ECGD Reserves (Hansard, 14 October 1981)

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

§ The Parliamentary Under-Secretary of State, Foreign and Commonwealth (Lord Trefgarne)
My Lords, ECGD's accounts are published on a financial-year basis in November or December. The most up-to-date figures thus relate to the financial year 1979–80 when ECGD's total reserves stood at £445.2 million. In addition, the department's accumulated provisions to cover buyer losses amounted to £215 million. It is anticipated that figures for the end of the financial year 1980–81 will show a decrease in ECGD's reserve levels and an increase in provisions reflecting the continuing heavy claims being met by the department.

Lord Bruce of Donington
My Lords, while thanking the noble Lord for his reply, may I ask him whether he will say why, in view of the fact that since the year 1970–71 the ECGD has accumulated reserve funds at an average rate of about £50 million a year apart from the year 1979–80—it accumulated a small loss during that year of about £21-£29 million—it was necessary considerably to increase a whole range of ECGD premiums during the current year, to the considerable disadvantage of many exporters in the United Kingdom? Will he undertake to have a review of the situation, since it must surely be clear that the reserves have been established after making due accountancy provisions for claims? On the basis of one year balancing out another, would it not be far better to refrain from increasing the ECGD rates and run a little upon the reserves that have accumulated over so many years to meet such a contingency as the noble Lord referred to?

§ Lord Trefgarne
My Lords, the fact is that over the three years, as I said in the original Answer, the ECGD has had to meet very considerable claims and indeed is continuing to do so. It has been the policy of consecutive Administrations of both political complexions that the ECGD should operate on a basis of no charge on the public funds for its day-to-day credit reinsurance operations. That is why it has been necessary to increase the level of charges.

§ Lord Shinwell
My Lords, if the Government are so optimistic about the future and feel that they are capable of solving all our problems, including our financial problems, then why not use some of the reserves available in order to boost up our exports? Either the Government are entitled to be optimistic or they are operating under false pretences.

§ Lord Trefgarne
My Lords, the claims upon the ECGD result from the shortcomings of other Governments—not ours.

Lord Bruce of Donington
My Lords, will the noble Lord undertake to reflect upon the last reply that he gave to my noble friend? Is he not aware that, since the ECGD has been operating, the first loss or depletion of the reserves took place in the year 1979–80? Will he bear that very carefully in mind? In view of the interest of the entire exporting world in this very important question, will the noble Lord give the House an indication as to whether he would welcome a full-scale debate on the whole operation of the ECGD at the moment when the 1981 accounts become available?

§ Lord Trefgarne
My Lords, the question of a debate on this or any other matter is, of course, something to be decided by the usual channels and not for me. But, of course, I stand ready to answer whatever debate your Lordships wish to initiate and which is down for me to reply to.

§ Lord Davies of Leek
My Lords, may I ask the noble Lord whether the availability of accurate statistics was interfered with by the Civil Service disputes and whether, consequently, his figures are just guesswork or the result of study? Secondly, may I ask the noble Lord what encouragement is given to the small business people whom the Economist rightly described as "the good Samaritans of capitalism", and who are increasing their output per person by about 100 per cent., to understand the intricacies of the export credit guarantee system? Finally, is the noble Lord aware that we are aware that the fall-back is due to other countries reneging rather than to the exporters themselves?

§ Lord Trefgarne
My Lords, I think it is fair to say that the recent difficulties in which the ECGD has found itself result largely from the effects of the world recession. But it is also worth saying that one of the specific difficulties that it met was the special case of Iran, which imposed burdens of something like £200 million upon the ECGD, and which is, of course, a very substantial part of the deficit to which I have referred.

§ Lord Barnby
My Lords, would the noble Lord the Minister agree that it is extremely dangerous talk to suggest that there should be any reduction in the reserves? With the indulgence of the House, may I recall that when I was in another place I was a member of the committee which recommended the setting up of this whole export credit scheme, and it certainly would not have been the view of those who recommended this scheme that any such wrong talk should develop and that the reserves should be reduced?

§ Lord Trefgarne
My Lords, it is certainly appropriate that the reserves ought to be at an adequate level. In that context, it is worth saying that the present risks to which the ECGD is exposed are something of the order of £28,000 million.

§ Lord Drumalbyn
My Lords, can my noble friend say whether other countries have suffered the same kind of export credit losses, or are, at any rate, suffering them in parallel with ourselves?

§ Lord Trefgarne
My Lords, the arrangements in other countries are not always exactly in parallel with ours. But I understand that the export credit guarantee arrangements of some of our European colleagues are at least as difficult as our own.