Export and Investment Guarantees Bill

HL Deb 09 July 1991 vol 530 cc1318-87

3.16 p.m.

The Lord Advocate (Lord Fraser of Carmyllie)

My Lords, on behalf of my noble friend Lord Reay, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Fraser of Carmyllie.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 1 [Assistance in connection with exports of goods and services]:

Lord Williams of Elvel moved Amendment No. 1: Page 1, line 8, after ("to") insert ("encouraging or, if this is unnecessary,").

The noble Lord said: After allowing a short pause to enable those who are not interested in exports to leave the Chamber I shall explain the purpose of the amendment. The Committee will be aware that the enabling Act of ECGD, the Export Guarantees and Overseas Investment Act 1978, required ECGD statutorily to encourage United Kingdom trade by providing insurance and related export support facilities for United Kingdom exporters. However, Clause 1 of the Bill merely refers to facilitating instead of encouraging. The amendment is quite simple but very important. It is, I hope, agreed on all sides of the Committee that it is a primary function of ECGD to encourage exports. The requirement to encourage should in our view be retained on the face of the Bill.

I accept that the word "encourage" in the 1978 Act has given rise to certain problems. Exports, for instance, cannot be "encouraged"—these are rather technical points—as ECGD support for them would be ultra vires if the relevant supply contract has already been signed. I understand that. But the wording of my amendment, encouraging or, if this is unnecessary", seeks to cover that point.

The difficulties which have arisen from the inclusion of the word "encouraging" in the Act relate to the problems of establishing the exact point in time where an exporter's or a purchaser's commitment is sufficient to say when a binding agreement has been reached; in other words, at what point ECGD encouragement cannot operate. I believe that we can avoid that situation by the wording of my amendment.

I also believe that the Government ought to accept this relatively harmless amendment, but one which states a matter of very great principle.

Either we are in the business of encouraging United Kingdom exports or we are not. I submit, as I submitted on Second Reading, that we should write this particular wording on the face of the Bill. It adds an element to the Bill which is missing at present. It detracts in our view, and I say this on advice, nothing from the Bill—in other words, it does not damage the Bill in any way—but it provides an important signal which United Kingdom exporters are looking for from the Government: that the Government and the ECGD, which is a government organisation, are there to encourage UK exporters to export. I believe that that is the first thing with which we in this Committee should deal. We should start off by writing it on the face of the Bill. I beg to move.

Lord Fraser of Carmyllie

Although something of a useful explanation has already been given to Members of the Committee, I believe that it may be helpful if I explain why the word "encouraging" (as used in the 1978 Act) has been replaced by the word "facilitating" in this Bill.

The noble Lord is indeed correct. Legal questions have occasionally been raised as to the ECGD's power to provide support for export where contractual arrangements were already well advanced before any ECGD involvement. In those circumstances, it could be argued that encouragement was not necessary for the trade to take place and that, accordingly, the ECGD was not empowered to provide assistance. I would hesitate to go quite so far as the noble Lord in saying where that circumstance occurred in the past. It was ultra vires but there was undoubtedly, as he indicated, some legal concern on the point.

It was to overcome that difficulty that the concept of facilitating exports was introduced into the Bill. It is considered that, as a motive for providing assistance to exporters, facilitating the supply of goods or services has all the scope and trade promotion aspects of "encouraging" while escaping the problems arising from the more restrictive connotations of the latter.

I am aware that the amendment as drafted attempts to avoid the difficulties which I have outlined. However, it does not add anything material to the clause. There are no circumstances under which the Secretary of State could be said to be providing support for exports that are covered by "encouraging" but not also by "facilitating".

I appreciate what the noble Lord said when he stated that exporters might draw comfort from seeing the word "encouragement" in the Bill. However, I should have thought that most exporters would prefer to know that there is in fact no doubt whatever about the ECGD's powers to provide necessary support. The word "facilitating" certainly dispels any doubts in that connection.

However, in order to dispel any further concern about this change in the phraseology of the Bill—if exporters are indeed concerned—I am happy to repeat the words of the Minister for Trade in another place. On Second Reading he said that the Bill implies no fundamental change of any kind in the role of the ECGD and that—I stress this point— its primary function will remain the encouragement of exports and overseas investment through the provision of insurance against credit risks".—[Official Report, Commons, 22/1/91; col. 182.] With the repetition of that statement by the Minister of Trade, I hope that we can progress through this interesting Committee stage with the substratum of agreement that all of us on both sides of the Committee are in the business of ensuring that exports are indeed encouraged. However, I must tell the noble Lord that it would seem that his amendment adds nothing to that objective.

Lord Jay

I find the Minister's reply a little puzzling in one respect. I appreciate that there has been a legal difficulty. However, he has just quoted the Minister in another place as saying, in effect, that it is the job of the ECGD to encourage the exporter. If the Minister can say that—and of course his words in a speech will not convey quite the same authority as something written into the Bill —and if that is what is intended, is it really impossible to introduce the word "encouragement", if not perhaps in this exact part of the Bill, in some section of the Bill so as to make it perfectly clear what is the Government's and the Minister's intention?

Lord Morris

The word "facilitating" quite clearly embraces "encouragement"; but "encouragement" does not necessarily embrace the word "facilitating". I think that the original drafting is more correct; indeed, it is wider than encouragement. Further, I believe that it would be much more difficult to subject the word "encourage" to a critical test than would be the case with the word "facilitate".

Lord Ezra

I share somewhat the view that, if a Minister in this place and in another place used the word "encouragement" and our exporters need every possible encouragement to fight against the increasing tide of competition, it is difficult to know why it should be impossible to use the word on the face of the Bill. Further, we have to consider what is being done in other countries. They have similar organisations which positively exist to encourage their exporters. We have heard about the Dutch Government which give positive support through their various agencies for the purpose; indeed, in France, Germany and elsewhere they encourage their exporters. I do not see why we should in any way try to mask the fact that we are anxious to encourage our exporters.

Lord Prior

I accept what my noble and learned friend said. However, the very fact that we are having to debate the matter at all may raise suspicions that we do not always think the Treasury view is one which seeks to encourage. I believe that my noble and learned friend was right when he said that it is the will of both sides of the Committee that we should do everything we can to encourage exports. However, I am not anything like so certain that he is right in his view about the Treasury. It is because so many of us are suspicious about the role of the Treasury over a period of years in this business that we are having to raise these footling little points now. It is that which causes anxiety as regards the use of the words "to facilitate", and so on. They could have a different meaning from the one which we usually attribute to them.

Therefore, I hope that my noble and learned friend will do his best to convince the Treasury and others that we worry about such things, although we take his word on the matter.

Lord Williams of Elvel

Several Members of the Committee have spoken on this amendment and I am grateful to them for that. If I may say so very politely, it seemed to me that the noble and learned Lord adduced no arguments whatever against the amendment. We understand exactly what the noble and learned Lord said and what the Minister said in another place. Without the word "encourage" on the face of the Bill, there is a problem. It is no more than that. Without having the word "encourage" in the Bill seems to me to detract from the Bill.

As the noble and learned Lord said that the amendment would not damage the Bill and as we believe that it adds something to the legislation—and it adds a very important element to the Bill—I believe that v/e ought to start off this Committee stage by deciding whether the amendment should be included in the Bill.

3.29 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 84; Not-Contents, 125.

Division No. 1
CONTENTS
Airedale, L.	Hilton of Eggardon, B.
Allen of Abbeydale, L.	Hollis of Heigham, B.
Ampthill, L.	Holme of Cheltenham, L.
Aylestone, L.	Hughes, L.
Barnett, L.	Hunter of Newington, L.
Beaumont of Whitley, L.	Jay, L.
Blackstone, B.	Kearton, L.
Blease, L.	Kilmarnock, L.
Boston of Faversham, L.	Kinloss, Ly.
Briginshaw, L.	Leatherland, L.
Broadbridge, L.	Listowel, E.
Bruce of Donington, L.	Llewelyn-Davies of Hastoe, B.
Campbell of Eskan, L.	Lloyd of Hampstead, L.
Carmichael of Kelvingrove, L.	Lockwood, B.
Carter, L.	Longford, E.
Cledwyn of Penrhos, L.	Marsh, L.
Clinton-Davis, L.	Mason of Barnsley, L.
Cocks of Hartcliffe, L.	Mayhew, L.
David, B.	Molloy, L.
Dean of Beswick, L.	Morris of Castle Morris, L. [Teller.]
Desai, L.
Donaldson of Kingsbridge, L.	Northfield, L.
Donoughue, L.	Ogmore, L.
Dormand of Easington, L.	Peston, L.
Ennals, L.	Phillips, B.
Ezra, L.	Porritt, L.
Fisher of Rednal, B.	Redesdale, L.
Gallacher, L.	Ritchie of Dundee, L.
Galpern, L.	Rochester, L.
Gladwyn, L.	Russell, E.
Graham of Edmonton, L. [Teller.]	Sefton of Garston, L.
	Shackleton, L.
Grey, E.	Shaughnessy, L.
Hampton, L.	Stedman, B.
Hanworth, V.	Stoddart of Swindon, L.
Hayter, L.	Strabolgi, L.

Taylor of Blackburn, L.	Whaddon, L.
Taylor of Gryfe, L.	White, B.
Terrington, L.	Williams of Elvel, L.
Thurso, V.	Willis, L.
Turner of Camden, B.	Wilson of Langside, L.
Underhill, L.	Winchilsea and Nottingham, E.
Wallace of Coslany, L.	Winstanley, L.

NOT-CONTENTS
Aldington, L.	Howe, E.
Alexander of Tunis, E.	Hylton-Foster, B.
Arran, E.	Johnston of Rockport, L.
Astor, V.	Kinnaird, L.
Belhaven and Stenton, L.	Kitchener, E.
Beloff, L.	Knollys, V.
Bessborough, E.	Lane of Horsell, L.
Blatch, B.	Long, V.
Blyth, L.	Lucas of Chilworth, L.
Boardman, L.	Lyell, L.
Brabazon of Tara, L.	Mancroft, L.
Brigstocke, B.	Margadale, L.
Brougham and Vaux, L.	Marlesford, L.
Buckinghamshire, E.	Merrivale, L.
Butterworth, L.	Mersey, V.
Caithness, E.	Middleton, L.
Campbell of Alloway, L.	Monk Bretton, L.
Campbell of Croy, L.	Morris, L.
Carnegy of Lour, B.	Mottistone, L.
Carnock, L.	Mountevans, L.
Carr of Hadley, L.	Mountgarret, V.
Cavendish of Furness, L.	Mowbray and Stourton, L.
Chalfont, L.	Moyne, L.
Clanwilliam, E.	Munster, E.
Cochrane of Cults, L.	Nelson, E.
Cockfield, L.	Norfolk, D.
Colnbrook, L.	Nugent of Guildford, L.
Constantine of Stanmore, L.	Orkney, E.
Cottesloe, L.	Orr-Ewing, L.
Cox, B.	Oxfuird, V.
Craigavon, V.	Park of Monmouth, B.
Cullen of Ashbourne, L.	Pender, L.
Cumberlege, B.	Peterborough, Bp.
Davidson, V. [Teller.]	Platt of Writtle, B.
Denham, L.	Pym, L.
Denton of Wakefield, B.	Quinton, L.
Donegall, M.	Rankeillour, L.
Dundee, E.	Renton, L.
Eccles, V.	Rippon of Hexham, L.
Eringham, E.	Rodney, L.
Ellenborough, L.	Savile, L.
Elles, B.	Selkirk, E.
Elliot of Harwood, B.	Sharpies, B.
Elliott of Morpeth, L.	Shrewsbury, E.
Erne, E.	Skelmersdale, L.
Erroll of Hale, L.	Stockton, E.
Fanshawe of Richmond, L.	Strange, B.
Flather, B.	Strathcarron, L.
Fraser of Carmyllie, L.	Strathclyde, L.
Fraser of Kilmorack, L.	Strathmore and Kinghorne, E.
Gainford, L.	Strathspey, L.
Gridley, L.	Sudeley, L.
Grimston of Westbury, L.	Swinton, E.
Hailsham of Saint Marylebone, L.	Thomas of Gwydir, L.
	Trefgarne, L.
Halsbury, E.	Trumpington, B.
Harmar-Nicholls, L.	Ullswater, V.
Henderson of Brompton, L.	Vaux of Harrowden, L.
Henley, L.	Wharton, B.
Hesketh, L. [Teller.]	Whitelaw, V.
Hives, L.	Wise, L.
Hood, V.	Wynford, L.
Hooper, B.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

3.37 p.m.

Lord Williams of Elvel moved Amendment No.2:

Page 1, line 12, leave out ("rendering") and insert ("providing").

The noble Lord said: I beg to move Amendment No. 2 standing in my name and that of my noble friend Lord Clinton-Davis. The object of my amendment is to substitute the word "providing" for "rendering". "Providing" seems to us to sit rather more comfortably within the accepted vocabulary of overseas aid. We talk of "aid recipient" and "aid provider", but I wonder whether one can properly talk of "aid renderer". In addition, "rendering" implies that economic assistance can be rendered only within a specific framework, whereas it may from time to time be Her Majesty's Government's wish to provide economic assistance through ECGD in exceptional circumstances outside the normal aid framework.

For example, as I understand it, the 1991–92 aid provision was totally used up within about three weeks and no more money is to be made available. It is entirely possible that circumstances may arise over the course of this financial year which will make it convenient for the Government to provide economic assistance. That may be done by way of ECGD's facilities.

It seems to me that that is an opportunity which the Government should not allow to pass. I therefore believe that this is a small but interesting amendment which the noble and learned Lord may wish to consider. It is meant in the most constructive manner and I hope that he will take it as such. I beg to move.

Lord Fraser of Carmyllie

It may be helpful if I were to give the Committee some background on the economic assistance powers, their past usage and possible future usage. These powers were first introduced into the Export Guarantees Act 1939 and have figured in all subsequent ECGD legislation. The powers became largely redundant in 1964 following the creation of the Overseas Development Ministry which took on the aid-related functions previously administered by ECGD.

The powers to render economic assistance were not called on again until 1984 when they were used to facilitate a loan to Brazil for the re-financing of ECGD-guaranteed sovereign debt. They were subsequently used for similar re-financings of Yugoslav, Philippine and Mexican sovereign debt to assist the orderly repayment of debts which were owed to the United Kingdom.

The powers have been dormant recently as debt restructuring no longer requires their use. Debt is now rescheduled with Her Majesty's Government providing the funding rather than commercial banks, as this is at present a more cost-effective method. In future, the need to call upon the economic assistance powers is likely to be even less since the proposed financial management powers in Clause 3 will allow ECGD to guarantee debt re-financing loans for the purpose of the proper financial management of ECGD's portfolio of assets and liabilities. However, the powers have been retained as a contingency against possible future need and to give ECGD the flexibility to respond to and participate in the increasingly sophisticated Paris Club debt rescheduling arrangements.

The Bill does not restrict any future application of the economic assistance powers to particular countries, or indeed in any other way. These powers will not be used, except in the case of sovereign debt refinancing, without a statement being made to Parliament. The amendment in no way alters the scope of the powers so there is no good reason for departing from the terminology established in earlier ECGD legislation; that is, the term "rendering economic assistance". I have dealt with this matter as carefully as I can but I do not see that the proposed change adds anything to the Bill. The word "rendering" has been used previously and I believe that where we can leave the language undisturbed we may as well do so, particularly as there have been some comments on our intentions.

Lord Williams of Elvel

I am grateful to the noble and learned Lord for his explanation. The object of this amendment is to elicit a statement on how it is proposed that the ECGD should use its powers. The noble and learned Lord said, if I heard him correctly, that ECGD would only be used in the context of sovereign debt. Why is it to be used only in the context of sovereign debt? There are all kinds of other forms of debt in which ECGD could properly become involved.

Lord Fraser of Carmyllie

I agree that I said that, but I also added that there is a contingency retention of these powers. There was some suggestion that the powers might be set aside all together as they were considered unnecessary. I cannot be specific at this stage but I am sure the noble Lord appreciates there are a number of proposals on how debt rescheduling might be achieved in the future following on the elaborate discussions that have been held in the Paris Club. If we hold the contingency powers in reserve, they might be effectively used if new arrangements are adopted. The noble Lord heard me correctly. I said that I believe the contingency powers would normally be used in the context of sovereign debt refinancing.

Lord Jay

The Minister will notice that Clause 1(4) states: The arrangements that may be made under this section are arrangements for providing financial facilities". Why is it that the word "rendering" is used in subsection (2) while the word "providing" is used in subsection (4)? Do the words mean exactly the same thing and are they interchangeable? If there is some difference, will the Minister explain what it is?

Lord Fraser of Carmyllie

The word "rendering" is used to denote rendering economic assistance. That terminology has been used in previous legislation. As I have already said, I believe that where such language has been used and understood in the past, we should continue to use it. I believe the noble Lord, Lord Williams, misunderstood me on the matter of sovereign debt refinancing. The powers we have been discussing would not be used, except in the case of sovereign debt refinancing, without a statement being made to Parliament.

Lord Williams of Elvel

The noble and learned Lord has said that the. powers will not be used without a statement being made to Parliament. I hope the noble and learned Lord can clarify a matter for me. On Second Reading we discussed the whole problem of the aid and trade provision and how that sat alongside what I call the commercial activities of ECGD. On Second Reading many noble Lords said that the aid and trade provision had mysteriously been exhausted. Is the noble and learned Lord saying that ECGD will have facilities, together with the ODA, to increase aid and trade if that is what Her Majesty's Government deem appropriate? Will statements be made to Parliament on that matter? Is that one of the purposes of this clause?

Lord Fraser of Carmyllie

On Second Reading there was considerable reference to the aid and trade provision. However, as I think the noble Lord appreciates, that is a separate allocation within the aid programme designed to help British firms win sound projects of commercial and industrial significance to Britain in developing countries. Certainly there has been a difficulty in that, as there has been a spate of recent successes by British firms in winning contracts, the budget of some £97 million for 1991–92 is already heavily over-committed. Both DTI and ODA Ministers have indicated that no further commitments may be taken on that involve expenditure in the year 1991–92. However, in this instance we are talking about a separate allocation.

Lord Williams of Elvel

I am sorry to press the noble and learned Lord on this point, but am I to understand that Clause 1(2) does not relate to the aid and trade provision but to something quite separate?

Lord Fraser of Carmyllie

I have already indicated that it is a matter of a separate allocation.

Lord Williams of Elvel

I am most grateful to the noble and learned Lord for that reply. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.45 p.m.

Lord Williams of Elvel moved Amendment No. 3:

Page 1, line 25, leave out ("or loans").

The noble Lord said: Again this is a probing amendment. I am not entirely clear why ECGD should be empowered to make loans. I recognise that this capacity existed under Section 3 of the Export Guarantees and Overseas Investment Act 1978. I hope that e noble and learned Lord can explain why this particular function, which is an odd one for ECGD, is included in the present Bill. I beg to move.

Lord Fraser of Carmyllie

The power to make loans as part of the assistance available to exporters is not a new one. Section 3 of the Export Guarantees and Overseas Investment Act 1978 explicitly provides this power. The power is currently used when ECGD guarantees loans denominated in US dollars or in deutschmarks. ECGD then has a contingent liability to step in as a lender of the last resort if for some reason the original lender is unable to maintain the loan aid no other lender can be found. Perhaps I can best explain the position by referring to a recent example when Kuwaiti banks had their assets frozen during the occupation of Kuwait by Iraq. ECGD was asked to step in to take out a foreign currency loan made by a Kuwaiti bank that had formed part of the syndicate providing finance for an ECGD insured export contract.

