ECGD Insurance (Hansard, 15 January 1991)

§ The Minister of State, Department of Trade and Industry (Lord Hesketh)
My Lords, my right honourable friend the Secretary of State for Trade and Industry yesterday announced the Government's decisions with regard to the cost and availability of ECGD support for project and capital goods exports.

§ Lord Taylor of Gryfe
My Lords, I thank the Minister for that reassuring advice. Is it the case that the new terms will not place British exporters at any disadvantage compared with their overseas competitors?

§ Lord Hesketh
My Lords, we believe that the portfolio management system strikes the right balance between the need to exercise proper control of the ECGD's exposure to high risk business and the need to provide a stable framework of support for project exports.

Lord Bruce of Donington
My Lords, is the Minister aware that the CBI recently made allegations that Britain's export of goods to Eastern states, particularly Poland, Czechoslovakia and Hungary, is adversely situated as regards the Export Credits Guarantee Department when compared with Germany and France? The latter two countries provide cover where we do not. If that is true, will the Minister assure the House that the Government will take sups to adjust the position, either by giving cover or by making a formal complaint to the European Commission?

§ Lord Hesketh
My Lords, it is important to remember that we are facing a deficit to the Consolidated Fund of some £3 billion. In the final analysis that sum will have to be paid by the taxpayer. That is why there has been a review and why the Government believe that they must introduce an element of prudence rather than expose the taxpayer to unlimited expenditure.

Lord Bruce of Donington
My Lords, will the Minister answer the question: is this country at a disadvantage compared with Germany and France?

§ Lord Hesketh
My Lords, I assume that the noble Lord believes that the Government should allow the Export Credits Guarantee Department to back any project that comes before it.

§ Lord Williams of Elvel
My Lords, my noble friend Lord Bruce of Donington did not say that. Will the Minister address the problem we are discussing? Is it not the case that 80 per cent. of the activities of the ECGD are about to be privatised? Is it not also the case that there is a serious problem as regards privatisation which concerns political risk insurance? Has the Department of Trade and Industry asked the Treasury to provide a subsidy, post-privatisation, for political risk cover? If that is not available, will not British firms be at a serious disadvantage both in Eastern Europe and elsewhere?

§ Lord Hesketh
My Lords, the reality of the situation is that some 90 per cent. of the sums that have not been repaid have been acquired on the project side of the Export Credits Guarantee Department. That side of ECGD is not affected by the privatisation.

§ Lord Williams of Elvel
My Lords, the Minister must try to answer the questions that we are putting. Will there not be a problem with political risk cover as regards that part of the Export Credits Guarantee Department that is to be privatised? If there is no subsidy from the Treasury, will there not be a problem and will British firms therefore not be at a serious disadvantage? Will the Minister please answer the question?

§ Lord Hesketh
My Lords, the noble Lord, Lord Williams, hopes to anticipate the market and what is to happen in the future. I am not in a position to make that judgment.

§ Lord Taylor of Gryfe
My Lords, did the assurance which the Minister gave earlier in reply to my Question affect the project group, which concerns the long-term project financing, or did it simply apply to that part of the Export Credits Guarantee Department which is to be privatised?

§ Lord Hesketh
My Lords, it referred to the project group on the assumption that the Question of the noble Lord, Lord Taylor of Gryfe, had an interest as regards the future.

§ Lord Mackie of Benshie
My Lords, I believe that the fund for guaranteeing exports is £3 billion in the red. How many years does that figure cover? How much are the Government prepared to lose in order to guarantee exports?

§ Lord Hesketh
My Lords, I believe I am correct in saying that the figure covers roughly a decade. However, the assessment made at the initial allocation makes assumptions which the Government hope represent sound business in the case of the Export Credits Guarantee Department. My right honourable friend made an assessment that a further £2.5 billion may be needed in the decade ahead. That figure represents losses that may arise from contracts that have been agreed in the past.