department of Trade to co-ordinate the official effort. Changes have also been made to the organisation of the overseas project group of the BOTB which should give it more impetus and enable it to work more closely with industry, particularly on the increasing number of projects where the overseas customer is looking for a single British bid. We are also seeking to harness more effectively the experience and expertise in the public sector. We see an extended role for these organisations in assisting, or even leading in certain cases, the British effort to win major contracts.
To summarise, we can look back with some satisfaction to the recent achievements of our exporting firms. They have given us a base from which we can do more, both to seize the immediate opportunities in the OPEC markets and to meet the challenge of the revival of world trade. There are formidable, but by no means insuperable, problems to be over come, but with co-operation at home and abroad between employers, employees and Government we can solve them. Above all, we shall need to solve the problem of inflation. But, given confidence that we are moving towards a stable currency and given the full utilisation of our national skills, we can more certainly assume the improvement for which the noble Earl asks in his Motion.
§ 4.3 p.m.
§ Lord CARRINGTON
My Lords, the Motion of my noble friend is welcome. Doubly welcome, I think, is the well-informed speech with which he introduced it. The noble Lord speaks from great experience of these matters and had a number of constructive suggestions to make which I hope the Government will take into account in the future when thinking about and reading this debate. Welcome, too, is the decision of the noble Lord, Lord Pritchard, to take part in this 807 debate. He has had, and is having, a very distinguished industrial career. In addition, he has made a particular speciality of exports and of being concerned in them. The House is very lucky to have in my noble friend a new recruit who is so well qualified to take part in this debate.
The whole House appreciates and accepts the need for increased exports if this country is to survive in an increasingly competitive world. Indeed, there is nothing new about us accepting that. In earlier Elizabethan times Lord Burghley once said,Nothing robbeth the wealth of England but when more merchandise is brought into the Realm than is carried forth".And so say all of us! The difficulty, however, about such a Motion as that of my noble friend is that, when one is asked to discuss anything so self-evident, the debate is inclined to deteriorate into a declaration by all concerned of a belief in goodness, beauty and truth. We are all against sin. I am not at all sure that there is a very great deal more that the Government in their own right can do to help in the matter of exports. They can put a number of obstacles in the way of exporters, but the positive steps which they can take are fairly limited. All Governments, therefore, should beware of taking upon themselves the credit for increased exports. That is not to say that we as a country have reason to be totally dissatisfied with our export record since the war. Compared with many of our neighbours, I should not have thought that our performance has been bad. On the contrary, in some fields it has been very good. The difficulty is that we need to be better—and much better—than most of our friends if we are to increase our standard of life.
I said that there are certain areas in which the Government could actually impede exports; and there is no doubt whatever—as, indeed, we have all said—that the most important factor at the present time is the incidence of inflation upon our competitiveness. This is not the occasion for an economic debate, but the recent good export figures which are due in part to the fall in the cost of raw materials will undoubtedly fall away as the inflationary pressures in this country—notably labour costs—take effect and 808 price us out of the market. Everybody so far has said that, and no doubt everybody will say it in this debate.
It would not be too much to say that our economic future depends upon the success of the Government's measures, which I understand will be announced later this week. If they fail to curb inflation, if they fail to reduce the percentage increase in wages, then no exporter, however able, however competent, can be expected to compete. The Government must also have some regard, although the balance is obviously difficult, to the maintenance of a sufficiently buoyant home market, both to enable investment for the future and to encourage exporters. There can be very few companies which can live by exporting alone, although there can be very few which, if given the right climate, cannot export more.
It is right to comment here upon one area of our exporting record. When one examines the figures it is very significant that one sees that credits on invisible account rose faster between 1964 and 1974 than exports of goods. For example, in the last quarter of 1974 invisible trade credits—which includes interest, dividends and profits—amounted to 63 per cent. of the total value of our goods. Too frequently, I think, action to improve the export of goods is inclined to act adversely on invisible earnings in which Britain still retains a comparative advantage, and because they are invisible people seem to forget about them. Certainly, credit is not given sufficiently to those activities which make up our invisibles. For example, last year invisibles were responsible for £2,700 million of our exports, and of this over £700 million was due to the City.
I believe that there is one way in which possibly the Government could help rather than hinder. For example, the Government could help by not introducing Bills like the Policyholders Protection Bill, which in its original form would have had serious disadvantages to the insurance industry. Incidentally, thank goodness for the House of Lords! But on the positive side there might be something to be said for bringing the overall sponsorship of invisibles under the aegis of one Minister; at the moment there are, I think, at least two. The Committee for Invisible Exports made 809 this suggestion, but I do not think that there has been any response to it.
Generally speaking, however, the Government are inhibited from taking positive action to help exporters by the various international agreements to which we are party—GATT, the European Economic Community and so on—and it would not be right for us to circumvent the obligations into which we have entered. Perhaps it is not entirely irrevelant to suggest that there are others who seem to be a good deal less delicate than we are in their approach to their obligations. I know that this is difficult to prove but I have a deep-seated suspicion that there are countries which, if not actually contravening their obligations, are certainly going very near the bone. It is always galling to be the good boy when a number of others seem to be the bad boys. The sanctions policy in Rhodesia seems to be a related point.
One thing we could ask the Government to do is to examine very closely those classes of imports from those countries which we suspect. Motor cars and textiles are two possibilities. We have a right to an assurance from the Government that they take this matter seriously, and however difficult it may be to prove these allegations they should inquire very carefully into them if there is any suspicion of contravention. If, as I think probable, our export performance slips during the latter part of this year, partly because of inflation and partly because recently our good balance of trade has been helped by destocking, by the mild winter and by the fall in imports due to the recession in this country, there is an even greater need than usual to encourage exporters.
I remember nearly 20 years ago when I was High Commissioner in Australia, there were far too many cases of British businessmen relying upon the traditional market and descending, as it were, from above with an attitude, if not of condescension, certainly of "take it or leave it", and that was, of course, an attitude which derived from our imperial past. Until 25 years ago we did indeed have a captive market in countries which, if not obliged to buy from us, were at any rate in some difficulty in doing anything else. Of course that was very agreeable. A captive market is splendid; not 810 only do you not have to worry too much about the quality of your goods but you have an assurance of production which makes life easier for all concerned. But that era ended a long time ago and I do not believe that the sort of attitude which I encountered from time to time in Australia now exists. There has been a considerable shift in attitude.
Harold Macmillan once said that exporting was fun and that was one of the few remarks he has made with which I profoundly disagree. Exporting is not fun. In some cases it is very hard work and, in some cases, it is not as profitable as selling in the home market. But the fact remains that over the years, due to successive Governments, public opinion and industry generally have come to realise the need to export. But despite this realisation I sometimes wonder whether British firms are as aware of the need for high-class representatives abroad as are our competitors, or are prepared to send their representatives for sufficiently long periods to countries where contracts might be available to make the necessary contacts and to familiarise themselves with the problems of that country.
I remember on a recent trip abroad one British Ambassador told me that, in the country in which he was, only one British company—and I will name it, since let us give credit where credit is due and I am not in any way connected with it; it was Guest, Keen and Nettlefold—had sent men of sufficient standing for long enough periods to ensure the winning of contracts. The Ambassador went on to say that in too many cases British companies sent representatives for a very short period who were not of the seniority required to deal with Government Ministers or the functionaries who play such a large part in the placing of contracts in so many countries abroad.
When talking the other day to the export director of a company of which I am a director, he told me, naturally, that he placed the very highest priority on sending exports sales managers out into the world market to generate business and he said that he never expected to see more than 20 per cent, of his export managers team at their desks in London on any one day. He went on rather ruefully to say that this was an extremely expensive 811 business and that there was one thing the Government might consider doing. I will ask the noble Lord who is to reply whether he will be good enough to pass on this idea. He understood the purpose of outward missions which are, I think, sponsored by the Department of Industry for those who are eager to establish themselves in export markets, but for those who are already established in export markets he thought it would be much more useful that there should be some sort of Government travel assistance which would reimburse companies, say, half the annual expense which is incurred in the effort to seek a higher level of export sales. I think it would be generally agreed that it would be wrong if the cost of travel for the export management team were to be the inhibiting factor because of the depressing effect of profit margins which now exists in British companies. Better quality men, more frequent and longer visits are, it seems to me, an essential element in our export drive.
I read a very convincing pamphlet the other day in which it was argued that investment in several hundred export salesmen would, in fact, be more effective than a 12 per cent. devaluation, and of course with none of the adverse effects that devaluation brings. To some of us who travel a good deal, either on politics or on business, it is sometimes a puzzle—and the noble Lord, Lord Beswick touched on this—that there are products from Britain which it is almost impossible to obtain abroad. Of course one knows about strikes and about difficulties in regard to delivery, and all that is greatly to be deplored, but may I take one example of a company which has recently been in the news, British Leyland. Land Rovers, Range Rovers, Jaguars, could be sold in very large numbers, if they were available, almost everywhere in the world and yet people cannot get them. I cannot believe that the reason why they are unobtainable is not, at any rate, in part due to the lack of investment in production facilities and a lack of foresight. In this country for whatever reason, whether it be lack of cash or lack of confidence, it is sad to see opportunities of this kind wasted when we have products unrivalled in the rest of the world, and I am afraid I must tell the noble Lord, Lord Beswick, that I am yet to be converted to the idea 812 that the Industry Bill and the NEB will help in this respect.
But if one looks at exports commodity by commodity it is noticeable in this field of transport industries that they have done comparatively badly; for example, if you look at the figures for them and for the chemical industry. It is equally true, as has been said, that exports to the Middle East, though showing a considerable percentage rise are nothing like so dramatically increased as those of Japan, the USA and Germany. I was glad that both my noble friend Lord Limerick and the noble Lord, Lord Beswick, referred to this. I hope the Government might look particularly at this area and that there might be something to be said for a programme of trade promotion in this area.
But, my Lords, in the end the success or failure of our export trade will depend on the Government's actions in this next week or so. We have talked about the pressing need to reduce inflation: if we do not reduce it, we are sunk. The Government will have to go very carefully about price control. Although it may appear to be an attractive political weapon (if one may use the phrase), if the Government impose even stricter price controls there will be greater pressures to squeeze increasing profits out of exports, and that would be disastrous since our competitors operating without our appalling rate of inflation will exploit their ability to offer equal quality for a lower price.
Finally, my Lords, let us consider for one brief moment the consequences of the downward drift in sterling. Those who say that exports are encouraged by the higher profit margins which sterling devaluation might allow ignore the influences which I think are becoming increasingly important of quality, of design, of service, of salesmanship and, above all, of delivery dates and reliability. As the pound falls our imports of raw materials rise and cost us more in real terms. There must be some end to this and we await the package to be produced by the Government upon which the success or failure of our export policy must in the last resort, depend. But, my Lords, whatever that may be let us be resolved, on whichever side of the House we sit, to do what we can to ease the burdens of the exporter.
§ 4.20 p.m.