Fortunately, in that instance another lender was secured to maintain the loan. However, it is in that kind of situation that it is useful to have this power. I stress that the facility has never been intended to be used for ECGD to enter into competition with the commercial banks by becoming, so to speak, a public sector export bank. I hope with that explanation the noble Lord will withdraw his amendment.

Lord Trefgarne

Before my noble and learned friend finally resumes his place, can he say whether this welcome new provision could be used in the circumstances which, in my experience, arose in a country in the Far East? In that instance, the government of the country concerned was not prepared to sanction the borrowing of money for public sector purchases except from other public sector lending organisations. We in this country had no convenient public sector lending organisation which could fulfil that role. I recall that the case in question arose at the time when the Trustee Savings Bank was still in the public sector. In the midst of the negotiations for it to lend the money the bank, to the fury of the potential borrower, was privatised. Is my noble and learned friend able to say whether in a situation of last resort it will be possible under this new provision for ECGD to make the necessary facilities available?

Lord Fraser of Carmyllie

Perhaps I may correct my noble friend on one point. He described the power to make loans as a new power. He will appreciate that, as I indicated, that power already existed under Section 3 of the 1978 Act. My noble friend is absolutely right. We envisage that the power could be used to enable ECGD to step in as a lender of last resort—to use his words. The example which I had in mind was when the original lender was for some reason unable to maintain the loan. My noble friend has provided another example where such a power might be usefully deployed.

Lord Desai

Can the noble and learned Lord say whether such a provision would extend to the hypothetical case of someone who was financing exports through the BCCI, which has recently collapsed? Could the ECGD assist in such a case? I simply ask for clarification.

Lord Fraser of Carmyllie

In the circumstances relating to that bank, I believe that I would be extremely unwise to offer any comment at the moment.

Lord Williams of Elvel

I am sorry that the noble and learned Lord is so coy about a hypothetical question. I assume that, as in the case mentioned by the noble Lord, Lord Trefgarne, which arose when the TSB was being privatised, if any bank—BCCI or any Other—turned belly up because of some problem, this clause would apply. I assume that the purpose of the clause is that ECGD should be lender of last resort.

If that is the case, it imposes a very important function on ECGD which, in moving the amendment, I had not understood. I am most grateful to the noble and learned Lord for his clarification. A lender of last resort has the responsibility to make sure—and I assume that ECGD will do so—that no export project fails because of a problem in the banking system which might reduce the likelihood of a loan being made by a commercial provider of funds or because of a loan which has been made being called. I assume that in those circumstances ECGD would step in as lender of last resort.

I imagine, and perhaps the noble and learned Lord will confirm, that any loans made by ECGD under the circumstances which have been discussed would form part of the public finances and therefore ECGD would have to refinance itself from the Consolidated Fund and so become part of the public sector borrowing requirement. Is that the case?

Lord Fraser of Carmyllie

The noble Lord has ranged far from where we started. I indicated to the noble Lord that the power exists for ECGD to operate as a lender of last resort. At the same time it does not actively try to set up in competition with commercial banks. I cannot expand on that point.

Lord Williams of Elvel

I am not asking the noble and learned Lord whether ECGD is trying to compete with commercial banks. I understand that it is not. However, we have stumbled into this argument, and we are in Committee. We are allowed to pursue lines of inquiry as well we may. The noble and learned Lord and the noble Lord, Lord Trefgarne, have used the expression "lender of last resort". That is what ECGD is under present legislation and will continue to be under the Bill. If it is a lender of last resort, just as the Bank of England is a lender of last resort, will the loans which it makes as lender of last resort be part of the public finances arising from the Consolidated Fund and hence part of the public sector borrowing requirement?

Lord Fraser of Carmyllie

I shall write to the noble Lord.

Lord Williams of Elvel

I am most grateful to the noble and learned Lord. I believe that we have pushed the discussion on this probing amendment as far as we can. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 4:

Page 1, line 26, at end insert: ("( ) The Secretary of State shall ensure that charges made for such arrangements are in general not materially higher than charges made for equivalent arrangements in other countries in the European Community.").

The noble Lord said: It may be for the convenience of the Committee if in moving Amendment No. 4 I speak also to Amendments Nos. 16 and 19. I should perhaps make clear to the Committee that I regard Amendment No. 16 as an alternative to Amendment No. 4. However, I regard Amendment No. 19 as consequential on Amendment No. 4.

The background to this group of amendments is that ECGD at present charges significantly higher premiums for medium and long-term business than other export credit agencies in the European Community. We believe that United Kingdom exporters should not be penalised in that way. I shall give a few examples of premium rates charged by the main export credit agencies for project business across a range of markets before May 1991. On those calculations the United Kingdom charged 4.79 per cent.; Belgium, 3.81 per cent.; Germany, 3.23 per cent.; Italy, 2.32 per cent.; and France, 2.06 per cent. Since then ECGD has increased its premium charges for medium and long-term business by an average of just over 10 per cent. under its portfolio management system which was introduced on 7th May 1991. That has made UK exporters even less competitive.

It seems to us that there should be, in the words of the Kemp Report, a "level playing field", at least within the Community. We shall come to exporters outside the Community later. In our view ECGD and UK exporters should not be penalised as a result of the losses—and we must admit that heavy provisions had been made by ECGD—in the early 1980s when there was a worldwide economic recession. It seems to us that it should be part of the 1992 arrangements that UK exporters and other exporters within the Community to third markets should be treated on an equal basis. The purpose of the amendment is to impose a duty on the Government to ensure that that is so, although I accept that the drafting of the amendment may not be entirely to the Government's liking.

Amendment No. 19 simply allows the Secretary of State to make further arrangements where these are considered necessary so that they become comparable with arrangements made by other export credit insurers within the Community. That amendment speaks for itself.

With this group of amendments—and I repeat that I regard Amendments Nos. 4 and 19 as going together —there would be a duty on the Secretary of State to ensure that United Kingdom exporters operate on a level playing field with exporters in the rest of the European Community. I beg to move.

4 p.m.

Lord Jay

I Hope that the Minister will accept at least the principle of the amendments. My experience in export promotion leaves me with the belief that one of the most essential elements in our armoury, if one may put it that way, is what has until now been called "matching in" the operations of the ECGD; in other words, that on any ECGD facilities it will be possible for at least as good an advantage to be given to British exporters as their competitors overseas receive. If the principle of matching is abandoned it would be a serious blow to exporting over a large area. I believe that that is the view of industry.

Incidentally, I see no reason why that provision should be confined to exporters to other parts of the EC, though it should no doubt be extended to them. After all, as exporting is not an easy business it is crucial for the exporter to know that, whatever his competitors are offered by governmental institutions elsewhere, those offers will be matched by their British counterpart. Surely it is also important that that fact should be generally known so that an exporter can be confident that if in the course of the transaction some new trick is thought up by some of his competitors' governments elsewhere, which had not been foreseen, he will be safeguarded against that. I hope that the Minister will give a positive reply to the amendments.

Lord Ezra

I too support this important amend rent. It exemplifies the concern that was generally felt by those of us who participated in the Second Reading debate that it is implied in the Bill that the facilities available through export and investment guarantees to exporters will be more circumscribed in the future than they have been in the past. One way in which that has occurred is through the charges made for export guarantees which have been increased here noticeably above those of our compel hors, particularly in the single market, as was mentioned by the noble Lord, Lord Williams.

If we are to hold our position in exports, it is imperative that facilities available to exporters— particularly in view of the creation of the single market —should be equal and that it should be an objective of government to ensure that that is so. By increasing so much the charges made to exporters for the provision of those services we are moving far too much in the opposite direction. I regard the amendment as one of the most important put forward in connection with the Bill and I hope that it will be considered seriously by the Government.

Lore Taylor of Gryfe

I support the submissions of my noble friend Lord Williams of Elvel and the noble Lord, Lord Ezra. They go to the root of the matter as to whether the Export Credits Guarantee Department, which has over the years been a great servant of industry by supporting and encouraging exports, will continue to do so, or whether the premiums demanded will make it extremely difficult for our major companies to secure business overseas.

I was a little disappointed in the vote that took place earlier on the use of the word "encouraging". I suspect that most noble Lords assumed that it was a question of semantics. However, this amendment is not about semantics but about granting our great exporting industries, particularly in the field of heavy engineering and the provision of plant, the same conditions as apply to their competitors.

On general export credits, there is a general consensus on terms but not on the premium rates for export credits. That is what we are talking about. Perhaps I may take the example of the noble Viscount, Lord Weir, whose company has been extremely successful in exporting engineering equipment overseas. I know that he and his officials feel strongly that when they pursue business overseas they have to pay premium rates to ECGD—ECGD cover is essential in exporting business—which put them at a disadvantage.

The Minister has already indicated that the additional incentive to exports, which encourages putting together an attractive financial package for export, is aid and trade provisions. However, it has also been indicated that, in addition to the excessive premium rates that are now demanded, our aid and trade provisions were exhausted within one month of the start of this financial year. That means that our exporters cannot add any sweeteners to their bids for overseas trade.

It has been said that we are anticipating the EC directive in that field, but I contend that we should not anticipate by putting up our prices before our competitors do. It is like Sainsbury's saying, "We shall put up our prices this week in anticipation that Tesco might do so next week or next month". No one conducts business on that basis, so the measure is fundamental to the Bill and to British industry.

I said on Second Reading that we are talking not only about balance of payments statistics but about jobs. If Weirs of Cathcart cannot compete successfully in their overseas bids because of the punitive provisions that are being made and premiums that are demanded as against those of their competitors, we are talking about jobs. I therefore hope that the Committee will consider the matter seriously. It is not an ideological or party matter but a question of the most effective way of supporting our export business, helping the balance of payments and maintaining jobs in British industry.

Lord Desai

Perhaps I may say a few words in support of the amendment moved by my noble friend Lord Williams. The problem relates to the concept of the level playing field. We might think that the world should ideally be such as to allow everyone to compete on equal terms and that we shall ourselves impose those rules, but we may be levelling our part of the field and leaving everyone else in a far superior position. That is what the amendment deals with. We should not level our part of the field until everyone else has levelled theirs. There are a variety of ways in which governments have actively encouraged exports by either hidden or open subsidies. We must grasp that nettle. If our industries are to succeed in the single market and elsewhere, we shall have to be watchful that we do not handicap them vis-à-vis what other industries in other countries obtain from their governments. There should be a lack of handicap for our exporters.

Viscount Weir

I must start by declaring my interest as an exporter. As such, I do not think that the Committee will be surprised that I find myself greatly in sympathy with the amendment, even if I perhaps have one or two small doubts about the wording.

The problem is that whenever the issue of British export premiums being higher than those charged by other countries is raised—that point has been made quite regularly, as we all know—we almost always receive the same answer from the Government; namely, that ECGD has lost so much money that it is necessary to raise the level of premiums that it charges exporters. I do not think that that is a very fair answer.

I am afraid that not many people are aware of our relative position as a country concerning our exposure on export credit. I think it will be found from our Government's export credit book that we have the highest exposure of any exporting country to the best and most creditworthy countries and we also have something like half the exposure to the 10 worst-paying countries which other major exporters have. That is something which the Government should most certainly take account of. Therefore I do not think it is good enough for them to hide behind the excuse, "We have lost money". Certainly, we have lost money. However, in relative terms, we are much better placed than our competitors, and I should be very happy today to hear some recognition of that.

4.15 p.m.

Lord Fraser of Carmyllie

Amendments Nos. 4, 16 and 19 make specific reference to export credit insurers within other member states of the European Community. The noble Lord, as is entirely his right, has indicated that he wishes to have a separate debate on Amendment No. 11 but I think he will appreciate that to some extent the issues we are considering under Amendments Nos. 4, 16 and 19 cover the point, which I immediately accept is very important.

In principle, I sympathise with the concern implicit in these amendments that United Kingdom exporters should have access to ECGD facilities which are competitive with those available to their foreign competitors from other official export credit agencies. As I indicated and now repeat, we would wish to provide a stable and viable framework of ECGD support for projected exports.

The Government have also indicated a readiness to provide reinsurance facilities to the privatised insurance services to ensure that there is no reduction in the support as a direct result of the privatisation contained within this Bill. While it has not been specifically raised during this debate, if there remains an underlying concern that what is intended here is to move on to what has been described as the "zero option", I remind the Committee of what was said by the then Secretary of State for Trade and Industry Mr. Ridley on 18th December 1989: In relation to ECGD's Project Group, the Government have decided that export credit and financing support should continue to be provided". The problem with these amendments—and one understands exactly what concerns they are intended to meet—is that they would require ECGD to provide cover for any business which another agency is willing to cover and at no higher premium charge, irrespective of ECGD's own assessment of the acceptability of the risks or of the premium to be charged.

While I appreciate the raw nerve that has been exposed among our exporters at the moment, it has never been government policy—and I would stress this —under any administration that ECGD should match the premium rates charged by other agencies or that it should be open for cover on individual importing countries on the same terms and to the same extent as other agencies. To a greater or lesser extent, there have always been differences in the premium rates charged by official agencies. For instance, the German system in the past has been one of flat rate charges, not differentiated by market. The system employed for many years by Eximbank of the United States was also very different.

There are also practical difficulties. In the circumstances of individual transactions it would be virtually impossible to establish, let alone compare, the terms and conditions upon which cover has been made available by other agencies. The reality is that there will always be differences in the competing commercial and financial packages on offer to the buyer. They will each have their own strengths and weaknesses. Obviously, it would be inappropriate to require that the United Kingdom's bid should always be at least as good in respect of every element as the other bids. Furthermore, the terms and conditions of cover must be expected to reflect the composition of the overall risk portfolio of the individual agency, as well as its financial position.

Is the noble Lord saying that the Official Opposition are prepared to match any terms and conditions offered by any of the other official export credit agencies, even if some of those countries may have a special relationship with former dependencies and offer special arrangements? He has put down a number of serious amendments. I must therefore ask him to indicate to what extent he feels it appropriate that, were his party to be in government, the taxpayer should pick up the bill for any deficit that follows.

Obviously, the Government are fully committed to giving ECGD support for worthwhile exports. Worthwhile exports are those which offer a reasonable prospect of being paid for. ECGD must be free to judge that prospect and to set a premium rate which, recognising that its judgment will sometimes be wrong and that claims will be paid, provides reasonable confidence that the scheme overall will break even. As I indicated, this objective, quite properly, has been laid upon it by successive governments.

However, it is not only a matter of an approach of national consistency by successive governments: GATT also demands it. Obviously, it would be inconsistent with those demands to require it to suspend its judgment and allow others to make important decisions on its behalf. Within this constraint, the range and quality of the facilities available from ECGD remain in many respects the envy of exporters in other countries. If I may single out one form of support as deserving special mention, it is the Fixed Rate Export Finance Scheme through which ECGD ensures that United Kingdom banks make finance available in support of export contracts involving credit terms of two years or more at the minimum fixed rates specified in the international consensus.

This means that United Kingdom exporters have access to finance at interest rates which are at least as attractive as, and in many instances more attractive than, those available to their foreign competitors. Maintaining United Kingdom competitiveness in this way continues to require very substantial public expenditure cost. In the last financial year, the value to exporters was something like £400 million, a not inconsiderable sum.

My noble friend Lord Weir cogently indicated his concerns about the overall arrangements we have in place, Oven the nature of his business, for medium to long-term cover. At the risk of incurring some wrath from htm, I should like to return to several points I made at Second Reading. The fact is that during the last decade ECGD had to pay claims on project business equal to something like eight times its premier income. So it was not just a matter of trying to adjust some small deficit. There was a very considerable imbalance between what was coming in and what was being paid out. Let me stress again that present premium rates are not being put up to recoup past losses. The PMS system is essentially a forward-looking one. I should also like to stress that accountt has been taken of the premium rates of other export credit agencies and of the competitive position of British exporters. Had that not been the case, in some circumstances premium rates would have been even higher. In this context it is worth emphasising that there have been reductions in premium rates for better risk business and indeed for some risks in developing countries. That should be of assistance to United Kingdom exporters.

The noble Lord, Lord Taylor, and my noble friend Lord Weir were concerned that this matter had to be looked at in a context wider than just the UK's position. As always, there is a concern that as far as possible we should have a level playing field. Part of the approach of the United Kingdom is to persuade other countries to eliminate subsidies from their premium rates, and that campaign is making good progress. That issue has a high profile. For example, it was referred to specifically in the communiqué following the recent OECD ministerial meeting.

In moving his amendment the noble Lord also covered Amendments Nos. 16 and 19. While I understand very clearly what he is driving at in Amendment No. 4—though I have indicated where I believe major difficulties lie in putting such wording into a statute it—seems to me that the proposal to insert Amendments Nos. 16 and 19 into Clause 3 is based upon a mistaken belief that in some way the clause provides statutory authority for the portfolio management system. Clause 3 is intended to provide ECGD with the means to mount a fully-fledged internal Treasury management operation in order to administer, cost effectively, the assets and liabilities arising on guarantees which have already been issued and where export contracts have already been won. These changes do not impact directly on exporters. For example, they would not have any bearing on decisions about the acceptability of the financial risks posed by a prospective export contract. That is the quite separate job of PMS.

The effect of Amendments Nos. 16 and 19 is that the Secretary of State will not only have to ensure that his financial management arrangements are on a par with those of other EC export credit agencies but also that the difference between the arrangements does not disadvantage the individual UK exporter vis-à-vis his overseas competitors. Quite how he is expected to make those two assessments seems to be a difficult question.

I have taken some time to explain to the Committee the Government's position on this important amendment and I hope, therefore, that with that explanation the noble Lord will withdraw it.

Lord Taylor of Gryfe

The noble Lord referred to the fact that negotiations were proceeding and that the Government were encouraged by the progress being made to achieve a consensus in this matter. The simple question posed by the amendment is whether it would be wise to postpone implementation until consensus has been achieved. Is there any reason why we should be taking the lead in this field and placing our exporters at a disadvantage?

Lord Prior

I am afraid that my noble and learned friend's reply raises a few questions in my mind. Is the figure of £400 million really a loss? Is nothing going to come back? Is it not just the case that it will take a little while to get back these payments?

Do we know how much other EC countries have been losing? Have they been losing less or more than the UK? I believe that in this context the word "losing" should be put in inverted commas, because from my experience other countries manage these affairs no better than we do.

Lastly, I can understand the reluctance of the Treasury to go along with the amendment while our interest rates (because of the economic position) are that much higher than those of our competitors. But under the European monetary system there has to be a convergence of rates within a reasonable period of time—at least that is what we are told. I believe that could come about. Is there any real reason why in the long term our interest rates—and therefore our charges in respect of export credit guarantees —should be higher than those of any other country? As my noble friend Lord Weir pointed out, in many cases our rates are already at least 1.5 per cent. to 2 per cent. higher.

I hope that my noble and learned friend will not rest his views on the extraordinary and naive argument that we are trying to get everyone else to follow our example. If he knows anything about the export business at all he will appreciate that the French, Germans and Italians have no intention of putting their industries at a disadvantage simply in order to fall into line with us. That is not the real world, and that argument makes exporters in this country boil over. It simply is not true. We have to get these messages through to a government who say they want to help exporters but on the whole do very little in that respect.

Lord Wade of Chorlton

When my noble friend replies perhaps he will also enlarge on the point made by the noble Lord, Lord Taylor, about the directives that are to be brought in. Surely, under the legislation within the EC we are bound to have equality of charges to industry. If that comes about how will it relate to the Bill? The point that my noble friend Lord Prior just made is that other countries in Europe are not going to give up any advantage they feel they may have. At the end of the day we may have a rate imposed upon us. If so, how will that affect the Bill?

