HL Deb 16 July 1991 vol 531 cc113-66

3.41 p.m.

The Lord Advocate (Lord Fraser of Carmyllie)

My Lords, 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 8 [Scheme of transfer]:

Lord Williams of Elvel moved Amendment No. 51:

Page 5, line 17, at end insert: ("( ) Without prejudice to the generality of subsection (1) above, the Secretary of State shall ensure that political risk insurance, on terms and conditions comparable to that prevailing before the transfer, shall continue to be provided to UK exporters by the Export Credits Guarantees Department").

The noble Lord said: The amendment stands also in the name of the noble Lord, Lord Ezra. It may be for the convenience of the Committee if I speak to Amendment No. 51ZA too. I gather that in the course of our discussions we shall return to Amendments Nos. 52 and 53 to which the noble and learned Lord the Lord Advocate spoke last week.

Amendment No. 51 directly addresses the question of political risk reinsurance. The problem that has arisen throughout the Bill—it is, I believe, the major Problem—is how the future privatised Insurance Services Group of ECGD will reinsure itself. We are all convinced that without adequate reinsurance ISG cannot survive properly. It certainly could not survive and give the service to exporters that it does at present within the context of ECGD.

Amendment No. 51 addresses the problem of political risk in the rather narrow sense because that was the issue which troubled another place in its discussions and which most troubled noble Lords at Second Reading. However, since I tabled my amendment the Government have tabled Amendments Nos. 52 and 53. The noble Lord, Lord Trefgarne, also moved an amendment at an earlier stage in Committee which went rather wider than Amendment No. 51.

I fully accept that if, as the noble and learned Lord claims, the Government accept the spirit of the amendment moved by the noble Lord, Lord Trefgarne, my amendment being much narrower than his would naturally fall. Nevertheless by moving the amendment I am giving the Committee an opportunity, which we sought last week, again to discuss insurance and reinsurance.

Amendment No. 51ZA goes a little further than Amendment No. 51. It seeks to ensure that when the Secretary of State disposes of his interest in the privatised ISG, he will make a statement to Parliament, on the financial viability including reinsurance arrangements available, and the business plan of the purchaser".

It is simply a mechanism to try to ensure that the reinsurance plans are open and known to Parliament before the Secretary of State disposes of any securities in the privatised ISG.

I come back to Amendments Nos. 52 and 53 in the name of the noble and learned Lord. The Committee will recall that when he spoke to those amendments on 9th July we had a short discussion. The Committee was happy to accept my suggestion that we should reserve the substantive analysis of the amendments until I moved my amendment today; we would then have had a week in which to consider whether the government amendments, which are slightly complex in their drafting, satisfied the Committee or whether we wanted something further.

At col. 1355 of the Official Report on 9th July, the noble and learned Lord said: 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".

That was the expression used by the noble and learned Lord in respect of the amendment of the noble Lord, Lord Trefgarne. He later stated: 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 I to provide assistance to encourage exports … I wish to point out that the amendment applies to all types of ECGD reinsurance and that there is no time limit".

As I understand those expressions used by the noble and learned Lord, the Government are prepared to see ECGD act as reinsurer of last resort on all classes of risk, not just political risk. He said: The amendment applies to all types of ECGD reinsurance".

In explanation the noble and learned Lord somewhat qualified what he had originally said about Amendment No. 52. He explained to us, quite rightly, that up to that point the Government had considered two types of assistance for market reinsurance. The first was what was described in another place and in this Chamber on Second Reading as the national interest: there would be certain political risks that were simply not acceptable to the market and the Government would ensure that ECGD stood behind those without qualification and without time limit.

Furthermore, he said that there was a second arrangement known as a top-up arrangement whereby for a period of three years the Government would ensure that ECGD became a member of the reinsurance syndicate that was going to reinsure ISG both for political risk and for commercial risk. For the moment I leave aside the anxiety that the three-year period has very little significance. A top-up facility might provide supportive capacity in value terms but it cannot do so in terms of the period. The commercial insurance market simply cannot go beyond three years on any one risk. Therefore the Government under the top-up scheme would be liable to find themselves topping up something that did not exist.