§ Lord PRITCHARD
My Lords, as your Lordships can imagine, I rise in great humility on this first occasion of my speaking in your Lordships' House; and I crave your Lordships' indulgence. If I may, I should like to begin by thanking very much the noble Lord, Lord Carrington, for what he said about my humble efforts in exports. His remarks were undeserved by me. I was lucky enough to lead a great team and to follow a great founder in the noble Lord, Lord McFadzean, who more than myself contributed to this important area of British economy. I wish to apologise to the noble Earl, Lord Limerick, because I missed just a few of his opening remarks. However, I got the gist of the argument earlier this morning when I was unsuccessfuly battling with my own humble contribution.
With the leave of your Lordships, I would make three points. First of all, as the noble Earl said, there is no room for complacency in our export efforts. Indeed, it is a non-political, purely British operation to which everyone in the country, whoever he may be, whatever are his ideas, should give his greatest possible efforts, because on this our livelihood depends. There is a great need for action not only in all the export markets of the world, but also in our own home market, because saving imports is just as valuable in many ways as exporting. As the noble Lord, Lord Carrington, was saying, it is essential that people both here and overseas should be able to buy equipment such as Range Rovers, Jaguars and other things which are in short supply, for reasons that I hope the Government, in their very difficult period ahead, will be able to overcome.
My Lords, the noble Earl also drew the attention of your Lordships to the fact that, while imports have fallen recently both in value and volume, a substantial part of our imports is basic materials, which indicates to some extent a destocking by industry. This is serious. This is due to a number of reasons, not the least being the shortage of finance needed during the period of processing those raw materials, and building up stocks against the time of market demand. An upturn in world trade is reliably forecast to start next year, but will British industry have the stocks ready to take 814 full advantage of this? It is vital that this preparation is done now. There could be a case for Her Majesty's Government exploring the need to improve facilities for financing short-term exports and preshipment problems due to liquidity difficulties which industry is experiencing at the present moment in both large and small companies.
As the noble Earl, Lord Limerick, said, the Export Credits Guarantee Department is one of the great successes of Governments and provides a tremendous service to industry, but this area before the goods reach the docks is naturally and rightly outside its scope. There may be need for some investigation to see whether industrialists who are tight for cash have an opportunity of at least obtaining what they need on as favourable terms as some of our competitors. One of the things British exporters have lacked for quite a long time is a national shop window in which to show and sell their goods to overseas buyers. We should thank Her Majesty's Government and the noble Lord, Lord Beswick, and, indeed, the former Government, for the new National Exhibition Centre which I understand is to be opened in Birmingham next February. This will be a very great strength and a very great help to exporters, both present and potential. It will give some of the smaller firms the opportunity of dipping a toe in the water.
My Lords, I strongly support what was said by the noble Earl, Lord Limerick, that it is no good anyone going halfheartedly into exporting. As we used to say in the Army, reconnaissance is never wasted. It is in support of that that we should have such a centre. But the only real form of salesmanship is to get out into the market places of the world and to see for yourself. By "yourself", I mean the person who can make decisions in the company, not a junior. One should see what is wanted, at what price, in what quantities, and what is the method of distribution. One should then come back and make what the customer wants to buy, not what we necessarily think he ought to buy.
That, my Lords, brings me to my second point. I myself spend about half my working time on the Continent and abroad, so I constantly see British goods through the eyes of the consumer. Our greatest weakness is still our lateness in 815 delivery, our falling down on our promises. Second only to this perhaps, particularly in capital goods, are our attempts during negotiation of a contract, and sometimes afterwards, to alter the terms to suit ourselves, which naturally does not go down well with our customers. We do not always face up to the fact, as we should, that the world is a buyers' market. We may place the blame for breaking our delivery dates on industrial or shipping disputes; we may excuse our unwillingness to tie ourselves down even to short-term contracts on our rate of inflation, but as your Lordships will know better than I, the world does not owe us a living. If we cannot match what our competitors can offer, we will lose business. The sooner this fact is learned and understood by management, by Government, by the shop floor, by the public, the better it will be for the nation.
If I may make a quick aside, it is as well for exporters who let down their customers, or feel that they are going to, with regard to deliveries, to telephone the customer, wherever he may be, and especially if he is in Australia. It is as well if the exporter can explain to the customer the reason for the delay and to give him as much notice as possible. This is much better than either a cold cable or a tardy letter. It softens the blow; helps the customer to delay other production, to come in line with our own supplies, or make other arrangements. At the least we hold his good will.
My Lords, thirdly and lastly, may I congratulate the Government on the prompt way in which they have implemented the Montagu Report by the setting up of the British Overseas Trade Board Advisory Council under the chairmanship of the Secretary of State for Trade. More has been clone to restore confidence, to close the gap between industry and the Government than has happened for a long time. It is not that industry is against co-operating with the Government, but just that they do not always understand. To my mind, the measures recently taken will make a very big difference in that connection.
The remarks of the noble Earl, Lord Limerick, about the British National Export Council were kind. I can assure the noble Earl, and the Secretary of State 816 for Trade, and also Her Majesty's Government, that every member of the BNEC in the past, and every member of industry in the present, has nothing but admiration and support for the British Export Board. We wish it every success in what we know is a very difficult role.
There is one final point I would add, and this is something that helped us tremendously in those old BNEC days. We were lucky enough to have as sponsors four distinct sectors of industry: the Government, industry, the City of London, and, most important of all in my humble opinion, the Trades Union Congress. I believe that today it is vital that we involve the workers on the shop floor and in the offices in the whole of our export efforts, that they not only are given lip service but that they are taken into our confidence, enjoined in our plans; that they come overseas with us, whether it is an individual company mission or a Government sponsored mission; that they see at first hand the problems we face, the need for urgent deliveries, the importance of not breaking our word, so that they can then come home, and whether it be in the office or in the factory, they can convey the same enthusiasm to all their colleagues not only to meet exports but to win the battle for Britain.
§ 4.31 p.m.
§ Lord AUCKLAND
My Lords, it is a very special personal privilege for me to be the first to congratulate the noble Lord, Lord Pritchard, on a particularly distinguished maiden speech. Over the years in the field of both visible and invisible exports the noble Lord has contributed an enormous amount, in the brewery industry, in the insurance industry and elsewhere; and his record in both peace and war is one which is the envy of many of us. In these particularly difficult times, with the problems of inflation and otherwise which this nation faces at the present time, it is particularly delectable that we should have somebody of the noble Lord's experience joining this House and contributing such a very distinguished maiden speech. I know it would be the wish of noble Lords on all sides of the House to hear the noble Lord's wise and practicable words again before very long.
My Lords, my noble friend Lord Limerick has performed a most useful 817 service in initiating this debate today. As my noble friend Lord Carrington mentioned, the expression "Exporting is fun" will be taken rather cynically by those who have been actively engaged in this field. I have had, and indeed still have, business connections in two fields where export is concerned: one is insurance and the other is management consultancy. It is a rather traumatic thought that at the present time, certainly in the management consultancy organisation with which I am concerned, practically all our contracts are overseas, there is very little demand in this country. Indeed, one of my colleagues returned recently from a successful visit to Brazil, and we are currently negotiating with Finland, where I have had some experience and to which I should like to refer again in a moment.
The field of invisible exports is certainly not one to have received the share of credit to which it is entitled. I know it has been fashionable over the years to attack the City of London. As one who has worked in the City of London since 1948 I am bound to say that part of that is the City's own fault. Its image, if I may use that very over-used word, has not always been projected in the most practicable, or perhaps even the most discreet manner. If, for example, one takes the insurance industry, in 1973 invisible earnings from that industry, much of it from Lloyd's of London, were nearly £400 million. I go back to the mid-1960s, when I was a working member of Lloyd's. Then, as I know to my own cost—and other Lords will be in a similar position—due to certain catastrophic disasters through hurricanes, the insurance industry, and particularly Lloyd's and those connected with Lloyd's, suffered some grievous losses. The then chairman of Lloyd's, to his eternal credit, did not merely sit in the boardroom and weep, as he was fully entitled to do; he went out to attract new business. He went to America, he went to Australia, and he went elsewhere. Gradually, since then, Lloyd's has pulled itself round and is now contributing most valuably to the invisible export industry. Last year the chairman of Lloyd's went with a strong team to Scandinavia, a part of the world where I believe there is enormous potential still to be tapped in the export field, because this country and Scandi- 818 navia over the years have had enormous rapport. They went to Oslo, to Copenhagen and to Helsinki, a city of which we hear all too little. The visit brought very favourable results.
My Lords, what then are the problems facing exporters? I suppose it is always easier to talk about problems than about a fait accompli. Only the other day, in preparation for this debate, I was talking to the director of an international bank, and he was particularly keen that I should raise some of these problems before Her Majesty's Government. He mentioned that not sufficient pressure is brought to bear through diplomatic channels when contractual obligations are not met by overseas customers or suppliers. I think there is strength in this complaint; but I should like to make it quite clear that I am certainly not criticising our commercial counsellors overseas—very much the contrary. At such times as I have travelled abroad I have found our commercial counsellors to be unfailingly co-operative. As has been pointed out to me, what is absolutely essential is that people who are going out on exporting missions, whether with a chamber of commerce, in a small party or as individuals, should give as much notice as possible to the Embassy concerned and as detailed an account as possible as to what they want, who they want to meet, and what is their general purpose.
Another criticism made was that there are no tax advantages for firms willing to take the added risks of exporting. This may be a bad time to ask for too many concessions there, but of course if we are really seriously to increase our potential in the export market—and I think particularly of invisible exports, which do not, in my submission, get quite the same perks as the visible ones—the Government should at least look sympathetically at this point.
The other point is that there are no foreign exchange guarantees or incentives. Anyone who has had, or has tried to have, any dealings with the COMECON countries knows the problem there, particularly with a country like Rumania which is consistently asking to do more business with us even though the terms of trade are heavily in their favour at present. The 819 problem of exchange controls is a real one.
Then a pretty voluble criticism was made to me by a director of one of our leading breweries—I may say not the one with which the noble Lord, Lord Pritchard, has had a distinguished association. It was a very scathing criticism of some of our Embassies and the difficulty of getting en rapport with them. I make this point purely because the person concerned has had a lot of experience of travelling overseas. I must say, speaking purely for myself, that I have not come up against this problem, but it arises at times.
One of the directors of the company with which I am associated went recently to Teheran. Such was the difficulty of telephonic communication there that he could not fix the appointment for which he had hoped, although he received a courteous communication from our Embassy and has, I believe, had quite a successful mission. It is obviously vital that rapport between our Embassies and our exporters should be of the highest order.
A word about delivery dates. I suppose most of us who travel get this one thrown at us. I have had it thrown at me several times. The most recent occasion was a few days ago from a friend of mine who is shortly going back to New Zealand. The New Zealand Apple and Pear Marketing Board contracted for some tinfoil from this country, and due either to an industrial dispute or another reason this tinfoil arrived at a time when the apples were not in the kind of condition when this particular commodity could be used. Further supplies of tinfoil had to be imported from Japan. Many such incidents are taking place. This has been a problem for successive Governments. One cannot necessarily blame any one stratum of society in business or industry for it, but, now that there are clearly going to be close negotiations and talks between the CBI and TUC and other bodies. I would hope that this question of delivery dates could somehow or other be raised, because, particularly with visible exports, it is a matter of such vital importance.