Lord Trefgarne

I very much welcome what my noble and learned friend has been able to say about the efforts made by the Government to reach a wider international consensus on this matter. Nonetheless, I share some of the concerns expressed by my noble friend Lord Prior and others. We should not involve ourselves in what has been called "unilateral disarmament" ahead of international agreement. As indicated just now by one or two noble Lords (from sedentary positions) the fact is that very few other countries are leading the charge. Most of them seem to be waiting for the United Kingdom to take the lead so that they can follow with a good deal less initial difficulty than we may be experiencing. My noble and learned friend needs to give a rather fuller reassurance about the position of United Kingdom exporters in the international context.

Lord Ezra

Perhaps the noble and learned Lord would care to elucidate one of the points made in his comments. He prefaced his remarks by saying that he had a great deal of sympathy for the intention behind the amendment. However, he went on to say that there could be serious technical difficulties in trying to match different conditions imposed at different times by other countries. But the wording of the amendment does not ask that to be done.

The reason I support the amendment is that it is couched in general terms. It asks the Government to, ensure that charges made for such arrangements are in general not materially higher than charges made for equivalent arrangements in other countries in the European Community". In other words, the amendment adopts a broad-brush approach and gives an assurance that the aim is to be generally but not specifically in line on every transaction.

The Earl of Limerick

I yield to no one in the acknowledgement of the problems facing our exporters in a highly competitive world, and I yield to no one in the belief that the Government should do whatever they can to encourage and support them. In looking at the amendment and what it sets out to achieve I support the arguments of my noble and learned friend on the Front Bench. I say that with some reluctance for the following reasons. One can try to achieve a level playing field in one of two ways. Scorn has been poured on the idea that others will play the game more fairly than we see ourselves doing. One has to look at costs.

It has been pointed out directly that premiums charged by the ECGD in certain circumstances may be twice or even more than twice those charged by Coface. But we know very well that the cost to the French taxpayer for supporting French exports is a good deal higher than the corresponding cost to the United Kingdom taxpayer. It is a matter of policy. I would not take a line about how far governments should go. I merely say that it is something which I find difficult to conceive being written into a statutory framework; namely, that we should be required to match subsidy for subsidy. If there is one country in the EC that is providing cover for a country which for very good reasons we think should not be supported by insurance cover, there should be a duty on our export credit mechanism to provide some form of matching cover.

Incidentally, it was suggested that matching had something to do with insurance premiums. In my experience that has never been the case. The arguments are about matching and not about insurance premiums. They are specifically about down payments, the term of years to which a credit is extended and the extent to which local or non-UK content of the contract will be financed. These are matters of commercial judgment.

I have to conclude that, desirable as it would be to have this obligation understood as on the face of an Act of Parliament, it is not something that is capable of being enshrined in statutory language. It is a duty on which we should continue to insist. It is a matter of duty for a government to provide the support to which our exporters are entitled, but not by statutory means.

4.30 p.m.

Lord Fraser of Carmyllie

I take the risk of going on at some length but there have been a number of questions put to me which I should answer. In reply to my noble friend Lord Prior, I hope that I did not indicate a degree of naivety about the difficulty of trying to ensure immediate or complete agreement with other countries which are our competitors in exporting to third countries. Nevertheless, it seems to me to be right that the United Kingdom should lead the campaign to try to secure that subsidies are taken out of the arrangements which those other countries have in place. Although I have indicated that that has not yet been in any sense wholly successful, it would be wrong to assume that other countries are not similarly concerned by what confronts them in terms of the differences between claims paid out and premium income coming in. I understand that recently French premium rates have already been increased for many countries.

The noble Earl, Lord Limerick, came back to a fundamental point; namely, that hitherto there has appeared to be a consensus within this country to the effect that this is an arrangement which, while government have been behind it, is not one in terms of which a marked and considerable burden should be left for the taxpayer to shoulder. Regrettably, as I indicated, during the 1980s the amount for claims paid out on project business was equal to eight times the premium income coming in. Sooner or later that deficit would have to be made up.

I entirely accept the observation of the noble Lord, Lord Prior that at the moment it is not possible to know exactly the true extent of the deficit. All that can be said is that the ECGD has incurred very heavy deficits on project business and is currently borrowing something like £3.5 billion from the Exchequer. I accept that some proportion of the sum may be recovered. Nevertheless it is quite clear that there is a very considerable deficit.

The figure of £400 million to which I referred was not a deficit. It was an item of public expenditure which I indicated was there to provide support to exporters by allowing for a fixed rate of interest. That is a rather different matter.

Lord Taylor of Gryfe

Perhaps I may make an observation at this point. The £400 million is two years' short—term money at privileged rates. It is not a loss at all. It is not a burden on the Exchequer. It is a loan on which one would expect the interest rate to be subsidised—but it is a loan and not a loss. Is that not true?

Lord Fraser of Carmyllie

With respect to the noble Lord, that is a bill that the public purse will have to pick up. In the past year it was £400 million. The noble Lord will have to accept, given the payments that were laid out and the premium income that came in, that there will be a loss. I accept that it will be impossible immediately to quantify it. Certainly I do not seek to indicate to him that it will be £3.5 billion but he must accept that there will be a very real deficit to be met one way or the other.

If we are to make a change in the arrangement, it should be spelt out very carefully. Naturally, we are anxiou that our exporters, who provide such invaluable jobs, should be given every possible support. But if we are to do it by putting a considerable load on the taxpayer, it seems to me that that ought to be spelt out very clearly indeed.

Lord Jay

If hope that the noble and learned Lord can bear to answer just one more question. I understood that one of his main arguments was that it would be wrong to impose an obligation on the ECGD to match the facilities offered by competitors in every conceivable case. Surely it is desirable that the Government should empower the ECGD with the facilities to do that whenever the ECGD judged it desirable; it should not be compelled to do so against its will. Will he say whether it is the intention of the Government and the Bill as it stands that the ECGD should be empowered to take such action whenever it judges it wise to do so?

Lord Fraser of Carmyllie

Obviously one is anxious that the ECGD should feel that it can act to balance its liabilities and the premiums. I think that it would be desirable and everyone would be very pleased if it could set the premiums as low as possible because that would provide the encouragement to exporters that we all want to give. It is not in any sense being dictated to. It merely seems right and desirable that it should balance its books. It may take a long time to do that job. That has been the policy of successive governments. All I suggest is that if we are to move significantly away from that course, the cost should be clearly appreciated and spelt out.

Perhaps I may return to a point raised by the noble Lord, Lord Ezra. I accept that the amendment is framed so as to state in general terms that the charges should be similar to those provided for by other competitors. My argument comes to this: I understand how in a sense that might be done, but I do not believe that one could realistically do it other than by examining the individual detail of a large number of contracts and risks to see exactly how it all applied. I suspect that simply to look at the average premium rate charged by individual agencies of our foreign competitors would be largely meaningless when trying to determine what we ought to be charging as a premium rate for a particular contract going to a specific third country.

Lord Trefgarne

I hope that my noble friend will forgive me for intervening again. I am easily persuaded that the amendment that we are asked to agree suffers from a number of shortcomings and I certainly shall not support it. However, I believe that several Members of the Committee would be anxious to have from my noble and learned friend a greater degree of reassurance about government policy toward the raising of premium rates ahead of international agreement. I very much welcome the prospect of international agreement on this matter but it has not yet been achieved. In the meantime I hope that the Government will have regard to the premiums that they are asking our exporters to pay in the context of those being paid by their competitors.

Lord Fraser of Carmyllie

I must risk a last intervention as I have been asked a direct question. While we wish the international campaign to succeed, as I indicated—I take the risk of repeating it—there has been understanding and an acknowledgment of the difficulty. Although exporters have grumbled fiercely over the increases in premium rates that they have experienced recently, those increases have been tempered to take account of rates currently charged by other agencies. Although the increases were considered enormous, if that had not occurred, they would have been greater. That is one indication of the attitude that the Government and the ECGD have taken over this difficulty.

I conclude on a slightly more optimistic note. In the balance of premium rates that have been fixed, there have been reductions for better risk business and for some risks in developing countries. The overall reassessment is that what has been done has brought significant increases and significant benefits.

Lord Williams of Elvel

We must be grateful to the noble and learned Lord, first, for his patience in answering questions; and, secondly, for his expressed sympathy for the objective of the amendment.

Perhaps I may clear up some points that the noble and learned Lord made. I have not drafted an amendment to take account of risk. I have drafted an amendment to take account of charges—that is, premium for risks undertaken. Under no circumstances can I give any comfort to the noble and learned Lord if he asks for assurance from my party that we would ask the ECGD to go on risk on every occasion. That is not the point of the amendment.

The amendment addresses premium rates. It is up to the ECGD to decide whether it wishes to go on cover on any particular risk. We are not talking about risk—that is properly referred to under other circumstances that we shall come to —but about charges. The problem of the ECGD "deficit" is twofold. First, as many noble Lords have pointed out, we do not know what the deficit consists of. The ECGD has had to make provisions. As I pointed out at Second Reading, there is a considerable difference between making provisions which may come back in the course of time and may be brought back into account, and writing off. As the noble and learned Lord has been honest enough to admit, we do not know how much of the £3.5 billion will have to be written off and how much will come back.

Therefore it seems odd to base an argument about higher premiums in the United Kingdom on a deficit that may come back in the course of time. Whether or not it will, we do not know. It seems odd too to continue with this song that we shall get the other Europeans into line with us; we are the only ones in step. We all know the problems. There will be problems. We encourage the effort, but it will be a long, hard slog. There is no point in disguising that. I hope that the noble and learned Lord and I can agree on both those points.

The general provision that the ECGD should "in the course of time"—a great Morrisonian expression which takes one year or another with one decade or another—break even is certainly right. It is an insurance organisation like any other. Over the course of time it should break even. However, as with any insurance organisation, the real hit comes when there is a loss, not when there is a shortfall on premiums. The fact that there may be higher or lower premiums in the context of any insurance company, Lloyd's or the ECGD, does not matter. An insurance company is hit when there is a loss. Premiums should not be adjusted simply for the fact that there has been a loss. By definition, losses have to be written off at some stage.

If the Government feel that the losses sustained by ECGD in the early 1980s are not recoverable—in other words, that of that £3.5 billion there is a proportion, at present indeterminable, which is not recoverable—presumably they will say to Parliament, to the House of Commons, "It is not recoverable. Therefore, we as a Government will have to write it off". That would be in accordance with the commercial principles of insurance companies.

I was grateful to the noble Lord, Lord Ezra—indeed the noble and learned Lord recognised the point he made—for saying that the amendment is not much more than a statement of principle. We use such expressions as "in general", "not materially higher", or "made for equivalent arrangements". We do not seek to specify that premium rates in the United Kingdom for India should be exactly the same for a 10 year project as they are in France or Germany. That is not the point. It is to ensure that the Government have a general commitment to keep premium rates materially in line for equivalent arrangements with other members of the Community.

I believe in the course of time, as one noble Lord pointed out, that will happen. However, we ought to lay an obligation on the Secretary of State at least to move rather faster in that direction than he is able to do at present. I do not say that the Secretary of State tomorrow—if the Bill receives Royal Assent—shall undertake an enormous computer calculation of all risks and all premiums charged for that risk by all export credit agencies within the Community. I agree with the noble and learned Lord that that would be an enormous task. Nevertheless, there is sufficient information from our exporters—I have given some of it—to indicate that at present we are materially out of line with other members of the Community and other export credit agencies in those countries. I believe that such a point of principle should be written into the Bill.

If the noble and learned Lord tells me that the drafting of my amendment is defective, I agree with him. I am not here to draft amendments that can go straight into the statute. If he were to say that he sympathises deeply with the thrust of the amendment, and that if I took it away he might reconsider his position, that would make all noble Lords in Committee happy. There will be much pressure on the noble and learned Lord from all sides—and I believe rightly—because we cannot continue to disadvantage our exporters against other European exporters as we do at present. I hope that the noble and learned Lord will reassure me that he will reconsider the matter.

Lord Fraser of Carmyllie

Even if the noble Lord were to take the amendment away, or if parliamentary counsel were to consider it, I cannot see that much is to be achieved by such a broad statement without teeth, whether or not it is to be a justifiable matter. If we make the provision so vague and lacking in substance, none of the British exporters whom we seek to encourage would derive much benefit from it. It would not be a matter that could be brought before the courts. However, if it were in a form that could be brought before the courts, it would cause intolerable problems for the Secretary of State to determine by going round all the other member states of the European Community. Although the tests are "in general", "not materially higher" and so on, I do not see how he can sensibly discharge such a duty. I therefore cannot say to the noble Lord that the amendment can be sensibly cured by careful drafting.

Lord Williams of Elvel

I understand that we shall receive no more than sympathy from the noble and learned Lord. In the circumstances, I believe that it is for the Committee to declare itself on the matter. I commend the amendment.

4.49 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 77; Not-Contents, 123.

Division No. 2
CONTENTS
Allen of Abbeydale, L.	Buckmaster, V.
Ampthill, L.	Callaghan of Cardiff, L.
Aylestone, L.	Carter, L.
Beaumont of Whitley, L.	Clinton-Davis, L.
Blackstone, B.	Cocks of Hartcliffe, L.
Blease, L.	David, B.
Boston of Faversham, L.	Desai, L.
Brooks of Tremorfa, L.	Dormand of Easington, L.
Bruce of Donington, L.	Ennals, L.

Erroll, E.	Mulley, L.
Ewart-Biggs, B.	Nicol, B.
Ezra, L.	Ogmore, L.
Falkland, V.	Peston, L.
Fisher of Rednal, B.	Phillips, B.
Gallacher, L. [Teller.]	Pitt of Hampstead, L.
Galpern, L.	Prys-Davies, L.
Gladwyn, L.	Rea, L.
Graham of Edmonton, L.	Richard, L.
Grey, E.	Ritchie of Dundee, L.
Grimond, L.	Rochester, L.
Hayter, L.	Russell, E.
Hilton of Eggardon, B.	Sefton of Garston, L.
Hollis of Heigham, B.	Serota, B.
Houghton of Sowerby, L.	Shackleton, L.
Hughes, L.	Stallard, L.
Jay, L.	Stedman, B.
Jenkins of Hillhead, L.	Stoddart of Swindon, L.
John-Mackie, L.	Taylor of Blackburn, L.
Kearton, L.	Taylor of Gryfe, L.
Kilbracken, L.	Underhill, L.
Kinloss, Ly.	Varley, L.
Kirkhill, L.	Wallace of Coslany, L.
Listowel, E.	Whaddon, L.
Lloyd of Hampstead, L.	White, B.
Lockwood, B.	Williams of Elvel, L.
Longford, E.	Wilson of Langside, L.
Mason of Barnsley, L.	Winchilsea and Nottingham, E.
Molloy, L.	Winstanley, L.
Morris of Castle Morris, L. [Teller.]

NOT-CONTENTS
Abinger, L.	Fraser of Carmyllie, L.
Ailesbury, M.	Fraser of Kilmorack, L.
Aldington, L.	Gainford, L.
Alexander of Tunis, E.	Greenway, L.
Alexander of Weedon, L.	Grimston of Westbury, L.
Alport, L.	Hailsham of Saint Marylebone, L.
Arran, E.
Astor, V.	Halsbury, E.
Auckland, L.	Hardinge, V.
Belhaven and Stenton, L.	Harmar-Nicholls, L.
Beloff, L.	Haslam, L.
Bessborough, E.	Henley, L.
Blatch, B.	Hesketh, L. [Teller.]
Blyth, L.	Hives, L.
Boardman, L.	Holderness, L.
Borthwick, L.	Hood, V.
Brabazon of Tara, L.	Hooper, B.
Brentford, V.	Howe, E.
Brigstocke, B.	Hunter of Newington, L.
Brookeborough, V.	Hylton-Foster, B.
Brougham and Vaux, L.	Johnston of Rockport, L.
Buckinghamshire, E.	Joseph, L.
Caithness, E.	Kitchener, E.
Campbell of Alloway, L.	Lauderdale, E.
Campbell of Croy, L.	Lawrence, L.
Carnegy of Lour, B.	Limerick, E.
Carnock, L.	Liverpool, E.
Cavendish of Furness, L.	Lyell, L.
Cawley, L.	Mancroft, L.
Clanwilliam, E.	Margadale, L.
Cochrane of Cults, L.	Marlesford, L.
Constantine of Stanmore, L.	Merrivale, L.
Cottesloe, L.	Mersey, V.
Cox, B.	Middleton, L.
Craigavon, V.	Milverton, L.
Craigmyle, L.	Monk Bretton, L.
Cullen of Ashbourne, L.	Mottistone, L.
Cumberlege, B.	Mountevans, L.
Davidson, V. [Teller.]	Mountgarret, V.
Donegall, M.	Mowbray and Stourton, L.
Dundonald, E.	Moyne, L.
Dunrossil, V.	Munster, E.
Eccles of Moulton, B.	Nelson, E.
Ellenborough, L.	Newall, L.
Elliott of Morpeth, L.	Norfolk, D.
Fanshawe of Richmond, L.	Northbourne, L.
Flather, B.	Orkney, E.

Orr-Ewing, L.	Strathclyde, L.
Park of Monmouth, B.	Strathcona and Mount Royal, L.
Pender, L.
Peyton of Yeovil, L.	Strathmore and Kinghorne, E.
Platt of Writtle, B.	Sudeley, L.
Quinton, L.	Thomas of Gwydir, L.
Rankeillour, L.	Trefgarne, L.
Reay, L.	Trumpington, B.
Renwick, L.	Ullswater, V.
Rodney, L.	Vaux of Harrowden, L.
Savile, L.	Wade of Chorlton, L.
Shannon, E.	Westbury, L.
Sharples, B.	Wharton, B.
Skelmersdale, L.	Whitelaw, V.
Strange, B.	Wynford, L.
Strathcarron, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.57 p.m.

Lord Williams of Elvel moved Amendment No. 5:

Page 1, line 26, at end insert: ("( ) Such facilities or assistance shall be made available through a regional network which assures an Export Credits Guarantee Department office in each standard planning region of the United Kingdom".).

The noble Lord said: Currently the ECGD has nine regional offices. As I understand it, they are part of the Insurance Services Group and will be transferred to the private sector. That will leave only the London based headquarters to handle the medium and long-term business.

I understand that the market research, which produced support from exporters in favour of retaining the regional network, concentrated mostly on the short term business destined for privatisation. We take the view that exporters engaged on medium and long-term contracts will also welcome some sort of regional presence of ECGD.

In another place the Minister argued that such business could be handled more effectively from a central office and that a regional network would be an unnecessary financial burden. However, I do not believe that he ruled out the possibility that such a network could be advantageous for United Kingdom exporters.

The problem, our researches show, is that a number of staff of ISG currently employed on short-term business and employed in the regional offices will not wish to transfer to the privatised company. They want to remain in the public sector. In fact, a recent analysis conducted by the trade unions showed that a large majority of people do not wish to go into the privatised company. Therefore, it would be sensible to maintain a regional network for ECGD which could employ the people who wish to remain. I beg to move.

5 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

ECGD has a network of nine regional offices. Those centres are the main day-to-day contact points for customers of the insurance services business. As the noble Lord said, it is intended that those offices will be transferred as part of the assets of the Insurance Services Group to the new company. Thus, customers of the new company should continue to enjoy the skills and professional knowledge of the staff in those offices, although their retention is ultimately a decision for the new owners.

ECGD's project business involves very complex transactions which need special support facilities. That means that most UK manufacturers approach ECGD headquarters direct. The regional offices have no role in that business. This arrangement has been found to be the most effective system given the relatively small number of cases, detailed negotiations and intricate documentation required together with the need for exporters to consult with their bankers in London who will be providing further expertise and loan finance.