However, I believe on any reading of what the noble and learned Lord said—and I have quoted it —that the top-up scheme is no longer relevant. By saying that ECGD is and will be a reinsurer of last resort on all classes of ECGD risk, that implies to me that the top-up scheme is no longer required. According to my understanding of the noble and learned Lord's comments there will be a perpetual top-up scheme from ECGD.

I was confused by the noble and learned Lord's response to a question asked by the noble Lord, Lord Prior, and echoed by the noble Lord, Lord Ezra, and my noble friend Lord Jay. My noble friend put the matter most succinctly by asking: does the three-year limit disappear altogether from the Bill?" —[Official Report, 9/7/91; col. 1357.]

The noble and learned Lord said no, that was not the case. That reply threw me into confusion. If the government amendments are designed to reinsure all types of ECGD risk and there is no time limit, that must mean that the Government will stand as a reinsurer of last resort. They will be the last name on the slip—to use a technical expression—in the reinsurance treaty. If no one else is in the treaty, ECGD appears there on behalf of the Government. That must be the situation; I cannot see that it could be otherwise.

I shall wait to hear what the noble and learned Lord has to say, but if that is so there are two consequences. The first is that the Government have conceded the case of the noble Lord, Lord Trefgarne. We on this side of the Committee would welcome that, if my understanding of the noble and learned Lord's comments is correct. Secondly, and perhaps more importantly, the conditions under which ISG is to be privatised have radically changed. When the bidding was originally opened it was clear that a number of UK insurance companies were interested. However, they dropped out of the bidding because they were worried—and they said so openly—about the political risk problem. If the Government have now sealed off that problem, it appears to me that the bidding must be reopened.

To support that case I shall quote from a letter that I received from the Secretary of State dated 1st July. I have placed a copy in the Library. He stated: If the Bill were to be amended in a way which substantially changed the nature of the business to he privatised, and/or its value, it would then of course be open to us to reconsider the sale arrangements and if appropriate arrange for a new Invitation to Tender to be issued".

In my reply I thanked the Secretary of State for his courtesy in letting me know the situation. I expressed my view, which I believe will be generally supported, that if the bid is amended in the way in which I hope, the value of the business will change materially and a new invitation to tender must then be issued. If I am right in my interpretation of the noble and learned Lord's amendments, that is the situation in which we now find ourselves. It may be of interest to the Committee to note that I have placed a copy of that correspondence in the Library and sent a copy to the Chairman of the Public Accounts Committee of another place.

I hope that the noble and learned Lord will he able to clarify the slight confusion that remained after the end of our debate last Tuesday. It is in the spirit of trying to clear up that confusion, and not necessarily putting my amendment and that of the noble Lord, Lord Ezra, on the face of the Bill, that I beg to move.

Lord Ezra

I support Amendment No. 51 on two grounds. First, it is quite clear and puts forward the straightforward proposition that: the Secretary of State shall ensure that political risk insurance, on terms and conditions comparable to that prevailing before the transfer, shall continue to be provided to UK exporters by the Export Credits Guarantee Department". There can be no doubt about the meaning of the amendment. Secondly, it addresses a matter about which grave anxiety has been expressed; that is, the transfer of these responsibilities to the private sector. It is the view of' those who lead in the insurance business that political risk is not a matter that can be catered for by the private sector. I have in front of me an article written by one of the leading personalities in the European insurance business. Dr. Hans Kaufmann is the managing director of Swiss Re, one of the biggest companies in the business. At the end of the article he states: the political risk in the sector of private export credit insurance is not insurable and in any case not reinsurable". It is clear that in the past the Export Credits Guarantee Department provided a service which no other sector could provide. The proposition is that it should continue to do so. Our anxiety is that, subject to what may be said later, the proposition put forward by the noble and learned Lord in the amendments which are grouped with Amendment No. 51 is unclear in the light of the debate that we had in Committee last Tuesday.