I mentioned Finland just now. So far in 1975 our exports to Finland have gone up in the first five months to £100 820 million, whereas imports have increased by only £58 million. However, there is a danger here that if the wood pulp industry in Scandinavia gets into a more buoyant state than it is now, substantially more paper and wood pulp may come into the country. Clearly, with countries such as Finland, we have to increase our exports, and there is enormous potential for this. There are problems on the invisible side, but I think rather fewer on the visible side.
This debate has served a particularly useful purpose. It has given an opportunity to raise problems at a time when exporting will be more and more vital. I believe that there are good opportunities now for the invisibles to receive more attention, and indeed more publicity. One very good move is made when the Lord Mayor of London goes on his annual overseas tour. The noble Lord, Lord Mais, who is to speak shortly, will know about that. The present Lord Mayor is due to visit Australia and New Zealand at the end of this month. I cannot imagine two more delectable countries to go to at this time, because I believe there is still a very strong potential market to attack there. This kind of matter gets all too little publicity. It should get more because it shows in a practical way what the City of London does in this vital battle for our survival, because I think that the subject matter of this debate may well be an extremely important one in the context of our survival as a. trading nation.
§ 4.48 p.m.
§ Lord SELSDON
My Lords, in what one might call these twilight hours of our economic history, there are some of us who do not know whether it is night or dawn which will follow. If it is night we will see the longest, most horrific night this country has ever endured. I find myself at a crossroads in my own life. I do not know whether to back my own country. which I have tried to do throughout my working life, or to leave it and look after my family's interests and move abroad where I could afford a better standard of life. I am an international person I suppose; completely British at heart. I have been involved in exports, export promotion, projects overseas, and all my life I have worked for a British group, and I would never work for a foreign company. But I have 821 now reached a stage where I am not sure whether my country has an economic future, and I have said this in your Lordships' House before.
The reasons for this are, first, inflation and secondly, leading from that, exports. It is not the role of Government to export, and no amount of exhortation from your Lordships' House or another place, or from outside in the country, will improve our exports. Government have done a lot. It is fair to say with pride that through our Foreign Office, the BOTB, the DTI and numerous other organisa tions we have perhaps the strongest poten tial base for Government co-operation of any country in the world. I made some inquiries the other day out of personal interest to find out how many different agencies there are within the Government which are willing to help, and I discovered that there are so many that it is impossible to define how they all fit together; yet many of them, when one speaks to them, ask, "Why isn't industry approaching us?" There is, on the one hand, the Overseas Projects Group, which can allocate sums up to £50,000 to help companies in their expansion abroad on overseas projects, and the Inward Mission Scheme, on the other. They are all there, yet there is no co-operation.
There is a danger here, because it is the duty of Government to create the climate in which companies export and wish to export, and the one thing that the present Government have done is to create a climate in which companies not only do not wish to export but are actively seeking to divest themselves of their United Kingdom interests and to move overseas. We make a mistake in this country, unlike the French, of thinking and living in the past. When one listens to noble Lords speaking on the Front Bench opposite, or reads reports of debates in another place, it is always said, "We did this in 1950 or 1960" or, "We took this step or that step." One hears very little about forecasts of what is likely to come.
On the other hand, when one goes to Paris one finds the French thinking entirely in the future, of what will happen and how best to adjust their country and their industry to take advantage of the opportunities which will arise. It horrifies me to learn with what conviction 822 people say, "There will be an upturn in world trade." That upturn will come too soon; this country is not ready for it. It cannot, as we know and have heard, deliver now and it will be in an even worse position to deliver abroad when the upturn in trade comes, because, after all, there is no shortage of export opportunities now.
I suppose that I should declare an interest in that I work with a group which is an invisible exporter of about £170 million a year, and I am currently involved in overseas projects and in promoting the exports of many British companies. It is not, as we have heard, a question of price. I should clarify that; it is not a question of a price written on a piece of paper, but a question of the inflation price. We have had Questions in your Lordships' House about how competitive British industry is; abroad and there was a comment by the noble Lord, Lord Jacques, recently that we are 9 per cent, more competitive than anyone else. I accept that comment, but when I ask the companies with which I work, "Can you quote for jobs and tenders abroad?", they say, "We dare not, because we cannot gamble with the ability of this Government to control inflation. Do we, in our calculations and tenders, quote with a 25 per cent, margin for this year when it is a three-year con tract? Do we double the price, because the size of some of the things we are involved in are so great that if we go for them and gamble wrongly against inflation we go bust?"
I would not criticise the efforts which the Government and Departments make to encourage companies to export, but the Government are going the wrong way to create the right climate. One cannot, as a marketing man knows, have a successful export market in the long term unless one has a good home market. One will never export unless one can get the right people, as the noble Lord, Lord Carrington, pointed out, to lead one's export drive abroad. I am talking about people of calibre. Exporting is not fun. It is not fun going off to countries with temperatures of 127 degrees in the shade, unable to ring one's wife and family, trying to get on a plane to get back only to find it has been double booked so that one has to spend two weekends abroad, obliged to miss such things as children's sports days.
823 It is not fun having to spend money without knowing that one will get a return. It now costs £65 a day minimum to operate abroad—£20 for one's hotel—and one may need to take someone out to dinner, or one may be taken out to lunch. The costs are horrendous, often when it is speculative, and the people at home cannot afford the burden that is placed upon one by declining currencies. When one's own currency starts to decline against even the Egyptian pound, it is not an easy business exporting, and more and more people are realising that the effort may not be justified. It is no good saying, "Your country needs your exports", because this does not help industry, and when industry feels that earnings generated by extra effort are not really justified then we have a real problem.
That is perhaps an emotional start and I will try if I can to be practical, because our potential is greater than that of any other country in the world. We have without doubt some of the best political links with the new expanding export markets, including the Middle East, of any other country. We have in Britain more know-how and experience in the developing and designing of products or services than any other country in Western Europe, and we can certainly compete with the United States as we have seen with new developments of which we are capable. We have the middle management, the people who can cut their way through bureaucracy and use one sheet of paper instead of 10, people who are willing to make decisions on their own account without needing the consensus opinion of a board or committee.
Let us not forget that almost half of the most powerful companies in Western Europe are British, and that we have people in those companies who are patriotic, who wish to live and build their businesses in the United Kingdom and who are willing and waiting to invest here when the Government can create the right climate. The Government should bear in mind, as I know they do, that exports depend not on nationalised industries but on the private sector. They depend not on a bulk of hundreds and thousands of companies in the United 824 Kingdom, but on the efforts of a minority of perhaps 100 companies. It is right to encourage every company to export, but it can be dangerous to encourage small companies to devote too much of their time and cost in travelling and developing markets overseas, without a secure and solid base at home.
This is the worry and it is not to do with export credits and so on; it is to do with the climate that is created for British industry now, and that climate is disastrous. I go further and say that one of the biggest handicaps I have found in trying to promote these activities abroad has been the attitude towards Her Majesty's Government—the fear that the Government may do something irrational, something which could condemn or hurt the company which is seeking to develop a project in a certain market. I do not know whether the Government are aware of this. I do not know either whether, when they send Ministers abroad to promote trade in certain markets, they are aware that if they send a Minister who is anti-private sector and anti-capitalism to a country which is pro-capitalism and pro the private sector, or send a man who is anti-EEC to a country which is pro-EEC, this does not create a feeling of good will and support.
In the developed markets of the world where we are seeing a recession there is not so much need for Government support; these are sophisticated markets that know companies know countries and know products. They do not need or seek Government interference. But in the new rapidly emerging export markets of the Third World one has a combination of three factors; government, technology and finance. It is this package that gets exports off the ground. There are many countries which suddenly decide that they wish to buy from a particular country. This decision is not necessarily based on a selective judgment on products, but can be a political decision—a sudden decision to switch away from the Soviet Union or away from the United States and towards Western Europe, and more often than not towards the United Kingdom which they have known in one way or another for many years.
These factors are critical and when the noble Lord, Lord Pritchard, points out the third factor—there is the company, 825 the industry and the work force—I recall that when I have been involved with companies there has often been a certain amount of pride that it is possible by good relations to get men to work overtime or long hours or to give up their weekends, so that one can stamp on a crate "Abu Dhabi" or some other place and be sure that it will get there and catch the flight abroad. I would far rather do that than mark it "Glasgow" or "Birmingham". There is a feeling when one is doing this and selling abroad, and it is a feeling that one should encourage. It is really a question of education, and within all our companies—and it is right that one can sometimes criticise export people—too much priority is often given to the home market. The home sales manager almost always takes priority over the export sales manager, because he is in touch on a day to day basis and he is selling a greater part of the company's products, but when there is a recession people suddenly start to turn to exports, often too late.
These are three areas of exports which we should look at. The first is the visibles. The Socialist Government have always concentrated too much upon visibles, as we know. Perhaps one might recall a rhyme which I learnt when I was trying to learn Latin:Abstract nouns in 'io' callFeminine are one and all;Masculine will only beThings that you can touch or seeThe potential of the United Kingdom lies in many things we cannot touch or see. One of those is, as we know, the invisible export. I shall say no more about that, as your Lordships' House has heard a lot about it from me, but the outside world knows the potential for invisibles, and it would be wrong to assume that the French are not trying with all their power to divert and take away the potential for invisible earnings from the United Kingdom to Paris.
Paris is becoming more and more a centre for Third World development. Also, more and more of the up-and-coming entrepreneurs of this country are leaving it, because they see no reason for staying here. They are moving and working abroad and using their diligence and efforts to earn money and to promote from abroad companies which are often of non-British origin. We also have that 826 invisible export which has caused a lot of problems on many occasions which is the amount of private capital which will continue to find its way out of the United Kingdom, and the amount of know-how and resources that will go abroad in the current climate. It is not just the invisible side. The technology side has almost as much potential as anything. Here, one uses that word, "know-how", which is the traditional magic word for converting common sense into cash.
There are certain areas where one can pay tribute to Government Departments and to State industries. One, in particular, which may not be widely known is the electricity supply industry. Because they happen to have the right people who have the true enterpreneurial spirit, they formed a consultancy division which set out to sell abroad British know-how in the electricity supply industry and, leading from that, British products in other industries around the world. In the Third World they are welcome, because they are British and, in a way, they represent the British Government. People trust the British. Electricity is important. The amount of work and the growth in their business has been very considerable and they need support. I hope they will not be hidebound with bureaucracy. We are faced, too, with the question of British consulting engineers who, again, lead Western Europe. In a way, they have the power to specify British products.
All these areas give room for hope and encouragement. When we come to visibles, I am pessimistic. We never have been a manufacturing nation which has been successful in exporting. It is no good pretending we are. The noble Lords, Lord Carrington and Lord Pritchard, spoke about British Leyland. I could sell £1,000 million worth of British Leyland products abroad during the next year if they were available now. I have no doubt about that at all. But what does one do with a company like that which has the highest unit cost of labour per car, the highest warranty cost, 246 bargaining points instead of one and delivery dates that run out to goodness knows when? One could sell their products. The only cars one can sell in the world at the moment are British cars. People in the Third World are buying and paying premiums for second-hand Land 827 Rovers that would make a Rolls-Royce Camargue look cheap. Here is the car industry. Here is what the Government are trying to help. It is one production area. Personally, I believe that if we cannot resolve its problems we should give up making cars and go back to making other things. It is not a question of the over-manning, but it is one industry which has it.