The DTI already provides a comprehensive service to exporters through its own regional network. There is thus no need for ECGD to incur extra expenditure by opening further new offices. If it were to do so, the costs would either have to be met by the taxpayer or be added to ECGD's costs which in turn would have to be reflected in the premium it charges its customers. The argument that one must keep a regional network going merely because some members of staff so wish it, is not necessarily a valid point nor one which the noble Lord will wish to pursue. The proposals in the amendment are unnecessary and expensive. I hope therefore that the noble Lord will withdraw the amendment.

Lord Trefgarne

The suggestion that an exporter would wish to wander into a High Street facility for £25 million worth of cover over 10 years is not sensible. I do not believe that the noble Lord's amendment has much merit and I welcome the Government's opposition to it.

Lord Williams of Elvel

I am grateful to the noble Lord, Lord Henley, for his reply. I am bound to say that I am uncertain as to how far smaller businesses —not the businesses referred to by the noble Lord, Lord Trefgarne—would benefit from such a regional network. I do not know. I do not believe that smaller exporters, which are the ones we are trying to encourage, necessarily want to travel up to London.

I accept that the DTI has regional offices. I am not convinced that they are properly or efficiently organised by the Ministers concerned. The question of whether and how far regional offices cater for medium and long term finance is in doubt. For that reason, I shall consider what the noble Lord said and find the answer for myself. I shall perhaps come back at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 6:

Page 1, line 26, at end insert: ("( ) Arrangements under this section shall continue to be made on behalf of the Secretary of State by the Export Credits Guarantee Department and no scheme shall come into force under Part H of this Act unless and until the Secretary of State has secured from the proposed purchaser of any shares or securities under section 10 of this Act an irrevocable undertaking that at no time in the future would that purchaser operate in competition in any manner whatsoever with the Export Credits Guarantee Department.").

The noble Lord said: My Lords, Amendment No. 6, in the name of myself and my noble friend Lord Clinton—Davis, is relatively simple. It is obvious that if privatised ISG is allowed to compete with ECGD it will only compete in what are known as safe markets; that is to say, essentially for ECGD business. If it did that it may take the cream of ECGD business and that would create exactly the same problems as the noble and learned Lord raised a few moments ago. Therefore it is essential to keep ECGD viable in its own right and for that reason it should hold the monopoly. I beg to move.

Lord Fraser of Carmyllie

After privatisation, ECGD's main activity will be to provide insurance and support to exporters and banks in respect of project exports. It is not this Government's policy to stand in the way of any company which wishes to offer such facilities to UK exporters and banks. Nor is it this Government's wish to enshrine in statute that ECGD should be a monopoly supplier of any products. I cannot see any advantage in restricting competition in that way.

Our approach is that UK exporters should be offered the widest possible choice of export credit insurance to meet their needs. Indeed, it is generally recognised that the fierce competition between Insurance Services and its private sector competitors has resulted in both seeking to improve the quality of their service to customers to the point where Insurance Services is now ready to take its place in the private sector. While the immediate prospect of a similar competitive situation developing in the market for medium and long term export credit insurance is more remote, there is every reason for the Government to encourage, rather than inhibit, this. For that reason, I cannot accept the amendment.

Lord Williams of Elvel

That is the reply I expected from the noble and learned Lord. It comes as no surprise whatever; the words were almost predictable. I hope that the noble and learned Lord recognises that the problem is that ECGD may become an insurer of last resort as well as a lender of last resort. That would place the whole question of ECGD breaking even over the years in enormous difficulty. However, if the Government are determined to pursue that course, I can do nothing to stop them. I simply warn them that that may well become the case. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 7:

Page 1, line 26, at end insert: ("(4A) The Secretary of State may, make arrangements for giving such guarantees to or for the benefit of persons carrying out business in the United Kingdom as appear to him to be expedient in the national interest. (4B) The arrangements to which subsection (4A) applies shall be contained in an order which shall be subject to approval by a resolution of each House of Parliament.").

The noble Lord said: Amendment No. 7, tabled in my name and that of my noble friend Lord Clinton—Davis, is a simple amendment in content. It is designed to give the Secretary of State the opportunity to cover contracts which may appear to be expedient in the national interest. I believe I am right in saying that that is a provision in the Export Guarantees and Overseas Investment Act 1978. At the time it was thought that ECGD may wish to cover projects for national interest reasons rather than simply for commercial reasons.

Under the portfolio management system, ECGD will no longer support an export contract unless it is reasonably confident that the contract will not adversely affect the overall risk portfolio. That may be prudent but it could well put UK exporters at a disadvantage competitively, particularly with those who subsidise their own industries.

As I say, it is a fairly simple amendment. I beg to move.

Lord Fraser of Carmyllie

I recognise that anxiety exists to ensure that there is continued statutory authority for the giving of support on grounds other than purely commercial ones. Such anxiety is however unnecessary as Clause 1 already permits the widest possible use of the Secretary of State's powers. Provided that the arrangements made fulfil one of the two fundamental purposes defined in Clause 1—that is, that arrangements should be with a view either to facilitating what the layman would call export contracts or to rendering economic assistance overseas—the Secretary of State has full powers to give an guarantees and provide any financial facilities or assistance that he thinks fit, regardless of whether the arrangements are commercially justifiable.

The distinction between "commercial" and "national interest" business which is enshrined in Sections 1 and 2 respectively of ECGD's current enabling legislation and which this amendment seeks to reproduce in this legislation has become less relevant in recent years. After privatisation it will be even less so, and perhaps I can explain it thus. Previously, the bulk of ECGD's business was transacted under Section 1 commercial powers. Only a relatively small number of large complex transactions in higher risk markets called upon the national interest powers in Section 2. That balance has changed in recent years, and the huge growth in project business in developing countries has made national interest business the larger part of ECGD activities.

After privatisation, much of what is now classified as commercial (Section 1) business will be transferred to the new company. By implication, that will leave the continuing ECGD with a portfolio of risks which are "uncommercial" though the degree of riskiness will vary considerably between individual guarantees. Nevertheless, the portfolio will be managed as a whole for accounting purposes. Given the degree of risk which it presents it has to be recognised that the primary justification for the total operation is the national interest.

National interest considerations will feature strongly in deciding whether and on what terms cover can be given for individual transactions. ECGD's portfolio management system has been developed to provide precisely the information framework which will enable Ministers to take due account of the weight of the national interest case. Therefore, in the Government's view, it would serve no useful purpose to continue to separate the business into two categories for statutory or accounting purposes.

I hope that those who were concerned in an earlier debate that we were not taking account of the national interest will read—if they are not here today—what I have said and appreciate that the national interest stands very much at the centre of ECGD business.

The Earl of Limerick

I was happy to hear my noble and learned friend say that the powers under Clause 1 are so wide-ranging. Is he able to confirm that, if my memory serves me correctly, under Section 2 of the former Act, occasionally it was necessary to look to the national interest to support a course of action that the ECGD might not otherwise have been able to take under its commercial remit in order to break even over the years, taking one thing with another?

When looking at the project business, my understanding is that we are talking about both the long and the short-term aspects of the matter when considering this clause and the proposed amendment. Is my noble friend able to say that there are no circumstances under which a power, were it carried forward from the old Act on the lines of the amendment, might be required in order to override guidelines that had been given for export credit?

Lord Ezra

I am slightly puzzled by the reasoning of the noble and learned Lord. As I understand it, he said that the national interest is likely to play an even larger part in the work of the remaining ECGD and therefore, it is not necessary even to mention it though it was specified in earlier legislation. However, if the national interest is to play a larger part, why should it not be mentioned in the proposed new legislation?

Lord Fraser of Carmyllie

My noble friend Lord Limerick is correct in saying that under the old Section 2 regard had to be given to a national interest consideration rather than a commercial one. I sought to explain that once privatisation has been achieved, whatever continuing ECGD business there is, it will be in relation to project business. There will be a portfolio of risks which are, generally speaking, uncommercial. The important point is to appreciate that the powers which are now provided for under Clause 1 are sufficiently wide to cover what might previously have been considered necessary to be separated out into commercial risks and the national interest. Because the totality of the powers provided for in Clause 1 are of such a width, I could have explained shortly to the noble Lord that his amendment was unnecessary.

Lord Williams of Elvel

I am grateful to the noble and learned Lord for his explanation. I am sure that I shall understand it when I read it. I accept his short and simple message at the end that the amendment is unnecessary and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

5.15 p.m.

Lord Williams of Elvel moved Amendment No 8:

Page 1, line 26, at end insert: ("( ) Arrangements under this section shall continue to be made on behalf of the Secretary of State by the Export Credits Guarantee Department and no restructuring or reorganisation of that Department resulting from the coming into force of any scheme under Part II of this Act shall be implemented without prior consultation and agreement with the accredited representatives of the Department's employees through their trades unions.").

The noble Lord said: In moving this amendment it may be for the convenience of the Committee if I also speak to Amendment No. 10. Both amendments reflect a concern held by the trade unions that the residual ECGD business will be reorganised after the privatisation of ISG. When such things happen, normally the trade unions are given time to respond to the proposals and are consulted. Generally, we hope that their consent is obtained. The problem at the moment is that the ECGD management in London is unclear how the residual ECGD in Cardiff, if there is to be one, will be handled. The trade unions are extremely worried that there may be a haemorrhage of staff immediately after privatisation.

The trade unions also understand that following the privatisation of ISG, the residual ECGD is to be subjected to yet another review of its operations which, whatever the noble and learned Lord might say, might in the end result in the zero option. Amendment No. 10 will ensure that UK exporters and the trade unions have an opportunity to make their views known. I beg to move.

Lord Fraser of Carmyllie

These two amendments betray an unnecessary concern on the part of noble Lords. It has always been ECGD's practice to consult interested parties when major policy decisions are made. There is no intention on the part of this Government to cease that practice. The officials of the department are in daily contact with the exporting community by virtue of their work. Ministers meet frequently both with representatives of trade and exporting organisations and with senior officials of major UK companies. They receive and respond to written representations from those whose interests they are appointed to serve. Where departmental practice or Civil Service agreements require so, consultation would also include the trade unions through the departmental Whitley Council processes.

In addition to that, the Export Guarantees Advisory Council exists for the purpose of advising the Secretary of State on the application of any of the powers conferred by this statute. Not only are these amendments unnecessary, but they also present some significant difficulties. First, the scope of the amendments would oblige the Secretary of State to consult on any changes affecting the business or its assets. At the most extreme, that may concern fairly trivial and day-to-day matters. While one appreciates that that is not the intention behind the amendment, it would nevertheless impose a duty on the Secretary of State.

Secondly, there are difficulties over what would be the relevant trade and exporting organisations. I appreciate that the noble Lord probably has in mind organisations such as the CBI, BEAMA, and other major British exporters. But that is not what Amendment No. 8 says. There were extensive consultations leading up to the privatisation proposals in the Bill. I hope that the noble Lord and others who are concerned with the matter, will study them and have regard to the assurances that I have given in reply. I hope that he will appreciate that his amendments are not only unnecessary but will create some difficulties.

Lord Williams of Elvel

As I understand it, the staff at the ECGD at Cardiff and in the regional offices which we were discussing a moment ago, will have the choice of whether to stay with the residual ECGD or with the privatised ISG. Is that the understanding of the noble and learned Lord as well? If so, what happens if the ECGD is oversubscribed with staff and the ISG is undersubscribed? How is the staff to be selected to staff the residual ECGD?

Lord Fraser of Carmyllie

The general proposition with which the noble Lord began is correct. Without trying to avoid answering the noble Lord, I understood that this was a matter that was to be the subject of rather more detailed amendments at a later stage. I was proposing to leave the matter until then, if that is satisfactory to the noble Lord.

Lord Williams of Elvel

I am quite happy to leave the matter until then. No doubt we shall have further discussions on the subject. Unless the noble and learned Lord has anything further he wishes to say, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 9:

Page 1, line 26, at end insert: ("( ) The making of arrangements under this section which relate to the provision of guarantees of insurance shall, if their availability is subject to the procedures and principles of the ECGD's Portfolio Management System or similar methodology, also be subject to the following

1. (a) any representations made by persons carrying on business in the United Kingdom to ECGD and/or the Secretary of State,
2. (b) the implications for the United Kingdom's future trade with relevant overseas countries and,
3. (c) the position adopted by ECGD's major competitor export credit agencies in Europe on the provision of similar arrangements,

and the procedures of the said Portfolio Management System shall not take precedence".).

The noble Lord said: This amendment is designed to cover the portfolio management system and its future operation. We on these Benches are somewhat concerned about the operation of the portfolio management system in that it will in future determine on a somewhat mechanistic formula whether or not ECGD will provide medium and long-term insurance cover for UK exports to overseas markets. We are concerned that the statistical exercises—which are no doubt valid—are based essentially on the economic analysis of the export market; and, in our view, on certain occasions tend to overlook the particular importance of some UK traditional markets. That is also accompanied by a suspicion that in the portfolio management system there may be a bias which favours competitors because the risk portfolio in our traditional Commonwealth markets is gradually being either adjusted or run down so as not to overload the whole portfolio. There are of course long-term implications of any withdrawal of ECGD cover for our traditional markets. That is a worry. There are also employment aspects which we shall do well to consider.

I hope the noble and learned Lord will be able to reassure me on all these points. It is of concern to many people how PMS is running at the moment, and how it is proposed to run in the future. The object of this amendment, which I emphasise is purely probing, is to enable the noble and learned Lord to give us a statement on the matter.

Lord Fraser of Carmyllie

Perhaps I may begin by clearing up any misunderstanding which may have arisen that the portfolio management system is receiving statutory authority in the Bill. The linking of PMS and the Bill may in part have been caused by the fact that certain stages in the introduction of PMS, and the related ministerial announcements, have been made at much the same time as the Bill has been proceeding through Parliament. This is however a matter of coincidence. The PMS has been under development for some time and the timing of its introduction was geared solely to the need to complete the development work. There is in fact no question of legislative authority being necessary for the operation of PMS which is, in effect, no more than an internal management tool to assist ECGD in underwriting and establishing premium rates for sovereign risk. PMS simply replaces an older and less sophisticated system which, again, had no basis in statute.

The confusion which this coincidence of timing may have caused has possibly been compounded by the fact that Clause 3 of the Bill refers to "proper financial management" of the ECGD portfolio. As I shall explain later, Clause 3 relates to treasury management operations and does not have any bearing about the acceptability or otherwise of export contracts.

While I understand that the noble Lord has put this down as a probing amendment, it seems to contain something of a misapprehension that the ECGD underwriting system—of which PMS is a vital element—takes no account of wider national interest considerations and that decisions are simply based on financial and statistical aspects. This, I have to say—and I hope it is a matter of reassurance to the noble Lord—is simply not the case. PMS does not take decisions for us. That remains the job of Ministers. We recognise the strong national interest case for supporting project exports. That is why we are committed to provide a stable and viable framework of ECGD support. But we must balance the national interest case against the financial risk, to which I have already reffered, to the taxpayer. To do this properly we need to quantify the financial risk. It is considered that e new sophisticated tool of PMS helps us in that task. The national interest case, on the other hand, is assessed by taking full account of the factors which the noble Lord has listed at paragraphs (a), (b) and (c) of the proposed subsection. Making this assessment is now a formal stage in the consideration whether ECGD should be on cover for the more risky markets. Having made these assessments, it is then for Ministers to decide whether or not the level of the financial risk is justified by the national interest case.

As I have indicated, PMS will ensure that Ministers now have better information about the financial risk. But this will not take precedence. It is simply a matter of getting the balance right. It would seem therefore that the amendment is based on a false assumption, and it would seem inappropriate to place in the statute the specific considerations which Ministers might wish to take into account in assessing the national interest. However, as I have said, the three heads that he indicates are appropriate to be taken into account. With that I entirely agree.

Lord Williams of Elvel

I am most grateful to the noble and learned Lord for that statement. It was an important statement to get on the record. There has been a certain doubt in many people's minds about how the portfolio management system is meant to operate: whether it is mechanistic or whether it is an aid to ministerial judgment. If it is as the Minister says an aid to ministerial judgment, then many of our worries are alleviated. If purely mechanistic, then our worries would have been intensified. This is as far as we can take the matter at the moment. I shall have to read rather carefully what the noble and learned Lord has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 10 not moved.]

Lord Williams of Elvel moved Amendment No. 11:

Page 1, line 26, at end insert: ("( ) The Secretary of State shall ensure that such arrangements are in general no worse in terms of both scope and cost in comparison with those available to persons carrying on business outside the UK.").

The noble Lord said: I recognise that the Committee has to some extent discussed the matter contained in this amendment. The noble and learned Lord was right to draw my attention to that. The amendment was originally in the group with Amendment No. 4, but I thought it useful to have a small and I hope short debate on the matter which to my mind relates to non-Community exporters—that is, specifically OECD exporters outside the Community.

I should like to draw this to the attention of the Committee. The pre-May 1991 United States premium rate was 1.9 per cent. for the business which I quoted earlier on in Amendment No. 4, but the UK was charging a premium rate of 4.79 per cent., and Canada was charging 2.6 per cent. That just serves to show how difficult it is for our exporters to compete in markets where we are competing with American and Canadian exporters.

A point that a number of Members of the Committee made about parity between ourselves and the Community exporters is the stronger when we come to other exporters in other OECD countries who seem to be even more favoured than Community exporters. I beg to move.

Lord Fraser of Carmyllie

As I indicated during the discussion on the previous group of amendments, I acknowledge that the noble Lord is right to separate them. There is a basis on which he does so; the previous three amendments dealt with EC countries and this amendment is of wider application. However, the noble Lord will appreciate that in answering that debate and having to make more than one contribution, the points that were raised on this side of the Chamber and by other Members of the Committee did not restrict themselves simply to EC matters but ranged generally over the difficulties that were encountered.

In the circumstances, it seems to me that I should be doing nothing more than repeating the points that I have already made in our earlier debate. Indeed, the noble Lord has mentioned specifically the United States. I shall make only one point about that. The noble Lord mentioned the figures. I indicated at an earlier point in the debate that the system applied by the Export-Import Bank of the United States in the past has been very different from anything that we have done. That is one of the reasons why, even outwith the European Community, it would be very difficult indeed to try to make the kind of assessment that the noble Lord considers appropriate.

We have considered this matter carefully and fully. Bearing in mind that earlier discussion, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Williams of Elvel

I am most grateful to the noble and learned Lord. I apologise for not realising that the debate on the Community exporter would go wider than the Community. With hindsight, I think I would have accepted that in the grouping. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause I agreed to.

5.30 p.m.

Clause 2 [Insurance in connection with overseas investment]:

Lord Williams of Elvel moved Amendment No. 12: Page 2, line 1, after ("may") insert ("subject to directions that the Export Guarantees Advisory Council may give from time to time, at the request of the Secretary of State".).

The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 17. These are probing amendments. The intention behind them is to confirm the role of the Export Guarantees Advisory Council in advising on overseas investment insurance. We should like to see the council strengthened. I believe that there is some sympathy in government for this idea but it does not seem that the Government are prepared to carry that through into legislation.

The Export Guarantees Advisory Council is an important body and has done extremely valuable work. We believe that it has an enormously important role to play. I very much hope that the Government will encourage the council to continue to play this important role. The role will become more important as we move along into the portfolio management system that the noble and learned Lord has described. I beg to move.

Lord Henley

I begin by offering the Government's thanks to the advisory council for the advice it has provided to the Secretary of State. I take this opportunity to congratulate the chairman of the council, Sir Peter Leslie, on his recent knighthood in the birthday honours.