Therefore, it is important for the benefit of the export industry in this country that we should know precisely where the Government stand on the issue. Are they prepared in one way or another to carry on political risk insurance or are they not? The wording is up to the Government; it depends how they interpret the proposal and how they explain it to us. Of the two main amendments that have been grouped together today I much prefer that with which I have associated myself which has been moved by the noble Lord, Lord Williams. I prefer it because it is clear and addresses the problem precisely. It covers the point about which we are all anxious, and I am surprised that the Government are not prepared to accept it. However, if they prefer their own amendment, a great deal of elucidation will be required on the part of the noble and learned Lord.

Lord Fraser of Carmyllie

In speaking to the amendment the noble Lord, Lord Williams, effectively restricted himself to an analysis of what I said on a previous occasion. He indicated clearly his anxieties about the Government's position in respect of their two amendments. In supporting Amendment No. 51 the noble Lord, Lord Ezra, went further and argued more fully in its favour. In reply I shall deal first with Amendment No. 51.

I have no doubt that in tabling the amendment the noble. Lords, Lord Williams and Lord Ezra, shared a common objective with my noble friends Lord Trefgarne, Lord Prior and Lord Weir. That objective was reflected in Amendment No. 14 which was considered during the first day in Committee. When considering that amendment I invited the Committee to consider Amendments Nos. 52 and 53 tabled in my name. I did so because, while I was prepared to accept what I believed to be the noble Lords' objective in proposing their new clause, it posed a number of legal and technical difficulties which my amendment sought to overcome. To a certain extent the same attitude applies to my approach to Amendment No. 51. However, it presents some additional problems which are greater and cannot be characterised simply as being legal and technical. Nevertheless, I hope that, having described the problems and explained more fully my Amendments Nos. 52 and 53, the noble Lords will be persuaded to withdraw their amendments and to support mine. I am mindful of the remark made by the noble Lord, Lord Williams, during our debate on Amendment No. 14—he was not here to draft amendments which could be written straight into the statute but was anxious to ensure that our shared objective was properly met within the statute.

I believe that this amendment fails to achieve what I understand to be its purpose because it is drawn too widely. By tackling all political risk insurance, rather than being provided under the intended reinsurance arrangements, the Secretary of State could probably satisfy the letter of the clause simply by making available under Clause 1 direct political risk insurance of the kind which ECGD will provide after privatisation in respect of project exports. It creates no specific obligation in relation to post-privatisation reinsurance arrangements. I understand that the noble Lord is anxious that such arrangements should be made.

While I am sure that the Secretary of State would wish to observe the spirit as well as the letter of the statute, I am sure that Members of the Committee will agree that it should be drafted in a way which most accurately and effectively imposes such an obligation.

Also, in my view the amendment is unacceptable because it seeks to freeze the terms and conditions of cover as those prevailing immediately before privatisation. That cannot be right. I have made that point before but I believe there is a general recognition —and I am not conscious that anyone has departed from it—that the Secretary of State and ECGD must retain freedom to vary terms, conditions, prices and availability of cover in accordance with their perception of changes in the quality of risk. For example, if a development such as the recent Gulf crisis should occur, the Secretary of State and ECGD must be free to respond by altering the terms on which they are prepared to make cover available on the countries most immediately affected.

4 p.m.

Lord Ezra

Would not that have applied at any time? The amendment uses the word "comparable". We do not suggest that anything should be hard and fast but that account should be taken of the developing situation.

Lord Fraser of Carmyllie

My anxiety is that the position would be frozen. I am grateful to the noble Lord for what he says; namely, that he accepts that flexibility must be given to the Secretary of State and to ECGD. I see that the noble Lord, Lord Williams, indicates his agreement with that proposition. The Secretary of State and ECGD must be free to react to changes in the economic performance of overseas countries.

In proposing that this amendment, like Amendment No. 14, should be withdrawn in favour of Amendments Nos. 52 and 53, it may be helpful if I say more about those amendments and respond to some of the points made in the course of the debate on our first Committee day. I hope also to answer the points raised by the noble Lord, Lord Williams, in the course of today's debate.