Let us go to another nationalised industry. I could, within the next year, sell 5 million tons of coal. I have written to the National Coal Board saying just as a beginning that I will buy a million tons of coal. It is for foreigners who want to buy coal. We have it in the ground. It was even suggested by some of my French friends that they should bring people from their own country to dig it out or that they should buy a coalmine. They are even trying to buy the slag heaps because people need coal. They read in Le Monde that the British have enough coal under the ground to look after the whole of Europe for generations to come. We have strikes all the time and there is no coal. We must exercise force majeure. We cannot export or sell it.
My Lords, one can go through the companies listed in Compass or Fortune or any similar list, and can look at the individual products. One can go to the companies and ask for kilometres of barbed wire to be delivered. The answer will be, "Oh, no!" All this is a production malaise. But it is not just an investment malaise; it is a social malaise. It is not, as I said at the beginning, the Government's responsibility to export; it is industry's responsibility. But the Government have not created the climate in which industry will be encouraged to export. They have done the reverse. It is a dangerous state of affairs. I would willingly cross the Floor of this House and sit on the Benches opposite if I felt that the Government would take the right steps, but they are not doing so.
They may not be aware of all that is at stake. I know that they take advice from different people, but when one is involved in countries abroad and is in the Middle East or wherever it may be three days a week, as I am, and when one sees the new markets and new potential in countries such as the Sudan, which has the greatest potential for the production 828 of food of any country of the world that I know of, other than Brazil and which, with the right amount of tripartite cooperation with the Arab world, could become a major market for British exports, one is depressed. The pioneering spirit which the British used to have has been dampened by interference and legislation, and by the Government taking away the willingness of the entrepreneur to grow and expand. My Lords, the fault and the future lie not in exhortations, but in the Government creating the right climate for industry to expand and export.
§ 5.8 p.m.
§ Lord MAIS
My Lords, may I begin by adding my congratulations to those already expressed to my noble friend Lord Pritchard. I have known him for many years and it gives me great pleasure to see him in your Lordships' House today. I express the hope that we shall hear similar words of wisdom from him on many occasions in the future. It is but a few weeks ago that we had a most interesting debate in this House on the economic and political situation. Here we are today debating exports. I feel that we shall find it difficult to divorce one from the other and I sincerely hope that we may not cover the same ground twice over. I shall endeavour not to do so. I should also like to say that some of us may find it difficult to believe what is said by those who consider themselves to be experts and who forecast that there will be a strong recovery in world trade next year. I for one hope that this will be so, but I must confess that I have my doubts. However, let us assume for the purposes of this debate that we shall have an improved world trade in 1976. If so, it is vital that the country should take a long hard look at its own export procedures and at its record in the past, if we are to obtain a fair share of that forecast increase in trade.
It would be as well to look for a moment at the incredible change in the pattern of our export position over the past years, for I believe that we are, to some extent, suffering from our past and from our history. We live in a country which was responsible for the industrial revolution and which was the birth place of sophisticated modern commerce and trade. In the glorious Victorian times—though some of us, looking at them in 829 retrospect, may not be quite so sure that they were as glorious as reported—and for several decades thereafter, we delivered manufactured goods to an Empire. We received Empire produce and raw materials in return. It was a "tied" market and this became even simpler when, in the twentieth century, we added Imperial Preference; preferential trade, conducted in sterling, in the English language, with British weights and measures and shipped predominantly in British ships. Frankly, with all respect to those who set out on the trade routes of the world in those days, it would have been difficult to go too far wrong, because the markets were there ready-made and so were the raw materials.
Today, we live in changed times. Fifty per cent. of our visible exports which, for example, went to the Sterling Area in 1950, 25 years later go to Europe. But in those 25 years our share of the world trade of manufactured goods has dropped considerably, although I am happy to say that it is reported that there has been a slight indication of an improvement. I do not think that many of us engaged in the export market would exactly hang out the flags or utter a cheer about that, other than to say that at least the swing may have stopped, but the improvement has not been all that marked for us to relax in any way at all.
When I spoke in the debate on the economy I gave certain figures. I shall not repeat them now, nor waste your Lordships' time. But I wish to remind your Lordships that I then said that firms generally were more pessimistic about future orders than they were four to six months ago, and that this particularly applied to export prospects over the next 12 months. I also said on that occasion that there was a danger of our pricing ourselves out of the export markets of the world, and that the rate of inflation in this country was tending to make us uncompetitive in world markets, due to our rising production costs. Therefore it is with some anxiety that we await the Government's measures which they propose to introduce, because, my Lords, it is one thing to introduce measures but another thing to see that they are carried out. I was brought up on the old adage that it is no good giving an order if you cannot see that it is obeyed, 830 and I sincerely hope that, whatever the measures Her Majesty's Government will produce for us in the next few days, they will at least ensure that production can proceed without delays arising from shortage of materials and from industrial disputes and, above all, that we shall have a stable incomes policy.
Without these we are sending our army of exporters out to do battle in world markets utterly and completely unarmed. Clearly we cannot go on increasing the value of our exports simply by putting up our prices. Our customers have no wish and no reason to import inflation from us. They have the obvious remedy. They will buy elsewhere. It is necessary to consider whether we have the capacity to produce more goods for export. It is natural that in a period of economic downturn—and this was being referred to by other noble Lords—one could expect a fall in the stocks held by companies both in their works and in their stores and, also, a fall in the import of industrial materials. If these two go hand in hand with substantial reductions in industrial investment in industry, there will be a danger that as world trade recovers and expands we shall find ourselves unable to take advantage of these markets due to a shortage of materials, a shortage of new equipment, plant and production capacity.
I gain some comfort this afternoon from the words of my noble friend Lord Beswick, and I was glad that it appeared obvious that Her Majesty's Government are conscious of this problem. This is where I believe they could be of inestimable help to industry in ensuring when the time comes that we are not short of raw materials or of stock and, above all, where possible that our plant and equipment is in a state ready to meet the challenge of growing world markets.
In a recent study more than half of the firms interviewed found that exports were more profitable than selling in this country. That is rather strange and it contradicts what one or two other noble Lords have said. But this is what was said in the survey, and the fact also remains that those firms had a much lower ratio of salesmen engaged on export than they had in the home market. First, you have to persuade the firms and then you have to persuade the men themselves to go, and with the present system 831 of taxation this is a very difficult problem. How can you reward a hard-working man who is probably married and who has to be absent from his home and family for months on end, probably living out of a suitcase for an equal length of time frequently suffering from what is known as "jet lag", and no sooner does he recover than he is pushed off again on another trip?
I do not doubt that such men do it and get a certain amount of thrill out of the competitiveness of the export market, but it is an exhausting business and, as the noble Lord, Lord Selsdon said, it is not enjoyable. It is a tough, hard world and a very exhausting one. How can you make it advantageous to a man—or a woman—to undertake this when at the end of the day the net income will probably not be all that much more than if he or she stayed at home and caught the 9.30 up and the 5 o'clock back, always supposing that they were running? The Government must look at this problem. I know that it is very difficult to have one law for one and another law for another, and this is a problem. We must give not only firms but the individuals who work for them an incentive to operate overseas.
Over a period of time our failure in some cases to re-equip and modernise British industry has meant that very often we are producing the wrong sort of product for export, or where we have the right type of product we are not producing it in sufficient quantities. It is here that the Government could make a considerable contribution towards helping industry. One problem in any discussion on export is the confusion which exists between export generation and export promotion. The fundamental issue of the former is: do we produce the right goods, in the right quantities, at the right price, for the right market? If I may offer a personal opinion, it is that if the National Export Development Council is to be re-organised it should have a role in export planning. We cannot talk about exports without talking about overall production capacity. One comforting thought is that there are more firms today showing an interest in export than perhaps we have ever seen before, firms which can see that it is in the overseas market—possibly in the overseas market 832 alone—that they will be able to sustain their profit levels over the next few years.
If I may declare an interest by mentioning the London chamber of commerce—the noble Earl has already mentioned the body one above it—I would draw your Lordships' attention to the fact that it was that chamber which largely pioneered the British trade links with Eastern Europe and, for that matter, Western trade generally with the Eastern bloc countries. These markets are now developing very rapidly and, while there are some welcome signs—such as a large tractor order from Poland, and the Prime Minister's visit to Moscow—the fact remains that Britain is falling behind again in Eastern Europe. In the 1950s we were the leading Western supplier to the Eastern bloc, but now we are fifth behind West Germany, France, Italy and Japan.
I also wish to refer to the rather considerable change in the pattern of trade. Here I refer, in particular, to the large projects which have now been drawn up. I think that Mr. Peter Shore referred to them as "jumbo projects". I do not know about them in general, but I know something about them so far as engineering and construction are concerned, of which I have some little knowledge. Today one is frequently asked to bid for the design of, say, a hospital, to build it, to equip it, to man it for the first few years and, during that period, to train local people either in this country or in other countries so that gradually they will take over. To bid for a project of that nature is a very costly business; and over a period of many years the risk that the consortium would run is considerable. I do not see how we shall be able to compete in that type of market—which is a growing one, particularly in Middle East countries—unless we receive every possible support from the Government. While I appreciate that there is an overseas project group attached to the British Overseas Trade Board, I would with some temerity suggest that it needs reinforcing. That is not in any way a reflection on their ability, which I know to be good; but I believe that they are undermanned and that we need all the strength we can get.
Lastly, but by no means least, it is essential that we so organise our affairs 833 in this country that when we give dates to deliver goods abroad, we keep to those dates. One can blame industrial disputes; but when one inquires one finds that these are only one of many causes. The fact remains that we not only are late with our deliveries but fail to back up with spares. There are many instances. Britain's image as a reliable supplier has become tarnished in recent years for the very reasons I have just mentioned. Late deliveries; shortage of spares; no adequate or efficient back-up. If we are to regain our reputation, every person concerned with meeting delivery dates will have to make a personal effort. The general public, and particularly a company's operatives—and by that I mean everybody from the boardroom to the shopfloor—must be enthusiastic about our export trade and, above all, about the export problems of their company. I wish we could get the same enthusiasm into a company, and into this country for that matter, about the position of our country in the export league as they show in the position of their local football team or their international team. I was going to say that it is more profitable and, also, there are fewer fouls, but having spent many years in export markets I would say that there is as much need sometimes for a referee in that game as in an international football match.
My Lords, I would associate myself with those noble Lords who have referred to the scope for greater improvement in the relationship and connection between the shopfloor trade unions and the export market. If you want to get the maximum out of your operatives, I believe it is essential that they must have an interest in the end product and where it is going. I should like to see shop stewards—trade union representatives—included on trade missions which are sent overseas. I should like to see them when potential customers visit your works; let them meet the trade union representatives and let them really know what it means to that company and this country if they get that order and what it will mean to them if they default on deliveries or quality. I think we have not scratched the surface of this aspect yet I believe that in it could lie the solution to many of our problems. I agree with the noble Lord, Lord Selsdon; this country has the greatest potential of any. We started a long time 834 before most as an exporting country and it is for us to exploit that potential and not to destroy it by lack of understanding and lack of unity.