The amendments are unnecessary because, in Clause 13 of the Bill, there is already provision for the advisory council to give its advice—I stress the word "advice"—to the Secretary of State if he should request it on the overseas investment insurance scheme and on the financial management of ECGD's portfolio. Indeed, subsection (3) of that clause provides for the council to give advice upon request in respect of any matter relating to the exercise of the Secretary of State's functions under the Bill.

This clause not only has the effect of retaining the council but also of widening the area of ECGD activity on which it is able to advise. Under the old Act the council was limited to giving advice only on credit insurance guarantees issued under Section 1 of that Act.

I can assure the Committee that the Government intend to continue to make full use of the wise counsel and expertise which the council brings to bear on the ECGD's activities. Indeed, the Committee will have noted that Amendment No. 53, tabled by my noble and learned friend the Lord Advocate, provides for a further widening of the role of the council by providing that the Secretary of State must consult it when determining the national interest case for providing reinsurance facilities. I am sure that the council's knowledge and experience of, and active involvement in, exporting and banking will mean that on this, as on other issues, it will be able to play a very helpful role.

The wording of the amendments as regards the use of the word "directions", would seem to imply a significant change in the role of the council. The function of the council is not to give directions but to give my right honourable friend the Secretary of State advice. It is for Ministers to take decisions after considering the advice they receive. It would not be right to alter either the respective roles of the council or of Ministers in the decision-making process.

The amendments also appear to be superfluous in that they provide for the advisory council to give directions to the Secretary of State but only when he asked it to do so. It would seem much easier for the Secretary of State simply to do what he wants without involving the council. With that brief explanation, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Williams of Elvel

I am grateful to the noble Lord for that reply. The amendment was tabled before the noble and learned Lord the Lord Advocate tabled his amendment to beef up the council. Therefore, in some ways he has moved a little distance towards us. This was a probing amendment. I am grateful to the noble Lord for his explanation of how the Government see the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

Clause 2 agreed to.

Lord Trefgarne moved Amendment No. 14: After Clause 2, insert the following new clause:

("Guarantee of insurance

If it appears to him expedient in the national interest so to do the Secretary of State shall, in cases in which such guarantees or insurance would otherwise not be available or not be available on reasonable terms, make arrangements under section 1 or section 2 of this Act for guaranteeing or insuring any person carrying on business in the United Kingdom, or any person providing guarantees or insurance to such person, against risks of losses arising in connection with the supply of goods or services by the insured to persons carrying on business outside the United Kingdom or in connection with any investment of resources by the insured in enterprises carried on outside the United Kingdom.").

The noble Lord said: In rising to move Amendment No. 14 I propose to confine my remarks to that amendment. However, I understand that my noble and learned friend may wish to speak to Amendments Nos. 52 and 53 when he comes to reply. I shall certainly have no objection to that.

This amendment, if agreed to by the Committee, would go some way to assuage the real concerns that the Bill has raised in the minds of many exporters. The amendment represents a redrafting of the original amendment which was proposed in another place by my honourable friend Dr. Keith Hampson, the Member for Leeds, North-West, and carried by a majority of the Standing Committee. The fact that it was carried indicated, I think, a recognition by honourable Members on all sides in another place that there was a real need for the Government to continue to have some involvement with ISG in Cardiff to ensure that Britain's important export business continued unimpeded. My honourable friend's amendment was removed at a later stage of the proceedings in another place and that was perhaps a pity.

My amendment seeks to confer powers on the Secretary of State to make provision himself to provide insurance or reinsurance cover for exports, should he think it expedient. Those last words are important. My honourable friend's amendment sought to do much the same thing but was criticised because it seemed to imply a duty of the Secretary of State to provide cover in all circumstances. In another place my honourable friend Mr. Sainsbury, the Minister for Trade, spoke of his willingness to consider providing some cover on a time limited basis, but subsisted that there was no form of words which would allow that to be written into the legislation with sufficient discretion. I believe that this amendment achieves that. It balances the need for flexibility and discretion on the part of the Government with the equally important need to send a strong signal to industry that the privatisation of ECGD in Cardiff will not be allowed to reduce the range and depth of cover which exporters currently enjoy.

Industry has had some specific concerns about this privatisation measure without retained government involvement—concerns which have been articulated on a n umber of occasions and in a number of fora, most recently in your Lordships' House at the Second Reading of the Bill. One concern is about the current state of the private insurance market. The market has taken a considerable battering over the past few years. Indeed, some Members of the Committee may have direct personal experience of the financial difficulties faced by some of Britain's biggest insurance names.

My honourable friend Mr. Redwood, the Minister for Corporate Affairs, speaking at the recent World Insurance Conference in London, described international insurance markets as having been, lashed by cyclones, droughts, man-made disasters and the American courts".

It is not wholly clear that in present circumstances the insurance market can hope to have sufficient capacity for all the needs of the future. My honourable friend Mr Sainsbury has given assurances that top-up will be available for a period of three years after the privatisation. But no one can be sure that the position will improve to the extent required within the three years. I fear that Ministers have no crystal ball in that matter. Capacity of the private market is restricted, particularly with regard to certain markets. Experience is that currently no more than £25 million is obtainable in the private sector, no matter how good that market. That £25 million is not just for one company; it is the total amount available. Some companies often require more than that for just one project. Exporters need to be clear that there is a safety net for when the private market fails them. It is essential that that should not be time-limited.

On Report in another place my honourable friend the Minister said: The placing in the private market of the Insurance Services Group's portfolio of risk is probably a unique event in the market's experience … there could be a small shortfall and the Government intend to fill that through the continuing ECGD becoming, in effect, one of the reinsurers of the new ISG". [Official Report, Commons, 15/4/91; col. 53.]

I do not think that it would be sensible to make this provision time-limited. But I should like to see the commitment written into the text of the Bill. I emphasise the fact that this amendment only empowers Ministers; it imposes no obligations upon them. I beg to move.

Lord Williams of Elvel

I wonder whether the noble Lord, Lord Trefgarne, can explain one or two aspects of his amendment. First, by placing the proposed new clause after Clause 2, does he mean to imply that "such guarantees", as mentioned in the second line of the amendment, refer to the guarantees under Clause 2? As I understand it, that is the meaning of the amendment. However, the Clause 2 guarantees refer to insurance in connection with overseas investment. Therefore, the guarantees which the noble Lord seemed to be speaking to would not come under the terms of his amendment. When I have finished my remarks, perhaps he would be kind enough to comment on that point. As a matter of interest, I believe that the Hampson amendment was placed after Clause 1.

Secondly, is he saying that the amendment would require insurance to be available to any person—that is, not just the privatised ISG—engaged in the supply of goods or services on credit? I hope that the noble Lord will be able to answer my questions.

Lord Trefgarne

I am most willing to do so. It is certainly my intention that the provisions which I seek to include in this proposed new clause should apply to both Clauses I and 2. If my drafting is such that I have not achieved that aim, I am very sorry. However, that was certainly my intention. It is also the intention that the proposed provisions should be available to the Secretary of State in such a form as he may find convenient. I have deliberately drafted the amendment in such a way as to give the Secretary of State the widest possible powers.

Lord Prior

I am waiting anxiously to hear what my noble and learned friend will have to say on the matter. However, in a fairly long parliamentary career, I must say that I have not yet known of any amendment drawn at any time, if it did not have the approval of parliamentary counsel, having any chance of getting through either this or the other place. In fact, as a result, I have very rarely understood any amendment which has been placed before this or the other Chamber.

In this case I am led to believe—though I do not understand why—that even after consulting learned counsel at, presumably, very considerable cost, the proposed new clause which we have tabled is still considered in some way to be not properly drawn from the point of view of parliamentary counsel. If that is so, and if as a result of that my noble and learned friend is able with his amendments —which we welcome and which we hope will meet the case—to tell us why our amendment is defective and why his meet all the points mentioned by my noble friend, then I believe that that will do the trick.

However, until we hear from my noble and learned friend and have perhaps questioned him on one or two points in connection with his amendments, it is hard for us to be able to tell whether the Government are thinking along the lines that we would wish. Therefore, I believe that it will be for the convenience of the Committee if my noble and learned friend can tell us what his amendments actually mean, and what he thinks our amendment does not mean.

5.45 p.m.

Lord Fraser of Carmyllie

While my parliamentary experience is not as great as my noble friend's, I understand his anxiety. However, even if the principle of an amendment is acceptable, parliamentary counsel like to ensure that they can run their own pen over it before it is incorporated into legislation. Of all the matters that we have been considering in Committee, it seems to me that probably the two most contentious and important issues were, first, those which we considered when we dealt with Amendments Nos. 4, 16 and 19—and I was not able to agree to that proposal—and, secondly, those contained in this group of amendments consisting of Amendments Nos. 14, 52 and 53.

I hope that I shall be able to explain to the Committee the fact that I fully sympathise with the objective behind the amendment moved by my noble friend Lord Trefgarne which proposes a new Clause 3 to the Bill. I understand the thinking behind it. I am most grateful to him for the care that he has taken to bring forward an amendment which seeks to overcome the problems which were identified when an equivalent amendment was considered in another place. Members of the Committee will recognise the difficulties in drafting an amendment which, while seeking to impose an obligation on the Secretary of State, quite properly leaves him free to exercise his discretion about the acceptability of individual risks. The amendment goes a long way towards achieving this balance though, as I will explain, there remain some legal and technical difficulties.

I should like, first, to remind the Committee about those assurances which the Government have given about the availability of reinsurance from ECGD post privatisation. As I explained on Second Reading, the Government's aim is that as much as possible of Insurance Services' business should in future be handled in the private sector. Nevertheless, they have recognised that some of this business could not immediately be so accommodated, and that there would be a need for some post-privatisation reinsurance facilities to supplement the capacity available in the private market. That would avoid any sudden reduction in facilities.

Apart from the special category of the risks arising on a small short-list of higher risk countries, the Government are confident that all of Insurance Services' reinsurance needs for both commercial and political risks can be met by the private reinsurance market. There may immediately, though, be a small shortfall and the Government intend to fill this through ECGD's acting as a top-up member of the new company's reinsurance syndicate. We anticipate that, once the market has familiarised itself with the new company and its management, it will wish to move quickly to displace ECGD in this role. We therefore regard this facility as transitional and have indicated that it will be available for up to three years after privatisation in order to give sufficient time for this process to be completed.

The special category commercial and political, but mainly the latter, risks on certain higher risk countries will be dealt with under a completely separate arrangement. For this business, ECGD will provide the company with a direct 100 per cent. reinsurance facility. Because the likelihood of this business becoming acceptance in due course to the private reinsurance market is rather less than for the "top-up" facility which I have described, we have not specified any time limit for it. To meet the concerns which have been expressed that this, so-called, "national interest" facility might be withdrawn prematurely we have given firm and specific assurances about its future availability. These are that the requirement for the facility will be kept under review and that the Government's intention is that, subject to its performing satisfactorily as an ECGD trading facility, it will continue for as long as the Government consider it essential to meet the reasonable needs of exporters. At Second Reading I gave the further undertaking that, when assessing exporters' needs as part of any future review of the facility, the Government will consult exporters and their representatives; their views would be fully taken into account before any final decisions were reached.

Against the background of these assurances the Committee will not be surprised that I am able to say that the Government accept in principle the intent of my noble friends' new clause. It has, though, given rise to serious misgivings from a legal, rather than a substantive, perspective. The main difficulty is that by creating a separate category of apparent national interest enabling powers (even though these are presented in the form of an obligation) the new clause threatens to undermine the integrity of the existing Clauses 1 and 2 which are intended to be drawn sufficiently widely to encompass this type of activity. The risk is that their approval might in future give rise to queries about what powers Parliament had intended to vest in the Secretary of State under Clauses 1 and 2 if it had been regarded as necessary to specify separately that he had powers to provide reinsurance in the national interest. The danger would be that Clauses 1 and 2 might be construed to authorise ECGD to cover only commercial business, with non-commercial business being done only in accordance with the new clause.

The Government also have technical difficulties with the new clause in the way that it applies to investment insurance, through the reference to Clause 2, and to direct insurance, rather than the reinsurance with which we have been concerned. Reinsurance of investment insurance is provided for perfectly adequately by subsection (2) of Clause 2. I explained earlier that there is no need to create a specific national interest provision for direct insurance. That is covered in Amendment No. 7.

Spurred, therefore, by the challenge of producing an amendment to the Bill which will meet the objectives of my noble friend while at the same time meeting the Government's legal and technical objections to the new clause, we have prepared amendments to Clauses 11 and 13 to the Bill which I have to bled. They have been grouped for consideration with the new clause. The purpose of these amendments is to build an obligation into the Bill for the Secretary of State to determine whether there is a national interest case for him to use, by means of reinsurance, the powers in Clause 1 to provide assistance to encourage exports. I hope that the Committee will agree that these amendments concisely and effectively meet the challenge I have described while adding the further dimension of obligatory consultation with the Export Guarantees Advisory Council. This reflects the Government's separate undertaking concerning consultation with exporters and their representatives in any review of the national interest reinsurance facility. The advisory council will, I am sure, provide a very helpful additional input to these consultations.

I wish to point out that the amendment applies to all types of ECGD reinsurance and that there is no time limit. Furthermore, the obligation to be introduced is permanent. I hope that the House will accept that the Government have gone a long way towards meeting the concerns expressed by noble Lords and honourable Members of another place and that my noble friend will feel that he can withdraw his amendment and support those that I have tabled when we consider Clause 11.

There is a further amendment, Amendment No. 51, which deals with much the same matter. It was tabled by the noble Lords, Lord Williams and Lord Ezra.

Lord Williams of Elvel

I apologise but perhaps I may interrupt the noble and learned Lord. As he is aware, his amendments were tabled yesterday. We have not had the chance to hear him on the subject nor to take advice on whether the amendments do what he says they will do, nor to decide whether we have any objections. I maintained my amendment in its place and not in the grouping so that we could have a debate next Thursday on the matter when we give our considered views on the Government's amendments.

Lord Fraser of Carmyllie

I believe that the debate will be next Tuesday. As regards the noble Lord's amendments, I appreciate that there is always a dilemma as to whether one puts down amendments as soon as one reaches a view on them. That may involve those who wish to participate in the debate, but it gives them little time to analyse the amendments. It seemed to me that it would be appropriate at this stage for me to indicate in advance that I shall invite the Committee to reject the new clause. However, when we reach Clause 11 I invite the Committee to support the inclusion in the Bill of the new obligation on the Secretary of State contained in Amendment No. 52. For the sake of completeness, I have to indicate that before we reach Amendment No. 52 I shall invite the Committee to reject Amendment No. 51. Clearly it would not make sense to have both the Government's Amendment No. 52 and Amendment No. 51 proposed by the noble Lords, Lord Williams and Lord Ezra.

I appreciate that what I have had to say may mean that those who have been concerned over the issue will wish to consider more carefully what is contained in Amendment No. 52. They will also doubtless wish to take their own advice on it. I also accept the right of the noble Lords, Lord Williams and Lord Ezra, to return to the matter when their Amendment No. 51 is considered on Tuesday. I hope that what I have said will satisfy Members of the Committee that we have gone a long way to meet the concerns and have spelled out clearly how the other amendments that have been tabled should be dealt with before my own amendment is accepted.

Lord Prior

My noble and learned friend seems to have been doing pretty well. However, I wish to ask him one or two questions before we finish with this point. He has gone a long way and we are grateful to the Government for going so far to meet the points. I understood my noble and learned friend to say that the three-year top-up arrangement will now continue indefinitely. In other words, the Government would no longer top up for three years—the arrangement would continue. First, I should like confirmation that that is what he said.

Secondly, the noble and learned Lord's, Amendment No. 52, states in the last line: "reinsuring persons providing insurance". That is not reinsurance as I understand it. Is that point covered?

Thirdly, we included the expression "reasonable terms". The Government's amendment includes nothing about "reasonable terms". Ought there not to be something similar in the amendment?

As my noble and learned friend said, we only saw the amendment this morning and we are not in a position to know whether it meets all our points. I have listed just three points which come immediately to mind and which need answers. We need reassurance from the Minister that they are covered. I suggest to the Committee that if the Minister will give an indication on those points we should leave the matter and perhaps return to it, if necessary, as the noble Lord, Lord Williams, suggested, when we reach Amendment No. 51.

Lord Ezra

On the first point raised by the noble Lord, Lord Prior, I understood precisely the opposite from what he suggested. I thought that the noble and learned Lord said that the facilities implied in his Amendment No. 52 would be less than the top-up facilities. Obviously there is a degree of confusion as to what Amendment No. 52 proposes.

Lord Jay

I was going to ask a similar question. Perhaps I may put it this way. As a result of the amendment proposed by the Minister, does the three-year limit disappear altogether from the Bill?

6 p.m.

Lord Fraser of Carmyllie

No, that is not the case. One of the difficulties with this matter is that there are two separate issues that have to some extent become intermingled, if not confused. There has been a concern that as this company enters the private sector, and because it is a new creature and is unknown to the market in those circumstances, the reinsurance facilities that exist in the market might prove to be insufficient to meet the needs of the new company. In such circumstances the Government have indicated that they will provide a top-up facility for three years by becoming a member of the new company's reinsurance syndicate.

However, there is a further difficulty which I understand is at the centre of the concern which my noble friend Lord Trefgarne clearly spelt out in moving his amendment. He is concerned about whether there is ample facility in the private sector, having regard to the nature of the risks involved, to provide reinsurance in these circumstances. He considers that the private sector cannot be expected to do so. It is in respect of that reinsurance that the Secretary of State's obligations, as set out in the amendment I have tabled, will continue. Those obligations have no time limit. We must separate out these two issues. I hope that explains the point that was raised.

The other point put forward is whether reinsurance will be provided to persons providing the insurance. I am not sure whether I have understood that concern correctly. I cannot elaborate on that matter. I trust that the amendment we have introduced achieves what my noble friends and others have sought to achieve. I appreciate that they have not yet had a great deal of time to consider our amendment. I hope that between today and our further consideration in Committee, they will have an opportunity to consider further our amendment.

Lord Prior

I am sorry to intervene again but I doubt whether the Government amendment deals with the matter of extending the top-up for longer than three years. However, I shall have to seek further advice on that. The purpose of our amendment was to enable the Government to continue to provide help, if that was necessary, beyond the three year period. We are simply not prepared to accept the words used by Mr. Sainsbury in another place on this matter simply because in the past the words that Ministers have used on a subject of this nature have not always been religiously followed up by the Treasury. I am trying to be as polite as I can, but, speaking for myself, unless the Government can give some greater assurance on this point, I shall need to return to this matter on Report.

Lord Fraser of Carmyllie

I had certainly understood, and my honourable friend the Minister for Trade had certainly understood, that the greater point of concern was that there should be a continuing obligation with respect to reinsurance beyond the top-up facility. The Government take the attitude at the moment that the fears expressed on that point will disappear once the private sector is accustomed to dealing with the new company. I appreciate that my noble friend has a greater cause for concern in that there will be a class of risks which, irrespective of the facility that exists in the private sector, will be unlikely to be taken up by the private sector given the nature of the risks involved. It is in respect of that reinsurance that this important continuing obligation is imposed on the Secretary of State.

Lord Prior

If the risk will disappear, as the Government seem to believe, I cannot see why there is any objection to extending the guarantee beyond three years.

