HL Deb 10 November 1981 vol 425 cc99-100
Lord Bruce of Donington

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they will state, in respect of claims paid during the years ended 31st March 1978, 1979 and 1980 under ECGD external trade guarantee policies, the total amount of such claims which arose from the "special case" of Iran during those years.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne)

My Lords, it has been the policy of successive Administrations not to disclose details of the ECGD's experience in relation to particular markets. However, I can affirm that, of the total of claims paid under the department's external trade facilities for the three years in question, the proportion which related to Iran was less than 1½ per cent.

Lord Bruce of Donington

My Lords, I thank the noble Lord for that reply. Will he bear in mind that, according to the Answer to the Question that I put to him a few weeks back, there are some £660 million by way of reserves and provisions as at 31st March 1980? That is on the basis of his own Answer. In the interests of exporters generally, would it not have been far better to draw modestly upon the reserves that have accumulated over the years rather than have this very drastic increase in the rate of premiums for these particular types of policies, which has made it very difficult—and increasingly difficult—for the exporters and for the confirming houses? Is there not some other, better way of taking one year against another, rather than slavishly following the somewhat ambiguous form of accounting practice that appears to have been adopted so far?

Lord Trefgarne

My Lords, the noble Lord will recall from my previous answers that the performance of the ECGD generally in these matters—not only in regard to this particular type of policy to which the noble Lord refers, but also to the other types which it writes—has been less than satisfactory. But, in regard to this type of policy which is the subject of the Question, it might be worthwhile my pointing out that of 68p worth of premiums that it took on an actuarial basis, it paid out no less than £1.39p in claims of one kind or another and, clearly, disparities of that sort had to be corrected.

Lord Hawke

My Lords, is it not a fact that, owing to the rise in the price of oil, dozens of countries all over the world are virtually bankrupt, and if we are to continue to trade with those countries the rates of the ECGD will have to go up a great deal as, otherwise, those reserves will vanish very quickly indeed?

Lord Trefgarne

My Lords, my noble friend puts his finger on the nub of the problem; that is, that it is the world recession which is the principal cause of the difficulties in which the ECGD has found itself. But it is not the only cause. One of the other causes has been the disparity between premium rates and claims performance, and it is that latter disparity which we sought to correct with the recent rate adjustment.

Lord Bruce of Donington

My Lords, is the noble Lord aware that there is a view in export circles that the degree of investigation of the credit-worthiness of overseas clients for, or on behalf of, the ECGD has some shortcomings? There is a feeling that if the investigations were carried out a good deal more thoroughly, country by country, risk by risk, the claims that were ultimately liable to be paid would probably be significantly less. Will the noble Lord confirm that an amount not exceeding £1 million, out of the total expenditure of the ECGD, is spent on investigation which seems to be a remarkably small sum?

Lord Trefgarne

My Lords, I do not have in front of me the precise figure of what is spent upon investigations. I shall ascertain that figure if I can and write to the noble Lord with it. But, of course, the ECGD's general policy in these matters must be related to its claims experience.

Lord Glenkinglas

My Lords, will my noble friend bear in mind that during the period when I was responsible for the ECGD exactly the opposite to what the noble Lord, Lord Bruce, suggested happened. A very large number of companies complained that the ECGD was much too strict in making investigations in countries, and in refusing credit to countries with which they wanted to do business.

Lord Trefgarne

My Lords, I venture to suggest that the conduct of the affairs of the ECGD under my noble friend was particularly exemplary.

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