Anxiety was expressed about the effect of my proposed amendments on the so-called top-up reinsurance facilities. On reflection I accept that I should have elaborated further in response to my noble friend Lord Prior when I sought to answer his anxieties.

I should explain that my amendments create a clear obligation on the Secretary of State to determine at appropriate intervals whether there is a national interest case for him to provide reinsurance to primary insurers. That obligation applies to all types of insurance. That was picked up by the noble Lord, Lord Williams, from what I said on the amendments last week and I repeat it. That obligation applies to all types of insurance. Thus, the use of the phrase "expedient in the national interest"—and this may be where the confusion arose—does not restrict the obligation to the type of business which is to be handled under what we have been calling in a shorthand way the national interest reinsurance facility. It will apply to all classes of insurance and will, therefore, embrace the type of insurance to be reinsured by ECGD under the top-up arrangements. That is the statutory position.

The policy position remains as I told the Committee last week. The top-up reinsurance facility, as the Secretary of State has indicated, will be available for up to three years. Our confident expectation is that it will not be required beyond that period or indeed, as the way things are going at present, it will not be required for the fullness of that three-year period. However, if those confident expectations of the Secretary of State are misplaced —and that seems to be the ground for worry here—and the private market has failed to take over ECGD's top-up share of the new company's global reinsurance, my amendments create an obligation on the part of the Secretary of State to decide whether a national interest case exists for him to continue the facility.

He does not reach that judgment or decision wholly in isolation because the second amendment requires that he must consult the advisory council before reaching his decision. If he concludes that there is such a national interest case, the powers exist under Clause 1 to provide the reinsurance. In other words, none of those powers is time limited.

Another anxiety was that the amendment referred to "reinsuring persons providing insurance". I should explain that the intention is to impose an obligation on the Secretary of State to determine whether he should reinsure other insurers. Obviously we have in mind the privatised insurance services but the amendment does not restrict the obligation to insurance provided by that company alone. The Secretary of State already has the power to provide direct insurance in the national interest to exporters and banks under Clause 1 as I explained.

A further point was that the amendments say nothing about "reasonable terms". Amendment No. 14 used that expression in the context of requiring the Secretary of State to make reinsurance available, when he considered it to be in the national interest to do so, and in circumstances where such reinsurance was not otherwise available or not available on reasonable terms.

I do not believe it essential for such a concept to be included in the statute. When the Secretary of State is determining whether there is a national interest case for him to provide reinsurance, I am sure that one consideration will have to be whether the terms on which reinsurance is available from elsewhere—if it is available at all—are so onerous that they would place UK exporters at a significant competitive disadvantage. I do not see how the national interest can be judged without such an assessment being made, but I see no need for that to be specifically included in the Bill. Indeed, since there is no legal definition of reasonableness in those circumstances, its inclusion would be ineffective because in the final analysis the Secretary of State must exercise his judgment about what is or is not reasonable.

I have been asked a number of further questions. The noble Lord, Lord Williams, said that ECGD always stood in the background as reinsurer of last resort for all classes of risk. The answer is that that is so, where the Secretary of State considers it in the national interest to do so. In such circumstances it would be reinsurance which could cover both commercial and political risks.

I hope that I have fully explained the situation as regards the top-up reinsurance. There is already a policy commitment which continues beyond that period, as I have said on a number of occasions.

Finally, the noble Lord was anxious that the terms and conditions of sale may have been so significantly changed by the Government that the matter should go out to tender in order to allow fresh opportunities for others. The terms on which reinsurance is likely to be available to the preferred purchaser have not changed throughout the sale process. The terms and conditions of the privatisation, and of the tenders submitted to the Secretary of State, reflect that position.

This is undoubtedly the most important amendment and it has attracted a great deal of interest on all sides of the Committee. Having had the opportunity to expand on the points which appear to me to give rise to concern, I hope that I have been able to answer those points. Also I hope that it is appreciated that the top-up reinsurance could be covered beyond three years if it was deemed to be in the national interest by the Secretary of State.