The Earl of Limerick

Before my noble friend Lord Trefgarne decides what to do with Amendment No. 14, I wish to say that the acceptance of the amendment in principle is greatly welcomed. I hope that my noble and learned friend can guide us on a different question. There is a distinction between the two amendments we are discussing. Amendment No. 14 states: If it appears to him expedient in the national interest so to do the Secretary of State may make arrangements for guaranteeing business. Amendment No. 52, on the other hand, is concerned with reinsurance. It states: The Secretary of State shall … determine … whether it is expedient in the national interest for him to exercise his powers … to make arrangements for reinsuring persons providing insurance". In other words, the amendment provides for the Secretary of State to take on the risk on a reinsurance basis. If Amendment No. 52 were accepted, would it allow the Secretary of State to accept the primary underwriting liability on business that is conducted in the national interest

Lord Williams of Elvel

It seems to me that Amendment No. 52 in the name of the noble and learned Lord, Lord Fraser of Carmyllie, deals with the question—if I may put it bluntly—of political risk reinsurance when none is available in the market. That is essentially what we are discussing now. On the other hand, the amendment of the noble Lord, Lord Trefgarne, goes much wider than that. It deals with insurance or reinsurance of political or commercial risk if none is available in the market. I am afraid I have to disagree that the spirit of the amendment of the noble and learned Lord meets the spirit of the amendment of the noble Lord, Lord Trefgarne. However, no doubt we shall study these matters and return to them next Tuesday when we shall have another opportunity to discuss the same subject.

Lard Trefgarne

Contrary to popular belief, parliamentary counsel are human beings. They, too, suffer from the NTH syndrome; that is, the not invented here syndrome. As my noble friend Lord Prior said a few moments ago, they tend to pour cold water on any piece of drafting which does not emanate from their own pens. Be that as it may, I believe the Government have attempted to go some way by means of Amendment No. 52 towards meeting the spirit of the amendment which I have tabled.

Like every other Member of the Committee I have only seen the Government's Amendment No. 52 comparatively recently—in fact, I saw it this morning. I am not yet in a position to form a definitive view on the amendment, but quite clearly the Government have made an attempt to go some way towards meeting the problems that we have identified. I am grateful for that attempt and welcome it. I agree that it is rot clear whether the Government's amendment provides for the top-up facility which is distinct and separate from the national interest facility. I shall wish to consider that point between now and the next stage of the Bill.

Whether it is better for the Government to provide insurance of the last resort—I hope that is the right expression—as distinct from reinsurance is a highly technical matter. At this stage I do not wish to pronounce on that matter. However, off the top of my head I should say that I do not believe it matters very much. If the Government are willing to provide reinsurance to existing insurers in the market that should be sufficient. However, I wish to consider that point further between now and the next stage of the Bill. I repeat that the Government have attempted to move some way in my direction. I am grateful for that and for the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 [Financial management]:

[Amendments Nos. 15 to 19 not moved.]

Clause 3 agreed to.

Clause 4 [Provisions supplementary to sections 1 to 3]:

Lord Clinton-Davis moved Amendment No. 20: Page 2, line 44, leave out ("Transactions") and insert ("Any transaction").

The noble Lord said: This is a simple amendment. It may even meet the criterion established by the noble Lord, Lord Prior. The amendment follows the drafting of the other clauses in the Bill. We consider the form of words to be less vague. I hope, therefore, that the Minister will be able to accept the amendment. I beg to move.

Lord Fraser of Carmyllie

Clause 4(1) reproduces a provision in Section 1(3) of the 1978 Act. It allows the Secretary of State to fix the terms and conditions which may be applied to any export facilitating or financial management transactions which he may undertake under Clauses 1 to 3. The proposed amendment would make no difference to either the meaning or the scope of Clause 4(1), which allows the Secretary of State discretion to fix the terms and conditions to be applied to particular transactions. There is, accordingly, no reason to depart from the existing text. I hope that with that explanation the noble Lord will withdraw his amendment.

Lord Clinton-Davis

I had hoped that in this initial expedition I should be regarded as being extraordinarily helpful. However, that does not appear to be the case. I shall note what the noble Lord said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Lord Clinton-Davis moved Amendment No. 21:

Page 2, line 46, at end insert: ("( ) Transactions entered into in pursuance of arrangements made under sections 1 to 3 of this Act should take account of obligations deriving from international protocols to which the United Kingdom is a signatory.".).

The noble Lord said: International protocols imposing obligations on the Government, which may be a signatory to those protocols, are obviously important. It is right that Ministers should observe them and be seen to observe them. Perhaps one may exemplify that by reference to the Montreal Protocol, much lauded by the Government and with some justification, relating to ozone-damaging chemicals and CFCs in particular.

In terms of ensuring compliance with the obligations of the protocol, the export licensing branch of the Department of Trade and Industry may be thought to be the best placed regulatory agency. There is very strong doubt as to whether it has the time or the expertise to undertake those tasks. The question then arises as to how, at the very least, we avoid promoting contravention of such international agreements, expressly or tacitly.

The arguments adduced in another place on 25th January were singularly unconvincing. The Minister said that, it is a reflection of the real practical difficulties that would arise if attempts were made to make ECGD a central arm of environmental control".—[Official Report, Commons, 25/1/ 91; col. 634.]

That is to misstate the argument that we have adduced. We do not seek to make ECGD a central arm of environmental control. Our argument is that Ministers should not encourage the flouting of regulations which they or their colleagues obviously accept when they sign international protocol.

On 19th February in Standing Committee in another place the Minister argued, when debating a related matter, that the ECGD's expertise, to make those assessments does not include any expertise to make an environmental impact assessment".

Again, that is an argument which is misconceived. The amendment places no obligation on ECGD to undertake environmental impact assessments. The sanction that would arise is that the cover should only be offered if the export or investment in question does not contravene such obligations. Consequently, the onus of undertaking an environmental impact assessment does not fall on the ECGD. It does not involve the Government in any additional cost. The onus of undertaking such an assessment falls fairly and squarely on the shoulders of the exporter, who to supply a warranty.

We argue that exporters would not wish to imperil their cover by deliberately engaging in anything which might have the effect of flouting regulations of that nature. Moreover, that would evidence the determination of the Government to take seriously the obligations which they have undertaken—by adopting a principled method of enforcement. A parallel that comes to mind is the way in which the European Commission, faced by a not dissimilar situation, operates in relation to the application of the European Regional Development Fund. There may be difficulties with a member state in enforcing environmental objectives and laws. The Commission has considered withholding, withdrawing or limiting the application of moneys from the ERDF if there is good reason to suppose that Community laws are being broken. That does not apply only to the environment, but the environment is a good example. The Commission does not carry out an environmental impact assessment. The onus of doing so lies with the potential recipient of the moneys and the Commission incurs no cost. That is why I say that it is a reasonable parallel to what we seek to achieve here.

I hope that the Minister sees the amendment as helpful. We certainly view international protocols as deserving of the emphasis we place on them in the amendment. I beg to move.

Lord Fraser of Carmyllie

While the Committee will sympathise with much of the intention behind the amendment, I believe that it is unnecessary. All government departments are aware of, and take very seriously, obligations arising from international agreements.

Where an international agreement, be it a protocol, a treaty, or an exchange of letters, needs to be enforced under our law, the correct approach, as the noble Lord will know from his own experience, is for Parliament to translate the intentions behind the international agreement and pass it into domestic law. By contrast, the amendment would be an unsatisfactory way of giving a standing in our law to international agreements.

The amendment is vague in several respects. It would be unclear whether it applied only to an agreement described as a protocol or to any other international agreement. It is not clear what a requirement to "take account of obligations" entails. Does it mean that an international agreement should be followed to the letter at all times or would there be occasions when it could be overridden for some reason? If the latter, on what grounds, and who would decide?

Given that ECGD's business is concerned with goods that are put to use overseas, the amendment could be interpreted as having the effect of making the Secretary of State answerable in law for actions over which he has no control. I appreciate that the noble Lord did not intend to go that far and that he recognised the difficulties. However, it appears to us that might be the result of the amendment. I acknowledge the anxieties that have been expressed, and I certainly seek to assure the noble Lord that the issues are taken seriously. However, I urge that the amendment be rejected, not because what it seeks to cover is an undesirable objective, but because it is to approach the matter in the wrong way.

Lord Clinton-Davis

I am not wholly satisfied with that reply because although it is critical of the way in which we have sought to achieve that objective—the Minister may to some extent be right about that—he has not given any clear indication of how the Government will seek to exercise at least some degree of surveillance as regards the purposes to which we have drawn attention. However, I shall certainly read with interest what he has said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 22: Page 3, line 2, after ("Treasury"), insert ("provided that such consent is in accord with a scheme previously approved by each House of Parliament,".).

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 32 to 34 and Amendment No. 45.

The purpose of the amendment is to shift power from the Treasury—a matter about which the noble Lord, Lord Prior, made some observations earlier from which I do not dissent—which favours in effect what I might call the zero option for ECGD, to Parliament. There is a good deal of suspicion, not confined to the noble Lord, Lord Prior, and myself, about the interest of the Treasury in the activities of the ECGD. We are looking for a somewhat more equitable treatment from the department than the Treasury has hitherto indicated that it is prepared to give.

That deals with Amendment No. 22. The other amendments are a consequence of the same argument. It is particularly important that, in the controversial area of charges to exporters for services and information, the influence of the Treasury should not be allowed to burgeon but should be reduced. Amendments Nos. 34 and 45 have much the same effect and are part and parcel of this small package. I beg to move.

Lord Fraser of Carmyllie

The need for a Treasury consent provision in legislation arises whenever Parliament appears to be reducing the authority of the Chancellor of the Exchequer by placing a responsibility on departmental Ministers. The purpose of such a requirement is to avoid committing the Chancellor to honour a proposal which he would not have authorised and which may imply public expenditure not approved by Parliament as part of the usual PES process.

As I am sure the noble Lord appreciates, there is considerable historical precedent for the inclusion of a Treasury consent provision in legislation, going back as far as the Civil List Audit Act 1816. It is a general rule that, where fees and charges are involved, Treasury consent should be provided for in the legislation. That is clearly the case for all of the clauses to which the amendments apply. Precedent for Treasury consent before the giving of guarantees, etc., and increasing the commitment limits exists in the Export Guarantees and Overseas Investment Act 1978. That is very much in line with a considerable volume of earlier legislation and there appears to be no reason to depart from it here.

Lord Ezra

Although the noble and learned Lord is right to say that the precedent has established that in matters of this kind the Treasury's consent is required, there is grave anxiety with regard to this piece of legislation about the Treasury's intentions vis-à-vis support of the export effort. It is up to the noble Lord, Lord Clinton-Davis, to decide what he wants to do about the amendment, but we would be happier if at a later stage we could insert words to the effect that consent should not be unreasonably withheld. There is suspicion about the Treasury's intentions with regard to this piece of legislation.

Lord Clinton-Davis

I am grateful for the intervention of the noble Lord, Lord Ezra. I certainly find the prospect inviting, and I am sure that the Minister will find it equally inviting. Looking at matters objectively from his position, he must know that we are right about this. I knew that he would adduce the argument about the Civil List Audit Act 1816. That was staring us in the face, but I do not believe it to be a clincher. However, we shall most certainly want to reconsider the matter before we come to the next stage of the Bill. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 23: Page 3, line 6, at end insert ("or consultancy").

The noble Lord said: Here again, I want to be extremely helpful to the Minister. So far he has rejected every offer that I have made. At present ECGD offers cover for consultancy services. We think it appropriate that that should be specified in the enabling legislation. I beg to move.

Lord Fraser of Carmyllie

The noble Lord's amendment is redundant and adds nothing to the provision as drafted. When similar amendments were discus3ed in Committee in another place, my honourable friend the Minister for Trade quoted the legal definition of "business" from Halsbury's Laws of England. It ran: Business is a wider term than trade and not synonymous with it, and means almost anything which is an occupation as distinguishable from a pleasure. However, the term must be construed according to its context". I am sure that the Committee will agree with me that this definition is extremely wide and covers anything that might be regarded as a "consultancy". A consultancy can hardly be regarded as a pleasure. The amendment will cover nothing that is not already covered by the use of the word "business" as there is no need in the context of the Bill to restrict the width of the definition in Halsbury's Laws.

I should point out that in many statutes "business" has been expressly defined to include a "profession", as is done in this Bill. It may be that some doubt existed at one time as to whether carrying on a profession could be regarded as carrying on a business. It may well originate from an age when real social distinctions were perceived to exist between commercial people and members of the professions. The formula may be out-dated, but it is a time-honoured one and was used in the Export Guarantees and Overseas Investment Act 1978. As it was considered appropriate then for the avoidance of doubt, it seems appropriate to continue to use it in this Bill. I hope that, with that explanation, the noble Lord will withdraw the amendment.

Lord Clinton-Davis

The noble and learned Lord has done his best to cast a blinding ray of darkness over the debate. I thought that he was excessively harsh in using the word "redundant" when I have tried to be as helpful as possible. If he had said, "The noble Lord has been helpful, but it is rather unnecessary", that would have been kinder. "Redundant" is a harsh word. As a consultant on legal affairs, to suggest that consultancy is not a pleasure would be to do myself great harm. I cannot go along with the noble and learned Lord in that regard, but I have listened to what he said and tried to understand it. I have failed significantly; but I shall read his comments. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.30 p.m.

Lord Clinton-Davis moved Amendment No. 24: Page 3, line 10, after ("other") insert ("relevant").

The noble Lord said: I beg to move Amendment No. 24, standing in my name and that of my noble friend Lord Williams. Subsection (3) (c), with its unqualified reference to "any other activities" could, as it stands, include activities in which it would be inappropriate for the ECGD to be involved. Obviously we have put this down as a probing amendment, and I beg to move.

Lord Fraser of Carmyllie

I do not want to upset the noble Lord by indicating that his efforts in any part of this Committee stage are redundant. However, I shall be inviting the Committee, after the fullest consideration, to decline to accept this amendment. Clause 4(3) (c) is essential to ensure that the ECGD can cover the full range of United Kingdom exporting activities and can carry out its objectives effectively. The point is perhaps best illustrated by an example. If the noble Lord looks at Clause 1(1) he will see that the Secretary of State is empowered to facilitate, supplies by persons carrying on business in the United Kingdom of goods or services to persons carrying on business outside the United Kingdom". If the definition of "carrying on business" in relation to things done outside the United Kingdom were not extended to cover "other activities" a contract for a United Kingdom exporter to supply equipment to, say, an education institution abroad would not qualify for support. That clearly is not what we would wish to achieve.

I should add that the provision carries on, adapted as appropriate—as do many of the provisions of the Bill—provisions already in the Export Guarantees and Overseas Investment Act 1978, which currently governs ECGD's activities. The addition of the word "relevant" to the provision, as the amendment proposes, merely weakens the provision. For example, what are the other activities to be "relevant" to? If the effect is to restrict the provision to activities similar to those involved in carrying on business then, with respect, it would seem to me that the whole point of the provision is lost. I hope that I have not upset the noble Lord and that he feels able to withdraw the amendment.

Lord Clinton-Davis

I suppose that I was feeling somewhat sensitive. However, again I will read with interest what the Minister has said and try to follow it. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Trefgarne moved Amendment No. 25:

Page 3, line 15, at end insert: ("( ) The consent of the Treasury required under subsection (2) above shall not be unreasonably withheld, nor shall any unreasonable conditions be attached to it.").

The noble Lord said: I beg to move Amendment No. 25. I think I am probably entitled to say that if it were not for the Treasury hardly any of the concerns that have been expressed about the Bill would exist. Of course the Treasury has a duty to preside over public expenditure; to ensure that money is not wasted; and to ensure that government departments, including ECGD, do not spend more than is wise or prudent.

However, the fact of the matter is that ECGD is a crucial part of the international trading fabric of this country and it is also a fact, in my certain and personal experience, that the Treasury sometimes presents some quite unreasonable difficulties against what is clearly very often a desirable way forward. Of course, what has happened since I was responsible for these matters up to about a year ago I cannot say; but during the time I was the Minister responsible for the supervision and oversight of the ECGD the whole of our time was spent in battling with the Treasury. Every single dot and every single crossing of a "t" had to be approved by the Treasury. Very often, for reasons quite impossible to determine, it would make difficulties. Of course in the end matters had to go to Ministers, often to very senior Ministers and sometimes even to the Prime Minister, to be resolved. Senior Ministers almost always take the sensible course and indeed while I was concerned with these matters they always did, but it was necessary to drag the Treasury kicking and screaming into what was obviously, in the judgment of most of us, a sensible course.

I dare say my noble and learned friend will say that Treasury consent is never unreasonably withheld and therefore this amendment is ridiculous or absurd or, as he said in relation to a previous amendment, "redundant"—which caused such difficulty for the noble Lord, Lord Clinton-Davis.

I should therefore like to have two things from my noble and learned friend this evening. First, I should like a clear assurance that the Treasury's consent is not and will not be unreasonably withheld. I should also like a degree of Treasury remorse for the times when it at least sought unreasonably to withhold consent in the past. I hope that is not too much to expect. I beg to move.

Lord Prior

I never served in the Treasury, and what I am about to say will probably make it abundantly clear why I did not. I think that if one examines the record of the running of the economy over the last 35 to 40 years one actually comes to the conclusion that the Treasury has not been the fount of all wisdom and has made a pretty good hash of things. Therefore, I think that the time has come when at least we ordinary mortals who have not served in the Treasury and who perhaps take a different view from those people in the Treasury, might be given a look in. The amendment gives at least a chance for some others to have a look in, and that is what it is intended to do.

In relation to an earlier amendment my noble and learned friend mentioned the Civil List Audit Act of 1816 as being the precedent for the Treasury having always to be consulted on these matters. It seems to me that if that is the best evidence that can be produced for the Treasury always winning these arguments, it really is about time a change was made.

Although this is perhaps a slightly tongue-in-cheek debate, it has a serious point. Perhaps I may go on to explain why. Of course the Treasury wants this because it gives it power. It is the secrecy of the Budget and the general directions that the Treasury has through Acts of this nature which have given it this great power. I resent that, because there are other Ministers, other departments and other people in government with perhaps more knowledge and more understanding of problems than the Treasury. So I am against the overweening power that the Treasury has built up over the years. That is a serious point.

Secondly, when every single decision in Whitehall has to be second-guessed by the Treasury, we have administrative delay. That delay can be, and in many cases often is, extremely serious. I can quote chapter and verse of ECGD cases where the Department of Trade and Industry has in principle accepted something that industry wanted and a contract had been signed, and so on. Then it had to go to the Treasury and the Treasury took weeks—nay, months —to think about it, and the contract was thereby lost. That has happened on a number of occasions and so administratively it is a cumbersome process and it leads to delay.

Thirdly, how do people in the Treasury actually know anything about the subject involved? They are not concerned with it on a day-to-day basis. They are not in the Trade and Industry Department and they are not in every other department of Whitehall. Yet a principal or assistant secretary in the Treasury will in many cases have more power than a Minister or certainly a senior official in another department. That is no way to run an efficient administrative machine as part 3f government; yet time and time again one knows that it happens. This is again a serious point. A principal or a comparatively junior civil servant can quite often thwart what a Minister wishes to do. So I think it is time that position was looked at as well. There is great ignorance in the Treasury of the issues involved and it must always be that way because it is not concerned with the detail of a matter.

Of course, as my noble friend Lord Trefgarne has said, there has to be some overall financial control, and that must be exercised by the Treasury. But the Treasury must set the limit, as it does each year, on what a department can spend. Surely, it then ought to be up to the department to spend the money allocated to it in the way it thinks best. Otherwise, you may get to the stage of saying, "Why bother to have departments if the Treasury is to decide everything?". It is the job of the Treasury to set the ultimate limit of expenditure and for it to be agreed by Parliament; but after that it is not unreasonable for departments to make that decision for themselves. That may be a slightly wider point than getting Treasury approval which is not to be unreasonably withheld.