My Lords, may I end by thanking the noble Earl, Lord Limerick, for introducing this debate and giving us the opportunity to discuss this subject, particularly at the moment; for never was there a greater or more important opportunity for this country than exists at the moment. We are at the crossroads. We can go down one road and up over a hill to a very bright future or we can take the wrong turning and face disaster.
§ 5.25 p.m.
§ Lord GLENKINGLAS
My Lords, for almost all of the last five years, wearing one hat or another, I have been directly involved in the export market. In thanking my noble friend Lord Limerick for introducing this subject today, I should say that he asked me whether I would deal specifically with the agricultural side of exports, as Chairman of the British Agricultural Export Council. So that although a little of what I say may in some degree, overlap what other noble Lords have so ably said, I hope not too much will do so, and I also hope not to delay your Lordships for too long.
Many people do not realise that last year the agriculture industry as a whole exported £850-million worth of goods overseas, excluding anything for the "invisibles" and excluding processed human foods like whisky and biscuits. This is a considerable success story and most people hearing those figures would assume that this was all tractors and machinery and such like. It is not, in fact, quite as simple as that, because engineering and equipment are roughly half the total. There were £300-million worth of exports in livestock, poultry, wool, meat, milk products, vegetables, potatoes and so on and £130-million worth of chemicals and animal feeding-stuffs. As my noble friend Lord Selsdon has said, the chemicals industry has done particularly well over the last few years, particularly in the plant protection field. The first quarter of this year, I am glad to say, is still showing a good strong upward trend. We did just over £300-million worth of trade in the first quarter, against £191 million for the same period 835 last year, so we are still, I believe, going a little ahead of the normal inflation rate; but there is a vast amount that can still be done.
My Lords, there have been two rather remarkable changes in the last few years—perhaps I should say that one is a change and the other is something brought forcibly to our notice. The first has been in the Middle East, in the oil producing countries. They are suddenly aware of the fact that the oil reserves may not last for ever and that they had better use some of their enormous sums of money for developing something of real value in those countries, and they have chosen, among other things, the development of their land. This is an enormous, exceedingly difficult and expensive, task. The second change is that suddenly very large numbers of people in the world have woken up to the fact that with the day-to-day increase of population the danger of the world running out of food is very great. This should not be so, because we certainly have ample supplies of land to produce all the food the world needs.
My noble friend Lord Selsdon referred to Sudan and Brazil as two countries in which there is an enormous potential for developing food. But, as your Lordships know, the problem is not just how to produce the food but how to distribute it, how to sell it and how to get it to the countries you want to have it. With these potentials in front of us, with the market for developing the countries that need to be developed (and that are willing to pay large sums of money to have their agriculture developed) there is in the field I have chosen to speak about a really remarkable potential. How are we facing up to it? The British Overseas Trade Board, of which much has already been said, have been given no extra money this year to spend on the vitally important promotion of exports. I do not mean they may not have had a few extra pounds, but in relation to real terms they have been given no increased budget. I wonder whether the Government have their priorities right when they spend large sums of money on the other side of the Ministry of Industry. I believe they are not giving enough to the promotion of our exports without which the country will fail.
836 My own export council is perhaps lucky in being the only export council to which the Government allocate any money at all, and every few years the Treasury decides this must now stop. This year we get from the Government the handsome sum of £25,000, plus of course some help in other ways, which other people get too. If you compare that with my opposite number in France, who gets something like £5 million, or my opposite number in Germany, who gets £3 million or £4 million, and my opposite number in America—there are several of them who get millions and millions of dollars—you will see that, if I am not entirely successful, I am slightly handicapped compared with some people to whom reference has been made, who have done better than us in certain markets.
I have a hard-working staff of two, with four girls to cover the entire world and promote exports therein, and we do our best without having to admit often that exporting is fun. Over and above that, the bulk of our competitors in the developed world have a large number of entirely commercial agricultural attaches. The Americans have 80, the French have 40, and there are other countries on that scale. We did not have any. We are now, I believe for the first time, putting one into Teheran—and about time too!
In agricultural terms as a country we produce more per man and more per acre than any country in the world. How often has any ambassador sold that story to any country to which he was assigned? I have never heard of that happening and I have visited most countries. How many of our Embassies—and here I am not wanting to be unkind; they are extremely courteous and generally enormously helpful—have a single person on their staff who knows anything about agriculture at all? This is not their fault; farmers do not tend to go into the Civil Service. If one or two slip in, they tend immediately to be picked up by the Ministry of Agriculture. It is the rarest thing—and I have been connected with both Ministries from time to time—to find anybody in either the Foreign Office or the Department of Trade who knows anything at all about agriculture. Therefore this enormous potential field, of which I am trying to speak for a few minutes, is not easily promoted by the people who are, in many other respects, 837 doing an excellent job of work in their own field.
If that is so, there are many things we ought to do, and in a minute or so I will come to one or two minor recommendations. In this field we have one or two possibilities where, in the form of production, we do not have quite the same difficulties as have some of the others which have been spoken about earlier in this debate. This is because we have the potential of selling know-how—and noble Lord, Lord Selsdon, had a good expression for it—in the agricultural field, simply because we have greater skill than any other country in the world. We have the ability to sell knowledge about training. To those of your Lordships who have visited the Middle East and seen the terrain that they want to develop and the people who will have to run these enormously large herds of dairy cattle, sheep and huge farms that they talk about, it is absolutely clear that without basic training often at quite a low level, these schemes are bound to collapse. We in Britain can help in this situation, and I hope we will be paid for our help, because training is absolutely vital to the success of these schemes. We can also do a great deal to help in the whole process of marketing, packaging, storage, and so on, of the goods produced. These are all items highly saleable in the Middle East at the moment, yet not needing the enormous production techniques which have been mentioned concerning some forms of equipment.
I must say a word about Land Rovers. I have travelled the world extensively over the past 10 or 12 years, and in every country I have visited I have been asked why there are not more Land Rovers. I suppose I have a love/hate relationship with Donald Stokes about it. I have written to him so often, and I have never had an answer. I do not believe any other big company in the world could have had such a continuously high demand for a product and so totally failed to meet it. My advice, if I dare give it to an engineering industry, which, by and large, is doing a tremendous amount of skilful work, is not just to watch delivery dates and spare parts—we are not much worse than most of our competitors on this, if we are worse at all—but not to over-sell. I find it disstressing, arriving in a country, to be 838 told, "We like your tractors very much. Your firms promised us 300 last year but they delivered 20. This year they have promised 250. Do you think we will get 10?". This is not late delivery, this is sheer straight over-selling. I believe that in the long run it does more damage than good.
Now if I may refer quickly to one or two points where I believe we, as an industry, have a special contribution to make, and where, to some extent, the Government can help us. In selling livestock—I am thinking particularly of big farms in the Middle East—I believe that it is essential for us to produce a really effective after-sales service. This is something no other country is yet doing. I believe it would create a great deal of good will if we were to say, "We will sell you 1,000 dairy cows, and not only give you the management for them, but have somebody come out two or three times a year thereafter in order to check that everything is going right".
§ Lord DAVIES of LEEK
My Lords, would the noble Lord give way after that interesting point in which I concur? Does he not agree this shows the need for more research into climatology? In the Philippine Islands, where I had the pleasure of seeing British stock being reared, management can be followed up with climatology. There is much more potential export if we follow up with climatology and management help after we sell.
§ Lord GLENKINGLAS
Certainly. My Lords, in Baghdad ten days ago I was interested to hear that they wanted 50 meteorological stations in order to provide the information that the noble Lord mentioned to improve the management of their crops and stock.
If I may now come to my second point, it is vital that we get early intelligence in the case of these huge agribusiness concerns. I have not been to one country in the past two years where I have not, merely by talking to the right people, discovered one or more large projects of which our Embassies were totally, absolutely and completely in ignorance. This shows that visits are the key operation. I hope in the thinking of the British Overseas Trade Board they will, with the limited money I know they have, be more generous than they 839 have in the past to what I might call the research operation rather than the full mission. Equally, at the other end of the scale, it is vital, if we are to get a higher proportion of these big orders that are floating around, to invite the right decision makers to this country on inward missions and give them really slap-up treatment. I know this is what our French, German and American rivals do. They do it very successfully, and it is an important part of what is needed. My next quick point is that, if the Government will accept what I said earlier about the people in the Embassies being a little limited in their agricultural knowledge, I believe we should make a deliberate policy of training in agricultural matters at least one person in each Embassy when they return to this country. This is something which could be done and my organisation, and indeed many others, would be happy to do it.
I do not entirely agree with what the noble Lord, Lord Selsdon, said about the visits of Government Ministers. I find it quite possible to have extremely good relations with Communist countries, whose political views I do not entirely share; but as regards agricultural exports I think it is extremely important that we get the Department of Trade, the Ministry of Agriculture and the Department of Overseas Development closely coordinated, and that we use our Ministers regularly for visiting the countries that matter.
My Lords, I have spoken for longer than I meant to, for which I apologise. I also must apologise to the noble Lord who is winding up the debate, and say to him that if in fact I am not here for his winding-up it is because I have waiting a group of Brazilians who are busy buying in this country, and I want to give them a decent dinner.
§ 5.42 p.m.
§ Viscount SLIM
My Lords, may I, too, join in the congratulations to the noble Lord, Lord Pritchard. It was a great pleasur6 to find myself sitting beside him, because in the past he knew my father and has done me a number of kindnesses, and finally, because he is a good man. Perhaps I should also apologise for not being in your Lordships' 840 House as often as I should be. The reason is simply that I am an export salesman. Most of my life is spent abroad and I travel, obviously hotly, in the Middle East at the moment, and also in COMECON, mainland China, Asia and Africa. I work for an industrial group, and in case some of your Lordships may think I have never got my hands dirty, perhaps I should say that I have worked in a factory and have run a factory.
I have some fairly strong views about British industry. I may sound impertinent, because I have not been in it for as long as several other noble Lords in this House, but British industry is slack and it is idle. Some of the criticism of management is well taken by us in management, and some of the criticism about trade union leadership is well-made and well-deserved. There are today a number of young managers and young trade union leaders in our country who have not had to fight for survival; they have not had to fight a war. They have taken what a Welfare State gives, and have put little back.
In my company we have a different philosophy. We have small groupings, and we know one another. We are not perfect, but there are seventy of us in, the international trading company which I am working with at the moment, and whose running I have something to do with, and we probably speak just over 22 languages between us. There are seldom more than 25 or 30 people in that office at any one time. We are everywhere; and, if I may follow the noble Lord, Lord Carrington, there is nothing glamorous or "fun" about exports today. In fact, I would go so far as to say that it is a very hazardous and dangerous occupation, especially if you were in Beirut last week as one or two of us were. We are no longer paid to fight—at least, I am not, though I was for many years—and I certainly found it rather difficult to reach Beirut airport in time. That is just a very small hazard; but there are bigger ones.
Make no mistake, my Lords—if I may bring this debate down to the ground, as did the noble Lord, Lord Selsdon, as regards the business of selling—if you are a salesman, it is not easy today to get an order for Britain. It is not easy, because the ills—the rot, I would almost say—lie 841 not in overseas countries where the opportunities are, but in our own country, in our own industry, in our own City and in our own general political make-up today. We British today make many excuses. We talk a lot, and we talk pretty well. We were a nation of shopkeepers, but perhaps we are not even being allowed to be that today, with some of the doctrinal governmental stuff that is being pushed at us.