Lord Jay

I must confess that I am still a little puzzled by the Minister's explanation. That may be my fault. We agree that if the government amendments contain the appropriate proposals, the Government are far more capable of drafting them correctly than anyone else in the Chamber. But the Committee wants to know whether, under the Minister's proposals, through the ECGD the Government will have powers to provide political risk insurance in all cases and without any time limit.

I thought that that was what the Minister said. If so, I do not understand why the shadow of the three-year time limit must remain in the Bill. The Minister appeared to be saying that after three years the Secretary of State will stop and think and may then decide to do one thing or another. Why is that time limit necessary? An efficient department is capable of thinking all the time, and if it was necessary to vary arrangements later, it would be free to do so. The industry and exporters, the most important elements in all this, would know that the situation is clear and that in the future as in the past there will be in the last resort government cover for political risks that cannot be covered by commercial insurance. Can the Minister say without qualification whether that is so? If it is so, perhaps he will explain the need for this three-year stopping point.

Lord Fraser of Carmyllie

Perhaps I can pick up the language used by the noble Lord when he said, "stop and think". I am saying that the Secretary of State indicated that in the first three years he will not stop and think because he has already committed himself to ensuring that such top-up cover will be provided when necessary. From the moment the Bill goes through there will be a continuing obligation upon him to, from time to time determine, in relation to such classes of risk determined by him as might be insured by him under section 1 of this Act, whether it is expedient in the national interest for him to exercise his powers under that section". That is all I am indicating by reference to the three-year undertaking given by the Minister of State in another place. I hope that the noble Lord is reassured by that explanation. There is nothing sinister in it. I do not want to seem to be retreating from any commitment given by the Minister of State.

Lard Trefgarne

I speak for myself in this matter. My noble friends Lord Prior and Lord Weir, and the noble Lord, Lord Tombs, who added their names to my amendment, will speak for themselves if they see fit. From my point of view, my noble and learned friend has gone as far as he could reasonably have been expected to go, and I am grateful for that.

If my noble and learned friend's amendments are accepted, as I hope they will be, the Bill will be greatly improved and will broadly cover the anxieties I expressed to your Lordships both at Second Reading and at the first Committee stage. My sentiment in that regard is reinforced by the second amendment tabled by my noble and learned friend regarding the need for the Secretary of State to consult the relevant advisory committee. I have no doubt that that committee, consisting as it does of important, competent and distinguished people in the exporting world, will not hesitate to give my right honourable friend—if he is still the Secretary of State when the time comes—the most cogent advice that it thinks necessary.

I am greatly obliged to my noble and learned friend for the amendments he has tabled. I shall support them I am not in favour of Amendment No. 51 moved by the noble Lord, Lord Williams, which suffers from some important defects. I recognise that the noble Lord's heart was in the right place when he tabled his amendments. I am sorry that they were not as erective as they might have been. I prefer the solution of my noble and learned friend and hope that the Committee do likewise.

4.15 p.m.

Lord Prior

I rather like the Opposition amendment. The noble Lord, Lord Ezra, made only one mistake. The amendment to which he spoke is written in plain English. We have all come to understand that nothing written in plain English is ever acceptable to parliamentary draftsmen. Therefore, to that extent, it is unacceptable. On the other hand, I am told that the amendment tabled by my noble and learned friend, which I find extremely difficult to understand, meets all the objections contained in the amendment tabled by my noble friend and others. It is therefore acceptable.

I am grateful to my noble and learned friend for tabling his amendment. It meets both the political risk and top-up problems which were two areas of anxiety. The words spoken by my noble and learned friend this afternoon give us the satisfaction that we require. I am grateful to him and I shall support his amendment.

I add only one other comment. As a fairly recent Member of your Lordships' House, I believe that this debate again justifies the work that this Chamber performs. A sensible amendment was proposed. The Government accepted that there was a case to answer. The matter is of great importance to exporters, manufacturing industry and business generally in this country. If we did not have a second Chamber that would not have been possible. Once again the House of Lords has done its job very well.