I would have preferred an amendment which left the Treasury out of it altogether. However, I still do not follow the argument that this has to do with accountability to Parliament. It has nothing to do with it. It has a great deal to do with accountability to the Treasury, not to Parliament. Accountability to Parliament can be exercised through the Secretary of State and does not have to be exercised through the Treasury. It is the "accountability" argument which comes up in the public expenditure review, and that has to be approved by Parliament.

For all those reasons, I believe the time has come to take these things seriously. It is a grave reflection on the manner in which the Government carry out their business that delays and stumbling blocks are put in the way of decisions being reached by individual departments simply because since 1816 we have done things in another way. Frankly, it is time the practice was changed. Obviously, a minor amendment to what is a pretty non-controversial Bill will not get much attention; but this is a very serious point and something to which the Front Bench in the House of Commons ought to pay a lot more attention. If the Government want us to believe the country is being run efficiently and properly, they will not allow the present system to continue. I have always been amazed by the fact that the noble Lord, Lord Rayner, and others who have looked at the administration of government have not drawn greater attention to the point.

Lord Mottistone

I cannot go back to 1816 but I can go back 16 years when we were in Opposition. At that time, I sought to mount a campaign against the repetitive phrase "with the consent of the Treasury" which came up in many Bills. I clearly remember getting very strong support both in and out of the Chamber from the late Lord Elwyn-Jones, who sat on the Woolsack. Unfortunately, I was too busy with other things to carry on the process consistently; nor was I as eloquent as my noble friend Lord Prior in putting forward these points. Those were the very points and reasons I sought to put forward, because in running an industrial training board I saw the hard end of it.

It may sound silly but sometimes in that function "the consent of the Treasury" got in the way. It was so obvious that the Treasury did not know what on earth they were talking about or what we were trying to achieve.

I hope that even if this particular amendment is not accepted, as my noble friend Lord Prior said, those trying to run the Government for us will pay regard to the inefficiencies created by that little phrase.

6.45 p.m.

Lord Clinton-Davis

This debate has been some-thing of an eye-opener. So far we have heard three noble Lords on the other side of the House, two speaking from considerable ministerial experience and one—the noble Lord, Lord Mottistone—from experience as an industrialist. Nobody has had a good word to say about the Treasury. I shall not begin to do so. I shall leave that to the noble and learned Lord who as a fine advocate will perforce have to defend the indefensible.

I was touched by what the noble Lord, Lord Trefgarne, had to say. He spoke almost as vehemently about the Treasury as he did about parliamentary counsel. It is a pity that the noble Lord, Lord Boyd-Carpenter, was not here earlier because I am sure he would have defended the Treasury from the attack. When noble Lords make out their indictment against the Treasury—that they impose unreasonable difficulties, and delays lead to loss of contracts—it is a serious matter. I cannot help feeling that the situation is something like the old rolled up plea in the law. When the Treasury are charged with unconscionable delays, I am sure the noble and learned Lord will say they deny they did it. If they did it, they will deny that they had the effects to which reference has been made in the debate. The third part of the rolled up plea would be that if their actions had the effects charged, they were not as serious as alleged. I suspect the Minister will have to do rather better than that in the face of such a telling indictment. However, what the noble Lord, Lord Trefgarne, does is ask the impossible—remorse from the Treasury. Perhaps I do an injustice to the noble and learned Lord who will reply to the debate and he will be in a good position to offer that remorse. The noble Lord, Lord Prior, went back 35 to 40 years in his indictment of the Treasury. I believe that the past 12 years would suffice but he wants to go back further. He may be right.

The noble Lord, Lord Mottistone, prayed in aid my late and much-lamented learned friend Lord Elwyn-Jones whom we all loved. He always had a great strain of common sense in the way that he went about his business both here and in another place. The noble Lord, Lord Prior, is right when he injects into the debate, notwithstanding some fairly amusing aspects, the serious undertones which the Treasury will do well to take into account. In his experience, they have not been able to comprehend the detailed issues involved in matters relating to the Department of Trade and Industry (and before that the Department of Trade) in dealing with matters of this kind, and contracts have been lost. All that has to be treated with great seriousness. While I do not seriously believe the Minister is in a position to give the assurances which we seek, it is to be hoped that the Treasury Ministers will take note of what has been said in the debate. I therefore very much support the indictment strongly made out by the noble Lord, Lord Trefgarne.

Lord Ezra

The powerful intervention of the noble Lord, Lord Prior, made one very important point among many others; namely, that in subsection (2) of the clause we are now considering, the powers of the Treasury would cover not only the broad financial estimates underlying the proposals but would enable them to intervene in particular cases. The thought of every particular case under which the provisions of this legislation would apply having to go to the Treasury for approval, where major export issues are involved, really passes belief. Therefore, I very much hope that some modification can be introduced, on the lines of the proposal of the noble Lord, Lord Trefgarne, or some other proposal.

Lord Fraser of Carmyllie

I hope that my noble friend Lord Trefgarne, now that he has left ministerial office, enjoyed as much as we did getting off his chest what he thinks about the Treasury. I am sure he appreciates that it is a privilege afforded only to those who have left ministerial office.

Although, as my noble friend Lord Prior put it, some aspects of the debate have been somewhat tongue in cheek, it is curious that what appeared to be a not particularly important part of this Bill has nevertheless revealed a degree of disquiet which is very serious indeed. It will be appreciated that I cannot invite the Committee to accept the amendment, but I have little doubt, that those worries coming from such as my noble friend, who has an important role to play in a major exporting company, will be very seriously considered. I did not seek to pray in aid the Civil List Audit Act 1816 for its intrinsic merit. I simply sought to indicate that if there is a problem, it is one that has been with us for a considerable period.

I say to my noble friends Lord Prior and Lord Trefgarne that the amendment requires that consent should not be unreasonably withheld. I am sure that, when both my noble friends are honest with themselves, they can remember circumstances and occasions on which Treasury consent was reasonably withheld; yet by dint of political muscle and influence they and others, by the route of access to the Prime Minister and Cabinet discussions, have been able to override even that reasonable withholding of consent by the Treasury.

The noble Lord, Lord Ezra, is correct to say that the intervention power of the Treasury under this clause is wide. But I am sure that he too can think of circumstances in which the support that has been looked for from the ECGD has been in respect of major export contracts involving even tens of millions of pounds. It is not surprising that in some circumstances the Treasury would wish to intervene in particular cases.

It is also worth looking to see what power is conferred upon the Secretary of State in terms of Clause 4(1), which states: Transactions entered into in pursuance of arrangements made under sections 1 to 3 of this Act may be on such terms and conditions as the Secretary of State considers appropriate". I can think of Members of this Committee who, should it relate to a matter on which they did not approve the actions of the Secretary of State, would complain that that was far too great a power to confer on the Secretary of State without having a check by anyone else.

I have no doubt that what has been said will be carefully considered, in particular with regard to what was said about delay. It would be very alarming if important contracts were to be lost because of delay. However, the Treasury's view of what is reasonable is undoubtedly somewhat different from that of individual exporters. It has the difficult task of balancing taxpayers' interests against exporters' demands. It cannot always satisfy everyone, but it certainly has a role to play.

I conclude, saying that I appreciate that in all this discussion the Treasury is seen as the organisation in government which is most to be regarded with suspicion. That came from a consideration of the so-called zero option and I should like to emphasise once again that so far as concerns export credit and finance support the Government have decided that it should continue to be provided.

Lord Trefgarne

I am greatly obliged to my noble and learned friend. I must say that to be perfectly honest I am not much reassured. I had hoped for some Treasury remorse for past misdeeds; but I am bound to say that I did not detect much. The fact is, as I said earlier and as my noble friend Lord Prior underlined, there have been some quite serious problems in this regard. I agree with my noble and learned friend that there may be times when Ministers seek to obtain agreement to something which is not reasonable and to which the Treasury ought not to agree. Sometimes even in those circumstances it is overruled and business is nonetheless put in place.

Yet I attach even more importance to the point made by my noble friend Lord Prior, who said that what is perhaps almost equally damaging is the delay that it tends to impose upon the decision-making process in Whitehall. I do not propose to press the amendment. I am grateful to all Members of the Committee who contributed to the debate. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clause 5 [Provision of services and information]:

Lard Clinton-Davis moved Amendment No. 26: Page 3, line 17, leave out ("or investment").

The noble Lord said: In moving this amendment, it may be for the convenience of the Committee to consider with it Amendments Nos. 28 and 29.

The words "or investment" were added by the Government during the Commons Committee stage of the Bill. The purpose was to enable the ECGD to levy charges for any information or data that it provides to exporters who may invest or even consider investing in an overseas market. It would be additional to the charges that the Bill already introduces for information or data provided to exporters from this country in relation to basic credit insurance.

In his explanation of the amendment, the Minister in another place, Mr. Sainsbury, said: the sort of information services involved will not be the sort of service that the ECGD tries to provide to ordinary exporters—information on available credit insurance in a specific, market—but will be more wide-ranging information, amalgamated and averaged, thereby disguising confidential information about specific markets".—[Official Report, Commons, Standing Committee H; col. 226.]

He considered that that would have very little effect on small exporters because the amendment related to investment insurance and project insurance after the privatisation of ISG. That is business which is usually undertaken by large exporters.

What troubles my noble friend Lord Williams and me is that the amendment introduces the possibility of further charges being imposed on United Kingdom exporters, the effect of which would be to put them at additional disadvantage in relation to their foreign competitors. For that reason, we tabled this amendment which, for the time being, is intended to probe further the Government's thinking about the matter.

With regard to Amendment No. 29, the word "services" has been narrowly defined in Clause 5 (on page 3, line 20). I ask the Minister to explain what is included and what is excluded. I beg to move.

Lord Henley

The central purpose of Clause 5 is to allow the Secretary of State, through the ECGD, sufficient flexibility to market certain services in addition to its normal export credit and investment insurance facilities. However, I must stress that it is a contingency provision since as yet there are no firm plans to embark on such activities in any extensive manner.

The noble Lord said that it was the Government who introduced the amendment in another place. However, it was the noble Lord's colleagues in another place who wished to widen the scope of information which the Secretary of State can provide. The Government took that factor on board and achieved it by means of the government amendment which refers explicitly to investment insurance. I find it therefore somewhat bizarre that the Opposition now wish to delete the words "or investment" in lines 17 and 18 and extend the wording in line 20.

The other main type of insurance other than credit insurance on which ECGD could normally be expected to provide information is investment insurance, to which Clause 2 refers. Amendment No. 29 suggests adding the words "or other assistance". We believe that that is unnecessary. The department's activities in this area have so far been limited to giving seminars for which a fee is charged. Apart from those seminars, which exporters have found particularly useful, there are no firm plans to provide information relating to credit insurance and investment insurance matters or to provide services. The clause is essentially a contingency provision at this stage. However, in the future the ECGD's expertise in the field of risk assessment and debt recovery services could prove useful to commercial organisations in the private sector and to other credit insurers.

I hope that I have dealt with most points that the noble Lord raised in what was a probing amendment.

Lord Clinton-Davis

I shall consider what the noble Lord said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7 p.m.

Lord Clinton-Davis moved Amendment No. 27: Page 3, line 17, at end insert ("providing that such information does not breach commercial confidentiality").

The noble Lord said: This amendment stands in the names of my noble friend Lord Williams of Elvel and myself. At present the clause permits the Secretary of State to release any of the information held by the ECGD including that which may be of a commercially sensitive nature.

Lord Henley

Perhaps I may briefly interrupt the noble Lord. Is he moving Amendment No. 27? I thought that he moved Amendment No. 28.

Lord Clinton-Davis

I thought that I had moved Amendment No. 27. I believe that intervention was designed to put me off. It was certainly not helpful.

We seek to ask whether commercial confidentiality can be protected in the interest of the department and of its customers. I beg to move.

Lord Henley

I apologise to the noble Lord for that interruption. It certainly was not intended to put the noble Lord off his stride. I thought I heard the noble Lord refer to Amendment No. 28 and that we might have skipped an amendment. He might have found me responding to an amendment that he had not moved.

It is and always has been the policy and practice that certain information relating to ECGD's business should not be divulged. That is in recognition not only of the damage which might be done to United Kingdom exporters' chances of winning overseas contracts by the disclosure of sensitive information relating to their tenders, but also of the political embarrassment which might result if overseas governments became aware of ECGD's assessment of their economic and political conditions. I have no hesitation in assuring the noble Lord that considerations of confidentiality will not be overlooked, whether it is a question of providing services or information under Clause 5 or under any other part of the Bill.

Not only is it unnecessary to include in the statute a qualification of this type, which does no more than codify well-established precedent, but it would also be ill-advised since this amendment could leave the Secretary of State open to legal challenge about whether or not specific pieces of disclosed information are commercially confidential. I hope that that explanation will enable the noble Lord to withdraw the amendment.

Lord Clinton-Davis

It is a difficult area, but I thank the Minister for that information. I am not entirely of the view that he has met the concerns that we sought to draw to his attention. Nonetheless, I shall consider what he said and in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 28 and 29 not moved.]

Lord Clinton-Davis moved Amendment No. 30: Page 3, line 22, at end insert ("which are necessary to cover only the costs of procuring and presenting such information or services".).

The noble Lord said: I beg to move Amendment No. 30 which stands in the names of my noble friend Lord Williams and myself.

The purpose of the amendment is to return to the remit of the ECGD under the 1978 Act: to operate at no net cost to the taxpayer. We seek to probe whether the public at large —United Kingdom exporters—should be charged for information which, after all, the ECGD has already collected at the taxpayers' expense.

On Amendment No. 31, in Standing Committee H in another place there was a debate on the policy of charging for services by the ECGD to exporters. The Minister, Mr. Sainsbury, stated: It is not intended that the ECGD would in addition start charging customers for export or investment insurance, for the information that it provides in respect of particular transactions, when it is asked to provide a guarantee, or when an exporter wants to know about the possibility of cover for an overseas contract. Those form part of ECGD's basic service to its customers …[who] will not be affected by the clause".

The Minister continued: However, as I suggested, the ECGD might offer other types of service. In one sense, Clause 3 is an enabling clause, because ECGD does not have current plans for anything other than seminars. I could suggest that the ECGD might provide general market or credit information to the United Kingdom companies or to other credit insurers. The seminars are the only current activity, but those other activities are being considered".

The purpose of the amendment is to ascertain whether the charges are made only for the new type of services that are being suggested by the Minister. Should such services be provided free of charge on the basis that it would be a positive encouragement to United Kingdom exporters?

What is the Minister's estimate of costs? If the services were to be provided without charge, and if the amounts of money are limited as I believe they would be, might not the benefits outweigh the disadvantages of charging? It is therefore in order to probe those matters that we have tabled the amendment.

Lord Henley

With regard to Amendment No. 30, where companies wish to acquire additional information or services which will be to their benefit, it is entirely reasonable for those companies to be asked to pay a fee.

The ECGD has acquired considerable expertise, contacts and experience of credit insurance operations. Those are highly marketable assets which it would be sensible for the department to provide on a commercial basis independently of its day-to-day activities. The charges payable will assist the department in keeping costs down and will go towards lower premiums. That must be a matter which the noble Lord welcomes in terms of facilitating exports. The provision of information and services may be sold overseas. There is no reason why it should be sold at cost price. The best way to find out if an article is really required and necessary is to find out whether people are prepared to pay the going rate for it.

We expect ECGD to act in a businesslike manner. Therefore, it appears unreasonable to expect it to provide services without allowing it to make a reasonable charge for doing so. No business would contemplate doing business for which it was not allowed to make a profit. Any profits which it makes here will be a welcome addition to its reserves and can be used to subsidise premium rates.

With regard to Amendment No. 31, my noble and learned friend the Lord Advocate gave an assurance when introducing the Bill on Second Reading that it is not intended that ECGD should start to make charges for information or services which it provides in relation to a specific transaction or in response to a general inquiry from an exporter about the possibility of cover. These form part of ECGD's basic service to its customers. It is long-established practice and will not be affected by Clause 5. However, while we agree with the sentiments behind this amendment, we do not consider it wise to incorporate them into the statute for the simple reason that the phrase "basic service" is somewhat vague and might in the future open the Secretary of State to legal challenge.

I can assure Members of the Committee that this clause will not in any way mean that ECGD will provide less service to its customers; its intention is to enable it to widen the range of services which it can offer. Bearing that in mind, I hope that the noble Lord will withdraw the amendment.

Lord Clinton-Davis

The Minister has not wholly dealt with the points which I made earlier, although I thank him for his explanation in relation to Amendments Nos. 30 and 31. What sort of charges are we talking about? Presumably in the past ECGD has provided free of charge information of the sort which we are discussing. What has been the burden imposed on ECGD as a result? What benefits did it perceive that it was offering by not rendering a charge? In any event, that is somewhat unusual because government departments frequently impose charges for services of that character in other areas. Did ECGD take the view that it was beneficial to exporters to adopt the policy which it has applied in the past?

Will the Minister give an indication of the charges that are likely to be made in advance of incurring any costs? For example, if a potential exporter goes to the department and requests information which would be covered by a charge, will it be the practice to say, "You know that a charge will be made for that. We can give you an indication of the nature of that charge in case you do not wish to pursue the inquiry?" What guidelines are to be given? I know that it is difficult to specify a precise charge in a hypothetical situation.

The Committee will be reassured by what the Minister said. Whether that will be translated into practice is another matter; only time will tell. The Minister said that there would he no lesser service to the customer and that the policy was intended to widen the range of available services. I hope that that is the case. However, before I withdraw the amendment perhaps the Minister will answer the points I raised.

7.15 p.m.

Lord Henley

Clause 5 is a contingency clause. As yet there are no firm plans. The clause merely allows ECGD sufficient flexibility to market certain services in addition to its normal export and credit investment insurance facilities. Given that there are no firm plans as yet for the use of those powers, it is not possible at this stage to give any estimate of sums or fees involved. One would hope that in the hypothetical case which the noble Lord put to me—and I am glad that he stressed that it was hypothetical because I must give a hypothetical answer—it will be possible to give some idea of the fees involved when the inquiry is made so that a decision can be made as to whether or not the inquiry is worth pursuing, which is the case with any other service in the market place. I hope that that answers the noble Lord.

Lord Clinton-Davis

It does not entirely answer my point. if this Bill reaches the statute book we are giving the Secretary of State a blank cheque because he is at le to make such charges as he may determine in his absolute discretion. We should like further assurances that the charges will be reasonable and that they will not be used as a deterrent. I note what the Minister says. I am sure that he will say that they will be reasonable but it is a question of applying an objective approach.

Lord Henley

My right honourable friend the Secretary of State wishes to allow the ECGD to act in a businesslike manner. If it wishes to act in a businesslike manner, it must charge fees that are reasonable. As the noble Lord says, the Secretary of State has the power to make such charges as he determines. If the fees are unreasonable, then they will not be much use in allowing the ECGD to act in a businesslike manner.

Lord Clinton-Davis

Time will tell. It depends on whether the Treasury has a hand in the matter. The Minister seemed to indicate that he sympathised with at least one of the points in the hypothetical case I gave. Of course, it will not be hypothetical because people will wish to elicit information. I hope that guidelines will be issued to Treasury officials so that there is a harmonised approach to the way in which matters are dealt with. I hope that it will be drawn to the attention of the person seeking the information that a charge will be made and, wherever possible, that an indication of the charge will be given so that it will be known instantly that a liability is being incurred. Perhaps the Minister will indicate whether he is prepared to ponder on that.