For many reasons, I do not share the optimism voiced by the noble Lord, Lord Beswick, about exports. Certainly it looks good; we can all make figures speak. But the situation is dangerous and in my experience there is—and I am only talking for myself and my company—a very definite falling off in parts of the world where we think business is. We can blame a number of outside factors, if that is what we feel inclined to do, but our weakness as an industrial nation is the lack of productivity. I believe it is as simple as that. And even our excuse—from management, from employers or from any trade union leader you like—about failure to invest, cannot continue to be used as an excuse or as a handicap for not producing and performing on time.
When we go out to sell we do not have much in our quiver. We are not necessarily very competitive, particularly in comparison with our two major European rivals, and we are not necessarily as well covered in the rear as they are. Because of our inflation, which has been mentioned already, and the fact that somehow we have to make a profit because of the very heavy tax burden a company is lumbered with today, we find we are over the top of other quotations. You can pare it down a bit and bring the price down a bit, but you are in very grave competition, and you start off with quite a number of points to your disadvantage. Behind that, you have this British performance, this British service which is not up to par and not up to scratch.
Then you have the British salesman—because we are not all good and we are not all perfect—who flips in and out of a place, hangs around for two days, then gets up and goes and is never seen again. I could quote the experience of many countries in this respect. I was 842 in Algeria for a fortnight not too long ago, and time and time again I was asked, "Why don't you come and see us and stay for a bit? Why don't you send someone who can speak French? Why don't you write to us in French? We might answer some of your letters then. We don't speak English in Algeria." There is also another point which I feel I must mention, because it made me very cross at the time. too, got "a left and a right" on behalf of the noble Lord, Lord Stokes—his Land Rovers and his trucks—from a number of Ministers and a number of technical people down below. I, too—because I will not have people being rude about our country when I am overseas—took this on the chin and wrote to Lord Stokes, and I have never heard from him since.
If I may, I should now like to talk about export salesmen in a little more depth, because although the noble Lord, Lord Carrington, is correct in saying that Governments can do only so much, I believe there is much that this Government, or any group of people aspiring to be a Government, could do for the export market. There are the unsocial hours and the dangers which I have mentioned. May I suggest to noble Lords that they try six weeks in COMECON, in the Middle East, or go to South Korea for three weeks on the trot. You are living a life that no trade union leader would allow his people to suffer, and you get nothing for it.
However clever we are in management about making an incentive scheme for the chap who works, however hard we try to look after him, when he comes along to get his bonus half of it goes immediately in income tax, and when he gets home and opens another envelope he finds the other half has gone in surtax. It is very little recommendation for getting out on the road today. I merely highlight that point, because I would ask the noble Lord, Lord Beswick, to see whether there is some way to give relief, perhaps, as mentioned by the noble Lord, Lord Carrington, on travel costs. Our travel costs have gone up 34 to 44 per cent., and we do not travel first-class in 1974/75. I would ask the noble Lord whether he could see some way of alleviating the burden, and rewarding the work of the export executive and the technical man who goes with him.
843 There is one point on which I should be happy if the noble Lord would correct me or perhaps add a few figures. In my study of the number of people from industry and manufacturing who physically go overseas and sell, I can find only 3,000. We have a population of 55 million, we have a large workforce, and I do not think 3,000 is enough. We are also very aware, as the noble Lord, Lord Carrington, suggested, that the calibre of the man who goes to sell may not be good enough. Like the noble Lord, Lord Selsdon, I am always finding that when we come out of an office door in Teheran, Shanghai or somewhere like that, that there are four or five Frenchmen, three or four Germans and half a dozen Japanese waiting outside. They come with a package, they come with a plan and a purpose. They have worked out how it will be paid for, how to get extra credit and easy terms.
We go in alone. There always seem to be three or four lone Englishmen, and we meet in almost every capital in the world. We bounce in and out and do our best. My company has partnerships with many other groups and companies in the country, and we have tried hard to go along in reasonable numbers of three or four to offer a package, a complete requirement, and not only to offer it but to know, having done the research, what a developing country wants. So often people flip in and the country concerned does not know what it requires and they have to guide it diplomatically.
§ Lord WIGG
My Lords, is it not a fact that the British Government have set their face steadfastly against putting Government resources at the service of industries, in order to facilitate package deals? I think the noble Viscount is aware of my interest in Algeria. I had cause to have correspondence first with the Prime Minister and then with Mr. Peter Shore, and as long ago as June last year I was promised that the matter would be referred to an advisory committee, but I have not had an answer from that day to this.
§ Viscount SLIM
My Lords, I cannot answer for the noble Lord, Lord Beswick, and I do not know what correspondence the noble Lord, Lord Wigg, has had. The noble Lord and I have certainly discussed 844 Algeria together, and he was very kind in helping me to get there. I cannot say of my own group that we have been blocked by the British Government or anything like that, but I would go so far as to say that, in my view, the failure is in this business of the package deal on which we seem to agree. There is no leader to give financial management and co-ordination in order to run this package deal—not from industry, and we are guilty, no volunteers from the City, and certainly not from some of the Government bodies which we have heard discussed today.
§ Lord SELSDON
My Lords, there is a volunteer here. I know the names of 30 or 40 who are very interested in package deals. If the noble Viscount would care to talk to me about it afterwards, I feel that I could reassure him.
§ Viscount SLIM
I thank the noble Lord very much.
§ Lord BESWICK
My Lords, as the noble Viscount is being so gloomy, may I say that I was connected with a company which did package deals and had orders of nine figures and seemed to be doing them very well.
§ Viscount SLIM
My Lords, maybe that company's incentive scheme works, I do not know. In this debate I am trying to highlight the problems and difficulties of the salesman. There is a lot of smooth talk in Government circles and other places which gives the feeling that everything is all right. I should like to make it clear that my view is that we are in a very dangerous position.
I wonder whether the noble Lord would let me make a point or two about loans; he has much more experience than I have. I should be the first to congratulate him on this extremely good loan and the arrangements made with Egypt, a country with which I am familiar as I have been asked to lead delegations and missions in the past. When we wander around trying to sell, we get the impression that loans are given rather easily overseas and are practically impossible to get in this country. We also feel that we do not tie our loans down as tightly or as well as the French or the Germans. I should not like to bore the House, but there are instances where we 845 have given loans to people and the money has been immediately used to buy other than British goods. If we, hard up as we are, are kind enough to give loans I should like to see them tied in a more positive way than they have been in the past, to buying British goods.
My views have been rather lengthily expressed. I have tried to show your Lordships' House what it is like to sell today. I come back always not with anger but to face the challenge because, unlike the noble Lord, Lord Selsdon, however attractive the proposition, I feel that it is not right to go away. There are many overseas propositions which are more attractive than working from this country. I feel we should face that fact. There is one thought which I should like to leave with your Lordships today. If you look at the world today through the eyes of some of our friends on the Continent—and here, if I may have a quick aside. I have been told in Asia, Africa and the Middle East that if only German goods were sold by British salesmen how happy they would be—there is a much more warlike, aggressive posture for survival. This is the economic battle, the economic war, and they are determined to win it.
I feel that the question of exports is at the very essence of British survival. Without exports we shall not win; we shall not survive. I believe that our export performance to date is not good enough. Even at the present rate, with the graph going slightly up as people prophesy, although I am not too sure about it, we are still not in a strong enough position to win through. I would merely say to your Lordships' House that it is time we knuckled down to a hard day's work. There are many people who are willing to tell employers where to go and what to do, but there are not many today who are willing to tell people, whoever they are, that it is time they did a job. If we want to survive and win, we must retune the whole of our export thinking; we have to revitalise and galvanise the whole of our industry. Lastly, I beg anybody who is forced to cut his overheads today—as we all are—to remember that the one area in which he will not be able to make cuts is the export force that he is busy trying to train and build up.
§ 6.2 p.m.
§ Lord DENMAN
My Lords, I wish to take up your Lordships' time for a few minutes on the Middle East. Before doing so, I should like to congratulate my noble friend Lord Pritchard, who spoke so movingly. I hope that on many future occasions we shall hear his wise words. It is a great pleasure to me to congratulate the noble Lord because I have to declare an interest as chairman of COMET. I was a member of COMET when the noble Lord, Lord Pritchard, was a member of the National Export Council, and later its chairman. Therefore, I regard him as a friend and colleague of many years' standing. Also I should declare certain interests. When one joins boards one has business interests; mine extend over 25 years and include trading and banking. I am now also a member of the BOTB Advisory Council which was referred to by the noble Lord, Lord Beswick; and COMET is one of the advisory groups which he mentioned.
First may I say that I am conscious—as we all are as a result of what has been said this afternoon—of the immense effort which is being devoted to the Middle East. This is right. It is the area of central importance to our economy. May I say also that there are very many people, both in Government and in the Civil Service, who give great service to what we are trying to achieve. Mention was made of the new Middle East Division in the Department of Trade which is staffed by very able and devoted people. On Monday of next week there will be a seminar in London to which we have asked about 200 of the decision-makers in industry. The Prime Minister has agreed to address this seminar, and the Secretary of State at the Department of Trade will also make a speech. This is a measure of the interest and enthusiasm of the Government, and I should not like to do anything but praise it.
May I add that I believe that all of us are pushing at a wide open door. There is no area in the world that is more ready to receive British culture, British people, British machinery, British ideas. It is against this background that I report with sorrow that although the noble Earl, Lord Limerick, told the 847 House about the percentage of increase in our trade, if you look at the actual figures of United Kingdom trade in the first part of this year they are still well under half those of America and about half those of Japan—and Germany's trade is nearly half as much again as our own. This is in an area where we have all these advantages besides those of historic association; and it is the measure of our incapacity to walk through this wide open door that I wish to stress.
May I give your Lordships one or two thoughts on why I believe this to be. All the way through this debate emphasis has been placed on the problem of inflation. This problem is paramount. Until we resolve it we have no hope of restoring the confidence which will gain the business that is available to us. We are no longer believed to be credible exporters. It is a very serious point to state, but I believe it to be the fact.
My next point has been emphasised by many speakers. Over the past two years I do not believe that individual British companies have devoted anything like the effort that they should have done to matching the opportunity. I believe that this is because they have been operating in a period of acute personal insecurity—personal within their businesses, personal to their ambitions, personal to their staffs. I have talked to countless people who have given me the impression that their fight has been for the survival of their companies and of their workforces. In no way is this a base line which is conducive to any kind of export effort and promotion. How can you devote your own personal efforts and those of your staff to exports if you are not sure of your home base?
I should like now to touch on a very difficult issue. Today we have talked a great deal about co-operation between Government and industry. I pay full tribute to the efforts that are being made, but I believe that there is still a great gap to be filled, in that the Governments of the Middle East expect a major British order in some sense to be backed by the British Government. They believe that in certain circumstances the British Government may impose some restriction which will cause the order not to be fulfilled. Certainly this arises out of activities that have taken place in the 848 arms industry field where, for purely political reasons, spare parts have been withheld. This has created a climate of unsureness and insecurity about the attitude of the British Government. We have talked about visits of Ministers, and indeed we have had very great help; but I do not believe that we have yet achieved the situation in which we can convince our friends in the Middle East that British industry and the British Government are pulling as one team to achieve our export successes and the economic relationships which they want and we need.
May I congratulate the noble Lord, Lord Selsdon, on his most moving speech. On the matter we are debating he seemed to me to speak with a sincerity and a dedication that has been unmatched this afternoon. I believe that he has touched the heart of this matter—that we can do everything that is right to achieve the right formalities, the export documentation and everything else, but unless we have the spirit to create confidence and the right relationships we shall never achieve our aim. This is an extremely difficult concept to put over. That spirit comes only from people. It is not done by Government decree or by the direct spending of money; it is done by individuals creating the right opinion. I believe that few people have been able to speak with the kind of confidence that is necessary to overcome the difficulties and to create confidence in the minds of the Middle East buyers—the Middle East Governments.
I would add a word to what has been said by the noble Lord, Lord Glenkinglas. He and I have been working on the agricultural problems in the Middle East to which he so generously referred. I believe that the Vote which he receives is totally inadequate. I compare it with a figure of over £½million which I believe is being devoted annually to the development of the trade centre in Japan. In the development of agriculture we have in this country a situation where we have to overcome enormous problems of organisation—or the lack of it. There is a handful of firms which are what I describe as being in the agri-business. By "agri-business" I mean that they have the manpower, the financial muscle and the experience to manage on a long-term basis, which is what the Middle East 849 countries want. They want major agricultural ventures. It is going to take a great deal of effort by the noble Lord's committee and by other people—and, I believe, a great many resources—to develop the techniques, the companies and the organisations that will match the opportunities. Unless we do this, we shall fail not only in the opportunities that are before us but we may do very serious damage to our reputation in a field where rightly we hold our heads high throughout the world.
May I also add one further word to what was said by the noble Lord, Lord Beswick. He gave an interesting catalogue of the resources available from the Department of Trade, and he mentioned at length the various facilities offered by GCDE. Unless I failed to hear him rightly he made no reference to the investment guarantees which have been in operation for the last two years. These are on an entirely different basis: they are not ensuring credit, they are ensuring investment that is made in an underdeveloped country. It is my experience that the key to many situations is to get an investment from a British company to back up its management skills and its technological know-how in order to provide a firm base for the expansion of high technology industry. If that investment—it may be 10 per cent., it may be 20 per cent.—in the equity of a company is not there, the order will not come to this country. This facility is available and I believe it is working very well; but I believe it is known, and the failure to mention it may be part of the problem—that we are not letting industry know sufficiently of this facility.
In conclusion, may I say that the Middle East is an area of enormous opportunity. I believe many people here think of it as an area that was rich three years ago and today is five times as rich. That is true. What I do not think is appreciated is that these great riches have created a totally new climate of opinion. It is a climate of opinion which we must come to understand if we are to develop successful associations with it. I think the genuine intention to spend their money in support first of their own underdeveloped countries in the Arab world, and then to take the lead in trying, in their eyes, to obtain a fairer share of the world's cake for the primary 850 producers of the world, is creating a totally new world force which in itself has enormous opportunities for us. But I believe it is important for people to go to this area and to understand its rapidly developing new feeling, if they are going to get a grasp of the opportunities that are before us. I hope that the seminar to which I have referred will give impetus to this greater understanding.
§ 6.13 p.m.
§ Lord WINTERBOTTOM
My Lords, it is a convention in this House to congratulate and thank the noble Lord who introduces a topic for discussion on Wednesdays. May I say that my congratulations and thanks to the noble Earl, Lord Limerick, are far more sincere because I believe that the topic he has raised is of absolutely fundamental importance to everything else we are trying to do. If we can get our foreign trade balance right, if we can get a strong, successful export policy, then it is comparatively easy for us to solve our problems at home. If we cannot get this basic problem solved we shall have to struggle and suffer in all the other things that we are trying to do. So from my own experience I thank him most sincerely.
Having expressed my thanks to the noble Earl, may I also express my congratulations to the noble Lord, Lord Pritchard, who made his maiden speech today. He spoke from great knowledge. He was chairman of the British National Export Council, and of course his experience of industry goes far wider than that. I am not paying false compliments when I say that we are all waiting impatiently for him to speak again. Perhaps noble Lords who spoke first will forgive me if I turn straight away to two points made by the noble Lord, Lord Pritchard, as they struck a chord in my mind.
The first point the noble Lord made and which I felt was profoundly true, and it is something that I have been saying for the last 20 years to a number of people, is that the world does not owe us a living. We have to go out and win that right to live, and live prosperously. He made a point with which I agree; that it is not a question of directors or export managers, but one of the whole organisation of industry understanding what it is all about. The noble 851 Lord mentioned that we ought to get the trade unions involved. Indeed, he may have seen that it is now the intention of the Department of Trade to do just that. It is the intention that should a Minister go abroad on some mission he should take with him, as the French have done, not only business men but also trade unionists. This is of prime importance and is something that in my own commercial career I have always followed: If there was an inward mission from some foreign country one of the very first people they met was the convener of the shop stewards and other shop stewards. I was never able to get people to agree to take them abroad, but I think now it is the policy that the actual representatives of the work people on the shop floor should go out with the directors and the export managers to see exactly what is required, and in fact to get excited by what they see.
In spite of the fact that Mr. Harold Macmillan said it was, I would disagree with the general attitude expressed that exporting is not fun. I do not merely think it is fun; I think it is absolutely absorbing. I admit that one may meet an overflowing earth closet at four in the morning and suffer from an excess of twika. But on the other hand, you can stand on the site of Nineveh; you can see Nimrod; you can have enormous intellectual stimulus in getting to know a new country and this, I know from the experience of people that I have sent into strange parts of the world, is for them terribly exciting. It is a new experience. So I think we must work towards involving everybody in every organisation in the sense of purpose, and often the excitement, and occasionally the pleasure, that comes from major exporting operations.
The second point that the noble Lord made, and which I think is of great importance, concerns pre-shipment finance. In this time of ever-growing contracts this produces major problems wich I think we must consider, although I must say quite frankly that we have not yet quite solved them. May I just tell your Lordships the present state of play on pre-shipment finance, in his Budget Statement on 15th April, the Chancellor of the Exchequer made the following announcement: 852I have also decided to introduce a series of measures to encourage the shift of resources into the balance of payments. To facilitate the provision of working capital for exports ECGD will provide facilities to guarantee loans for pre-shipment finance on large export projects. The details are to be announced in the next few days.That is a statement of intent. But although discussions have continued with the banks over the details of a pre-shipment finance scheme, these have not been finalised, mainly due to the difficulties which the banks feel are produced by a scheme which will by definition involve them in being asked almost to provide or support lending over and above their existing lending limits or the maximum which they consider acceptable for an exporter. I know of cases where firms are trading most successfully, but at the same time are becoming, in the view of the bank, a risk because they are over-trading. They are suffering the penalties of their success. I think your Lordships should bear in mind when considering the problems facing industry those elements of industry which are willing to tackle the great opportunities that now face us.
May I now turn to the opening remarks of the noble Earl, Lord Limerick. I thought his speech was excellent, rational, down to earth and just what was needed. One thing he said was of very great importance indeed, and I should like again to underline this in my speech. Quite rightly, the noble Earl stressed the importance of our invisible exports. The noble Lord, Lord Selsdon, said that if you export something physical, people know you have produced and exported something, but if you export and sell a service, all that happens is that an invisible transaction takes place across the exchanges, but no one sees it. Nevertheless, if we look at history and at the figures for the balance of trade since the middle of the last century, this country has seldom been in positive balance on its visible figures. We have always balanced our accounts on our invisibles, and these are of great importance.
The importance is recognised, but may I recommend your Lordships to read the report by Sir Cyril Kleinwort, the chairman of the Committee on Invisible Exports, which came out last night, and which, therefore, will not have been on your Lordships' tables this morning. I 853 think it is a report written clearly, one which raises issues of great importance. I should like to quote one or two sentences from the first paragraph on page 11, because I consider this to be of fundamental importance. Sir Cyril is talking about the capital transfer tax in relation to invisible exports. He says:We are now giving every support to members' representations with regard to the proposed wealth tax and the higher incomes reference which is being considered by the Royal Commission on the distribution of income and wealth. My Committee believe it is of vital importance that the City's financial pre-eminence in Europe, and its contribuition to the balance of payments should not be imperilled by inability to provide incomes sufficient to keep good people in London against all pressures of foreign competition.What we are talking about is the simple fact that people working in the professions, people who provide our invisible exports, can go anywhere. Thank goodness we are not a closed society! Anyone can go anywhere in the world and earn his bread. For this reason it is essential that a climate should be created in the City where all those various elements which help us to produce these quite extraordinary results in the sphere of invisibles are able to continue to remain and to operate. Egalitarian policy is one that I have always supported, but there is a limit. People with specialised skills are in demand all over the world, particularly in the Middle East, as was indicated by the noble Lord, Lord Denman.
§ Lord HARMAR-NICHOLLS
My Lords, is the noble Lord, Lord Winterbottom, aware that he is taking precisely the same stand as did the noble Lord, Lord Beswick? He is saying things which must be accepted because they are true. He is paying tribute in areas which deserve tribute, but the whole policy of the Government and their representatives on that Front Bench is to do the exact opposite of what they say is desirable. The discouragement far people to go and do things, whether by tax or the bureacracy, or the separating of unearned income and putting the extra impost upon it, is doing the exast opposite of what the noble Lords, Lord Beswick and Lord Winterbottom, have said is essential for the good of the country. It is a paradox which leaves me quite amazed.
§ Lord WINTERBOTTOM
My Lords. I am sorry that the noble Lord, Lord Harmar-Nicholls, is amazed. He must realise we are living in changing times, and I am quoting what the Government are doing in fact. There is an element of paradox but nevertheless, the Government are aware of it, and studies are taking place. May I now turn to another point made by the noble Earl, Lord Limerick. This was a point also touched upon by my noble friend Lord Mais. The noble Earl, Lord Limerick, touched upon the possibility of creating a Ministry of Overseas Trade on the lines of the Japanese MITI. I was also impressed by the very important maiden speech made by the noble Lord, Lord Kissin, the other day in which he made just this proposal. The noble Earl cast some doubt upon the possibility, but I would have said that we must realise that, in this country, we are not putting enough resources behind the whole area of exports. The noble Lord, Lord Glenkinglas, mentioned a figure of £20,000 a year as against £5 million. One has only to study what the MITI are doing in Japan to see the sort of competition that we are facing. While there is an element of overkill in all this payment, we must face the fact that many of our competitors are devoting resources to exports which we ourselves as yet are not matching. I am not saying we are doing nothing. The speech of my noble friend has shown the wide range of services we are providing, but we are not making a political issue of this area of study.