Lord Henley

My colleagues in the department and I will consider that between now and the next stage of the Bill. Perhaps I may correspond with the noble Lord.

Lord Clinton-Davis

The noble Lord is very helpful. I shall await his correspondence on the issue. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 31 to 34 not moved.]

Clause 5 agreed to.

Clause 6 [Commitment limits]:

Lord Clinton-Davis moved Amendment No. 35: Page 3, line 28, leave out ("£35,000") and insert ("£35,001").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 36 to 43 inclusive. These are probing amendments. The financial limits in Clause 6 restrict the total amount of business which ECGD may have on risk at any given time; that is, it may not provide insurance in excess of those limits at any one time.

I understand that current government thinking may be that the existing commitment limits are rather high. Indeed, they may never be attained. The new legislation seeks to reduce them. That was a matter raised in another place at Committee stage when the intention was not to change the limits. The Opposition sought an explanation of the significance of the limits.

My honourable friend in another place, Mr. Alun Michael, raised these issues and they deserve a somewhat fuller explanation than that given by the Minister in another place. We are worried that United Kingdom exporters may be shackled unreasonably. The Minister says that exporters in other member states are given undue favour. We dealt with that issue in a previous debate this afternoon and I shall not range over that. But we strongly take the view that we are seeking—I believe it was the phrase of my noble friend Lord Desai—to straighten out the playing field while others are not. If we are to move on that front at all we need a concerted approach. We fear that that is not the situation at the present time.

Amendment No. 43 seeks to leave out "three" and insert "four". In another place a similar amendment was debated and again that was a probing amendment. At that time it was sought to replace "three" with "two". We are now approaching it in another way. At that time the Minister, Mr. Tim Sainsbury, said, I appreciate that this is a probing amendment, but successively I am accused of not doing enough and am then faced with an Opposition amendment that seems intended to lessen the ECGD's scope to help exporters by reducing the number of occasions on which the statutory limit can be increased by affirmative resolution;—in other words, bringing in the need for primary legislation at an earlier stage. If the hon. Lady [referring to my honourable friend Ms. Joyce Quin] had tabled an amendment seeking to substitute 'four' for 'three—

that suggestion came from the lips of the Minister— one would have seen that indeed her intention was to help the ECGD carry out its functions, but by trying to reduce the number of occasions on which the statutory limit can be increased and thus having to bring primary legislation before the House at a lower level, she makes the ECGD's work potentially more difficult".—[Official Report, Commons, Standing Committee H, 21/2/91; col. 250.]

I am therefore coming forward with the Minister's own proposition. The three times limit is common in legislation; I do not know whether or not it goes back to 1816 of which the noble and learned Lord is so fond. However, it was included in the 1978 Act and enables us to increase the statutory limit for the ECGD three times by affirmative resolution without the need for primary legislation. I return to the suggestion made by the Minister. I beg to move.

Lord Fraser of Carmyllie

This is a fairly complicated group of amendments but they effectively cover the same anxiety.

Statutory limits have always been set upon the extent of the commitments which the Secretary of State may incur in respect of his export promotion activities through ECGD. It is appropriate, in view of the extent of the liabilities which can arise, that ECGD's activities should continue to be subject to the control of Parliament in that way.

Clause 6 places limits on the level of commitments that may be assumed in respect of the operations covered by Clauses 1 to 3 of the Bill. Subsection (1) imposes a limit of £35 billion on sterling liabilities for commitments relating to exports and investment insurance. At present the sterling statutory limit is set at £35 billion and thus no change is proposed. At present sterling commitments stand at just over £25 billion. The Bill thus allows a reasonable level of manoeuvrability and there is provision for the maximum amount of commitments allowed under the Bill to rise to £50 billion.

ECGD commitments are divided into sterling and foreign currency commitments and the latter are expressed in special drawing rights (SDRs). The foreign currency limit at present stands at SDR £25 billion but, bearing in mind liabilities as at 31st December 1990 amounted to SDR £5.7 billion, it is proposed to reduce that limit to a more meaningful level of SDR £15 billion. Again the Bill contains provisions to increase the limit to SDR £30 billion.

Provision has been made in the Bill for separate limits on commitments relating to the new financial management powers thereby creating a clear distinction between commitments arising from the support for new export business, and those additional commitments which arise from the management of ECGD's portfolio. The commitment limits proposed for financial management activities have been calculated on the assumption that the bulk of ECGD's existing fixed rate export finance portfolio will be refinanced and/or hedged using the financial management powers in Clause 3. The basis on which those commitments have been calculated has been agreed with Treasury. Commitments, of course, start at zero. They are expected, however, to rise quite rapidly as opportunities are taken to manage existing exposures on ECGD's portfolio. I would not care to predict when the proposed ceilings of £15 billion and £10 billion SDRs will be reached. That will depend on a number of factors, including the speed with which the financial management process can be pursued.

As the Notes on Clauses explain, increases in the statutory limits would have to be made by an order made with the consent of Treasury and approved in draft by a resolution of the House of Commons, on not more than three occasions. The maximum amount of commitments in respect of arrangements relating to exports and insurance after permitted increases will, therefore, be the £50 billion and SDR £30 billion, to which I have already referred.

That is a complicated explanation but the long and short of it is that while there are limits, they are clearly not going to be bumped up in the near future, but nevertheless, they are sensible ones. Coupled with that, Amendment No. 43 seeks to leave out "three" and insert "four". As the noble Lord appreciates, the opportunity to multiply by three is one that is frequently found. Three increases in the statutory limit by affirmative resolution of the House of Commons strikes a reasonable balance between the need to minimise the requirements for unnecessary primary legislation, parliamentary accountability and operational flexibility.

The noble Lord referred to the intervention by my honourable friend Mr. Sainsbury when he said, "Why not four?". I do not believe that that was meant to indicate anything more than that what one should do in these matters is find a reasonable balance. Three is the traditional figure and there would seem to be no good reason to depart from that.

Lord Clinton-Davis

I found the first part of that explanation very complicated indeed. I was tempted to suggest that the noble and learned Lord put aside his brief and explain it in his characteristically clear way, but I thought that would be extremely unfair. I shall try to understand, on further reflection, what his explanation means.

As regards my reference to Mr. Sainsbury, he said, If the hon. Lady [speaking of Ms. Quin] had tabled an amendment seeking to substitute 'four' for 'three', one would have seen that indeed her intention was to help the ECGD carry out its functions". When one tries to follow what the Minister suggested, one finds that the noble and learned Lord is less than conciliatory. However, I do not propose to press the matter now. I shall look again at what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 36 to 45 not moved.]

7.30 p.m.

Lord Clinton-Davis moved Amendment No. 46:

Page 4, line 40, at end insert: ("( ) Nothing in this section shall interfere with Parliament's existing scrutiny rights: nor prevent any reference to the Parliamentary Commissioner nor limit the possibilities of judicial review".).

The noble Lord said: I wonder why the subsection has been left so vague? It confers very wide powers on the Secretary of State. I wonder why the normal accountability procedures should not apply because clearly they do not. This is an important matter. I await to hear what the noble and learned Lord or the noble Lord, Lord Henley, has to say in explanation. I beg to move.

Lord Henley

I am happy to give the noble Lord a firm and comprehensive assurance that neither Clause 6 nor any other clause of the Bill has the effect which this amendment seeks to guard against. Nothing in the Bill will interfere with or prejudice the right of either House of Parliament through its normal procedures to inquire into or debate the conduct of the Secretary of State in the discharge of his functions under the Bill. ECGD is subject to a range of procedures which should ensure that his activities are fully reported to both Houses.

Similarly, the activities of the Secretary of State in this area are subject to investigation by the Parliamentary Commissioner by virtue of Section 4 of, and Schedule 2 to, the Parliamentary Commissioner Act 1967. Nothing in the Bill expressly or impliedly repeals that provision. The jurisdiction of the courts in relation to the judicial review of the activities of the Secretary of State in the exercise of his functions under this Bill is determined by the general principles developed by the courts through case law. Nothing in the Bill removes or limits that jurisdiction of the courts in any part of the United Kingdom in that regard. The possibilities of judicial review will remain as they are now.

I hope that the Committee will accept my assurance on these matters. It would be possibly harmful to insert the amendment into the Bill. The implication would inevitably be that statutes not containing the provision embodied in the amendment might in some way prejudice or interfere with the procedures described. Why otherwise should Parliament make special provision in the Bill to negative such prejudice or interference? The result can only be at best confusion and at worst a weakening of controls, both parliamentary and judicial, over the activities of the Executive for no good reason. With that explanation I hope that the noble Lord will feel able to withdraw his amendment which is entirely unnecessary.

Lord Clinton-Davis

I am grateful to the noble Lord for using the word "unnecessary" rather than something as insulting as "redundant". The explanation he his put forward is fair. I am not sure about the amendment being positively harmful, but I take the point that the Minister made. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 agreed to.

clause 7 [Reports and returns]:

Lord Clinton-davis moved amendment No. 47: Page 4, line 41, after ("report") insert ("not later than 30th June in each year").

The noble Lord said: We seek to ensure by the amendment that the annual report referred to in the Bill will be available sufficiently early every year to allow proper, meaningful and efficient scrutiny by Parliament to take place and to enable any changes to future action under Sections 1 to 5 of the Act to be made before a further year elapses. I beg to move.

Lord Henley

The amendment obviously seeks to oblige the Secretary of State to produce the report no later than 30th June each year. It may help the noble Lord if I outline briefly the arrangements that the ECGD will have for reporting to Parliament and the role that the annual report is to play. ECGD will have a high level of reporting to Parliament. It already produces annual trading accounts which are statutorily required by the Exchequer and Audit Departments Act 1921. These are laid before Parliament. It also produces annual estimates and appropriation accounts and the Department of Trade and Industry report which from this year replaces the public expenditure White Paper.

When the Bill is in effect there will also be the requirement to make an annual return to Parliament of the ECGD commitments logged against the statutory ceilings and the statutory annual budget, both of which will be required by Clause 7 of the Bill.

Although final decisions on the precise form and content of the new statutory report have not yet been taken, the Government's basic intention is that the existing annual report should represent a starting point for the new report, though changes will be necessary to reflect ECGD's changed role after the privatisation of Insurance Services Group and the new powers which will be conferred by the Bill, particularly those in Clause 3.

The annual report, which at present is produced on a voluntary basis, covers the following topics: first, a review of the year's activities of the various groups or divisions; secondly, a detailed report and accounts of the trading operations; thirdly, a brief report of the non-trading operations, such as the public expenditure programmes operated by ECGD, for example, the fixed rate export finance scheme; and, fourthly, developments within international fora, for example, OECD and the EC policy coordination group.

As new activities permitted by the Export and Investment Guarantees Act come on stream after Royal Assent, sections will then need to be added on financial management activities authorised under Section 3 of the new Act and services provided by ECGD for a fee, as authorised by Section 5 which we discussed earlier. In addition it may be possible for the annual report to contain an expanded section on the non-trading operations of the new ECGD, possibly building in elements currently contained in the DTI public expenditure report and a summary of returns made under Clause 7 of commitments logged against the statutory ceiling. It is also the Government's intention that the separate annual report required by the present Act in relation to investment insurance activities should be subsumed into the new report.

It is planned that the annual report should report on the financial year covered by the annual trading accounts prepared under the Exchequer and Audit Departments Act 1921. It will therefore appear at the same time as those accounts and be combined with them to produce a reasonably comprehensive overview of ECGD's activities in that year. On that basis the timetable for its preparation will depend on the timetable for the preparation of the trading accounts. Apart from the statutory deadlines set in the Exchequer and Audit Departments Act it is not feasible to set any earlier deadline for the publication of the accounts and thus of the annual report. It is however highly unlikely that the accounts would be finalised as early as 30th June in any year.

I do not therefore think it will be helpful to impose on the Secretary of State the mandatory timetable for preparation of the report which this amendment seeks to impose. There will inevitably be a gap between the end of the year reported on and the appearance of the accounts and report for that year. Reflecting this, it is intended that the report should include material, when it does appear, on developments between the end of the financial year reported on and the publication of the report. That will ensure, we hope, that the report is as up to date and comprehensive as possible. On that basis, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Clinton-Davis

I am indebted to the Minister for his long explanation which those who are interested will wish to consider. I am glad that the amendment gave him that opportunity. After all, that was its main purpose. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 48: Page 4, line 44, after ("year") insert ("and not later than 30th June in each year for all returns except for the first return to be made under this section").

The noble Lord said: In moving this amendment I seek to obtain an assurance that reports on commitments are produced sufficiently early for any perusal and scrutiny of them to be useful and for any action which may be consequential to be implemented before the accumulation of any further commitments arises. I beg to move.

Lord Henley

It may help the noble Lord if I remind the Committee of what my honourable friend the Minister for Trade said, in Committee in another place, in relation to the timetable for the preparation of the returns of commitments other than the first return referred to in Clause 7(4) of the Bill. He said that in normal circumstances it would not be regarded as at all probable that the preparation of the return would be later than 30th June in any year and that, in such circumstances, he would expect a return to be available earlier than 30th June, as mentioned in the amendment.

That said—I appreciate that this is a probing amendment—it would not be wise to turn this target date into a statutory date with which compliance is mandatory. Unusual circumstances, as we know, often occur and may well prevent compliance with the 30th June date. We would not wish for the Secretary of State to commit technical breaches of the Act, through no fault of his own, when such circumstances Occur.

The noble Lord should note that the Secretary of State is placed under a legal obligation to prepare the return "as soon as practicable" and, if he were to fail in substance in complying with this obligation without good reason, he would soon be called to account through the normal procedures of parliamentary accountability.

I hope that the assurance I have given and the repetition of what my honourable friend said in Committee in another place will be sufficient for the noble Lord and that he will feel able to withdraw his amendment.

Lord Clinton-Davis

I thank the Minister for that helpful response. We shall look at what he said. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 49:

Page 5, line 2, at end insert: ("( ) Within 90 days of the coming into force of this Act, the Secretary of State shall prepare a report and financial analysis of the cost of researching, developing and implementing the Portfolio Management System in the Export Credits Guarantee Department.").

The noble Lord said: Again, this is a short matter. What we are seeking is the publication of the costs of setting up the portfolio management system in the ECGD. We are looking for the inclusion of staff costs, consultancy fees, information technology costs, staff training expenses, costs involved in publicising the new system to exporters. All those points are critical for any financial analysis. I beg to move.

Lord Fraser of Carmyllie

The proposal is not practical for a number of reasons. First, it would be very difficult to arrive at a meaningful estimate of the cost of developing and implementing PMS. As the noble Lord correctly anticipated, the main element of the cost is staff time, in both ECGD and other departments, going back over some seven years to 1984 when the concept of a portfolio management system was first mooted in an internal management review. It will be understood that over this period a large number of staff has been involved to varying extents in the development and implementation of the systems.

It is also important to remember that PMS is only part of a wide-ranging programme of change within ECGD, the objective of which has been to improve the management and control of its business. It is perhaps understandable that PMS has come to public attention. But it is only one of several systems which have been introduced as part of this programme of change. The implementation of these wider changes has been carried out, using standard Treasury guidelines of investment appraisal, to ensure that the benefits outweigh the costs.

The cost of the investment in the new systems, including PMS, will pale into insignificance when set against the potential benefits, the most important of which is that ECGD will be able to manage its affairs in order to give the taxpayer a reasonable degree of confidence that premium income will cover underwriting losses on future business, thus avoiding a repetition in future years of ECGD's current financial difficulties.

Lord Clinton-Davis

I am not wholly convinced by the Minister's reply. The noble and learned Lord is taking his life into his hands by even mentioning the Treasury in the presence of the noble Lord, Lord Trefgarne, who will no doubt seek to march us all into the Division Lobbies as a result of that incursion. I cannot accept the assertions made by the noble and learned Lord that the question we have raised is irrelevant or, as he says, not practical or worthwhile. However, I shall reflect on what he said. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7.45 p.m.

Lord Clinton-Davis moved Amendment No. 50:

Page 5, line 2, at end insert: ("( ) As soon as practicable after 31st March but not later than 30th June in each year, the Secretary of State shall prepare an annual report on and financial analysis of the operation by the Export Credits Guarantees Department of the Port folio Management System.").

The noble Lord said: The purpose of this amendment is to permit parliamentary scrutiny of premium rates and market restrictions consequential on the introduction and continued operation of the portfolio management system. As a result of this, comparisons could be made with similar facilities in other EC countries. One would thereby be able to find out whether our own exporters would be placed at a disadvantage compared with their EC competitors. That is rather important. I beg to move.

Lord Fraser of Carmyllie

While I sympathise with the purpose behind Amendment No. 50, I would say to the Committee that I consider its purpose can be achieved through the normal reporting requirements of ECGD to Parliament. During the Report stage of this Bill in the other place the Minister for Trade described the many ways in which ECGD is accountable to Parliament. I am not convinced that any significant benefit would be achieved by adding to the Secretary of State's reporting responsibilities in the manner proposed in this amendment.

It should be remembered that PMS is only one element of ECGD's new internal operating systems for managing and controlling its portfolio of risk. Its main purpose is to inform judgments about the cost and availability of ECGD cover, with a view to ensuring that there is a reasonable degree of confidence for the taxpayer that premium income will be able to meet any underwriting losses on future business.

The operation and effectiveness of the portfolio management system will be reflected in ECGD's future statutory annual reports to Parliament and, in addition, ECGD will be looking carefully at the implications of the portfolio management system for the presentation and format of its trading accounts.

These accounts have always reflected the outcome of the underlying management systems of ECGD, which were not themselves the subject of separate public reporting to Parliament. There is no reason for a different approach to be adopted towards ECGD's new management systems and, in particular, the portfolio management system.

It would therefore seem that, given the other reporting requirements, to impose this statutory obligation on the Secretary of State would not be of particular value. I invite the Committee to reject the amendment.

Lord Clinton-Davis

I do not go along with the noble and learned Lord. We are not dealing with the situation as it has been up until now but with a different regime. Because we are dealing with a different regime, about which Members on both sides of the Committee have some considerable concerns, we feel that we should have a specific undertaking to deal with the matters that are the subject of this amendment so that we can see at once what the impact has been on United Kingdom exporters, as against their competitors elsewhere in the European Community in particular. I should have thought that that is capable of being highlighted.

If the Minister were to say that it would he presented in the annual report in a way that enables it to stand out and to be printed in a particular way, then he would have gone a long way towards meeting us. The amendment goes to the heart of the matter. Will our exporters face fair competition on this front, or will they be disadvantaged, as we feel they will be?

I know the Minister takes the view that they will not be disadvantaged, but it would be very easy to give an assurance that specific attention will be drawn to this issue in the annual report so that it is not enveloped in a mass of other verbiage. That is what we are looking for. Before I withdraw the amendment, I wonder whether the Minister will seek to answer that point.

Lord Fraser of Carmyllie

It is perfectly legitimate to attempt to discover how efficiently matters are run when they are in the public sector, but I am not convinced that the way they operate here impacts quite as directly on individual exporters as the noble Lord thinks. Perhaps I may say by way of further amplification that annual reports are to be presented to Parliament. I have no doubt that the operation and effectiveness of PMS will be reflected in those annual reports. As I indicated in my first response, ECGD is looking at the implications of PMS for the presentation and format of its trading accounts. As the noble Lord will appreciate, ECGD will keep the operation of PMS under review together with its other management systems. They are always open to examination in the usual way by the National Audit Office which may wish to audit and report to Parliament.

Lord Clinton-Davis

I am not wholly in agreement with the noble and learned Lord. I shall read carefully what he has said, and I retain the right to come back to the matter at a later stage if I think it appropriate. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Lord Cavendish of Furness

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.