My Lords, it would be possible to say that the noble Lords, Lord Carrington and Lord Beswick, could have exchanged their speeches. Both could have said very similar things and we would hardly have noticed the fact that the speeches had been exchanged. Nevertheless, I am sure the whole House supports the noble Earl when he says that we must realise the competition we are facing and the resources we should be devoting to it. I come now to the speech of the noble Lord, Lord Carrington. There were three points in his speech that struck me as being important. Perhaps the most important was the need for high-class representation in the people we send abroad. This is a truism, perhaps, but one that is often ignored. The proposal of the British 855 Overseas Trade Board for special training for export representatives is of the first importance. We should train our export representatives as professionals in their own special skills—in languages, techniques of finance, techniques of approach and so on. The best British firms are as good as any, but we are now talking about the average firm which is feeling its way into the export market. We cannot spend too much time or money on training representatives who we send abroad.
The noble Lord, Lord Carrington, also mentioned the possibility of certain tax concessions on the cost of travel. One has a very great deal of sympathy with this, because if we are now starting to shuttle between this country and, for instance, Caracas or Rio, we are spending vast quantities of money in just getting there. In addition, one stays there in an expensive hotel for a long time. This was a point made by my noble friend Lord Mais. If you are going out to tender for a major contract, you can spend £100,000 as easily as kiss your hand. Whereas it lies within the power of the Overseas Projects Group to pay half the costs of tendering, I believe, first of all, we should realise that at the moment there is only £½ million available to the Overseas Project Group for its export work, which is excellent, and carried out by devoted people. Nevertheless, if we are to send people all over the world to tender for major export contracts, we must be prepared to provide finance for the firms which may not be rich or large, but which have a very good chance of getting contracts if they once get their best men out to these countries, and then let them stay there long enough. How one would manage a general policy of paying for travel for exports I am not sure, but I will bring it to the notice of my right honourable friend the Secretary of State.
My Lords, finally I go back to the point made by the noble Lord, Lord Carrington, in relation to my remarks with regard to the noble Earl, Lord Limerick. The noble Lord, Lord Carrington, mentioned that it might be advisable if invisibles were placed under one Minister. It might be advisable if they were put under a Ministry of Export Trade, the British Overseas Trade Board, 856 for instance, of the 'thirties. It is something that might be considered.
Nevertheless I believe these are soluble problems and we are discussing them in a rational manner, not as a matter of Party policy, merely with a professional view of how we can best compete in a world which is becoming extremely competitive. People have mentioned the success of France and Germany in the Middle East; the noble Lord, Lord Denman, mentioned this. Of course, they are willing to fight according to their own rules. We may be playing soccer, but they are often playing rugby football in these matters. One of the good things that I think we have done with this new power which has been given to ECGD, is to match the credit mix, which is a French concept; it is a mix of normal commercial business with grants in aid. The only problem we are facing is that we have to prove that they do it. If any noble Lord gets any information about other countries—I am not saying France specifically—where credit mix is being used, I am certain that the ECGD would be very glad to hear of it.
§ Lord GLENKINGLAS
My Lords, I am grateful to the noble Lord for allowing me to intervene. As he knows, I have had a good deal to do with ECGD. I do not know of a single case where matching has got the contract. I know it sounds good, but once you get to the stage where somebody else has the contract fixed, the fact that you can match it never wins it.
§ Lord WINTERBOTTOM
My Lords, I think this is very true, but it is helpful if information can be fed back, with no publicity, to the Government Departments trying to help us in this difficult area. May I turn now to the points made by the noble Lord, Lord Glenkinglas. I found them extremely interesting because I have some agricultural yearnings even if I am not an agriculturalist myself. Those of us who have seen the desert blossom like a rose will realise the exciting potential of these desert areas. Supply them with water and a certain amount of black soil and at once things begin to grow. Even Riyadh, which is a rather dry town, is now becoming quite green because of the water that is available to the trees and plants and so on.
857 As the noble Lord says, this country is in fact in the forefront of agricultural theory and practice. He made one point with which I agree completely, and it does not only apply to agriculture but to every operation we are undertaking in that part of the world; that is, that it is no good sending livestock and high-grade specialists there. You have to have the chaps underneath who can do the technical work; the technician is as important as the expert in this area. This also, of course, is what he means by after-sales service. It is really to make certain that, having delivered your flocks, herds, seeds, machinery, there are men there who will make certain that the things you have sold are satisfactory and a success. This is true, of course, of almost every other operation, hospitals, desalination plants and the rest.
May I now turn to the points made by the noble Lord, Lord Denman, and I am speaking having made my first trip to the part of the world in which he is so expert. I would agree completely that we are moving into a new world there. Something has happened. An explosion has happened in the Middle East which is breaking the moulds of our thought and way of life throughout the rest of the world. At the end of the day, uncomfortable though it is at the moment, it will be to our good. We will have to adapt to it. But, if this explosion of power—monetary power and real power—arising from the OPEC policy on oil prices had not come about, we would have talked ad infinitum about the needs of the developing countries et cetera. Now we have really to take their needs seriously, because the whole of the balance of power in the world is changing.
I find this encouraging and exciting. It is a challenge which has to be met. It is a new world force. Let us hope that the people who wield it will wield it wisely. I think it is really a question of education. The noble Lord has mentioned the seminar next Monday. The whole business of teaching people what is happening in the world is a continuing process. I believe, at the end of the day, the opportunities are very great, and if the Government can find the resources—and I am certain the determination exists to do so—then we will be able to gather to ourselves the benefits that will come 858 from this great interchange of ideas and potential between ourselves and this new world that is opening up in the Middle I East.
At the moment we are in difficulties, but I believe that our standing there is good. If we can recapture our credibility as reliable exporters—and I know we can, given the effort—I am certain the future that lies there for us is very bright indeed. May I turn finally to one of the remarks made by my noble friend Lord Mais; that we have reached a crossroads. I believe it is true to say that the "picturegram" in Chinese that represents "crisis" is disaster or opportunity. We in this country do not accept disaster, but I think we are willing to grasp opportunity, and this is what I think the present situation will enable us to do.
§ Lord HARMAR-NICHOLLS
My Lords, I am rather surprised that the noble Lord did not make any comment on the speech of the noble Viscount, Lord Slim. I thought it was down to earth, realistic and worthy of comment. I was wondering why it was omitted from what was otherwise a very detailed answer to the debate.
§ Lord WINTERBOTTOM
My Lords, I try to speak within limits of time. I have spoken for 25 minutes and I think that is probably long enough. I would have liked to comment at length on many speeches, but there is a time limit.
§ 6.38 p.m.
§ The Earl of LIMERICK
My Lords, the House will certainly not wish me to speak more than a few moments, least of all the noble Lord, Lord Brockway, waiting patiently in the wings, and especially after the most helpful summing up by the noble Lord, Lord Winterbottom. My task, anyway, is easy, because we have had a remarkable coalition of Benches and all the speeches following mine were wholly admirable; they were eloquent, well-informed and constructive. So my thanks to those who have so carefully thought out their contributions and given their time to attend are both deep and sincere. I am not sure what is the male equivalent of Susanna among the Elders, but whatever it is I feel that I am it. I have sat succesively in various trade promotion 859 bodies at the feet of the noble Lords, Lord Pritchard, Lord Denman and Lord Glenkinglas.
In general, I was struck by the number of speakers who picked up the point of the necessity of shop floor involvement, the point I made myself, and commitment to exporting. I hope this message will go out loud and clear. I see that the noble Lord, Lord Feather, is here, and perhaps we might enlist his advice on how to proceed. The other message which was astonishingly general was the fact that we had all had some experience over the years with Land Rovers. Perhaps that also will go out from this debate. I was delighted that the noble Lord, Lord Beswick, underlined so strongly the message about inflation and the fact that the best service to exporters lies in the creation of a healthy manufacturing sector. He touched on the shortage of skilled labour, and, of course, this is a constraint. But it was the Chancellor of the Exchequer who said recently that to make full use of our present unused capacity would have more impact in the short term than a decade of investment. I think this is a point that we need to have strongly in mind. My noble friend Lord Carrington pointed out that the Government can hinder, but perhaps not help very much. I think this was a little bit inverted in the summing-up Certainly one must agree that the attitudes of salesmen have changed, and one can share frustration at the failure to invest in success, and again we think of the Land Rover.
The maiden speech of my noble friend Lord Pritchard was one on which he has been widely congratulated. It is most indicative that, though he is sitting in the middle of this House, he is referred to as everybody's "noble friend". He has this great experience, and has reinforced the message about de-stocking. I was grateful to him for his mention of the National Exhibition Centre, which I visited yesterday. We had a meeting of the British Overseas Trade Board in Birmingham. It will be an enormous asset to our British exporters, and I endorse most strongly the commendation of all the initiative that has gone into that. It is proceeding on time and, as he said, should be open for business in February. Again, my noble friend was so right about 860 this question of reconnaissance. I was charmed that he felt able to put his benediction on the Overseas Trade Board, and he left us with the same point about the involvement of the shop floor.
The noble Lord, Lord Auckland, is always listened to with much attention when he speaks on the insurance industry. I am grateful to my noble friend Lord Selsdon. He made two points which I had no time to make, particularly about the co-operation of the Government and the private sector in opening up certain markets where the Union Jack can and should be planted as a matter of Government will. Secondly, I strongly endorse his reference to the role of the nationalised industries, flowing both from their procurement programme and also their role in the consultative field. I should like to see it done even more, specifically in airports.
The noble Lord, Lord Mais, pointed out that many manufacturers now find exporting more profitable, partly at least because there is no formal price restraint in the form of a Price Code, but the price limit is now being imposed by competition, as he recognised. He made the most valuable distinction between export generation and export promotion, and I would echo his tribute to the work of the London Chamber in promoting East/West trade. One of the missions to which I referred earlier, and which I was privileged to lead, was a London Chamber mission to Rumania. My noble friend Lord Glenkinglas helped me to survive my first weeks in the Department of Trade and Industry. He filled a yawning gap in our debate on agriculture. His mention of joint ventures and inward missions was most apposite. People have to come to Britain to realise how it is that 2.8 per cent. of our population can produce 3 per cent. of the national product, and 50 per cent. of our food needs. Finally, on after-sales service. I hope that all the after-sales service in his agricultural field will be provided by pedigree British bulls.
The noble Viscount, Lord Slim, among a wealth of valuable and earthy information about weeks in the life of a travelling salesman, made a very valid point about the desirability of promoting more package deals. That was taken up by the noble Lord, Lord Denman. I should not like to leave the noble Lord, Lord 861 Selsdon, with a monopoly in his offer to help with the promotion of such ventures. I, too, would be personally interested to hear about them. My noble friend Lord Denman expressed admiration for the Government's services in relation to the Middle East. This I echo, and I strongly reinforce his points about joint working of the Government and private sectors, both in agriculture and industry.
The noble Lord, Lord Winterbottom, pointed to the invisibles. I think I am right in saying that there has been a positive balance of trade only five times since 1800, and, strangely enough, two of those years have been within the last five, so that is the foundation of a great deal. He must have second sight, because the point he made on invisibles and taxation was one that was in my speech. I omitted it only because I thought I was going on much too long, and I was delighted to hear it from that Dispatch Box. On the Ministry of International Trade, I merely said that there was no time to deploy the case. I regarded it as not proven. But I am delighted to hear that he is looking seriously at it. It remains only for me to renew my thanks to all those who have participated and have stayed to the bitter end. I ask leave to withdraw the Motion for Papers.
§ Motion for Papers, by leave, withdrawn.