Lord Ezra

Before the noble Lord, Lord Williams, concludes, perhaps I may ask for a little further elucidation. With regard to the top-up, which is firm for three years, is my understanding correct that, subject to the Secretary of State thinking it in the national interest, it could be continued for an indefinite period beyond? I hope that is a correct interpretation.

Secondly, with regard to the political risk reinsurance, presumably that would be available subject to the Secretary of State considering it to be in the national interest after suitable consultation, but that it is widened to include commercial risk as well. In that respect it goes somewhat further than the amendment proposed by the noble Lord, Lord Williams, and myself. Perhaps the Minister can indicate whether that is a correct interpretation.

Lord Fraser of Carmyllie

It is an admirable and succinct summary of the amendments that I tabled.

Lord Williams of Elvel

Perhaps I could press the noble and learned Lord following the question put by the noble Lord, Lord Ezra. If it is the case, as the noble and learned Lord said, that the Secretary of State does not have to stop and think for three years, is the implication that the top-up insurance is automatic without regard to national interest or anything? Is that what the Minister said? In that case, it would seem to be odd for there to be a distinction between the three-year period, which to my mind means nothing, and the subsequent period where the national interest in some curious manner is taken into account in the Secretary of State's decision.

Furthermore, perhaps I could press the Minister regarding the words "reasonable" and "expedient". We must assume—and I hope that the noble and learned Lord will encourage me in this assumption —that those words were used by the parliamentary draftsman to make the amendment acceptable in parliamentary language. We are saying that the Secretary of State will encourage exporters; he will stand behind reinsurance of any risk that the market will not reinsure but that he must have some kind of let-out, with which I agree, and that is the reason it is drafted in that way. Essentially it means that the ECGD will be the reinsurer of last resort at all times unless the Secretary of State can make a grave exception. Am I right in that assumption?

Lord Fraser of Carmyllie

The Secretary of State does not need to stop and think during the three-year period. He has given the undertaking that if necessary top-up cover will be provided. I sought to add words of explanation and not, I hope, words of confusion that in fact the arrangements that have been made thus far to provide reinsurance within the private markets, have been very successful. While he has given that commitment, the expectation is that he will not have to deliver on it because it will all have been provided for in the private market.

Lord Williams of Elvel

Does that include the political risk element of the insurance treaty?

Lord Fraser of Carmyllie

No, and that is what I am talking about. The noble Lord is seeking to confuse me. I made it clear from Second Reading onwards that in dealing with these matters there is the political risk in countries where there is no prospect whatever of reinsurance. However, in the area of the top-up, it is anticipated that if it is not entirely covered the risk will be almost entirely covered. The noble Lord is looking anxious.

Lord Williams of Elvel

As I understand it, what used to be called the "national interest reinsurance" is for countries where political risk cover is simply not available at any price. But within the main reinsurance treaty to which the top-up applies, there is an element of political risk which can be covered normally by the market, assuming that the market has the capacity to do so. But there is still a political risk element. I was asking the noble and learned Lord to assure me that the top-up and the subsequent arrangement applied to the major reinsurance treaty.

Lord Fraser of Carmyllie

That is correct. Somewhere we found ourselves at cross purposes. I believe that the final question I was asked related to the phraseology in the original Amendment No. 14 and that something should be said about reasonable terms. I ask the noble Lord to look to my words when I answered immediately during the debate. I made it clear that I would certainly envisage that situation in circumstances where the Secretary of State had to decide whether it is expedient and in the national interest to ensure that such reinsurance is available. Clearly he does not just have to have regard to whether such cover is available. It is a necessary part of the assessment that he looks to see the terms on which such reinsurance cover might be obtained.

As my noble friend Lord Trefgarne rightly points out, where such a matter was under consideration, I have no doubt whatever that the advisory council—which he rightly says is made up of some very distinguished people in the field of exports—would be making it very clear to the Secretary of State whether the terms available in the market were reasonable or not.

Lord Trefgarne

I am most grateful to my noble and learned friend. Perhaps I may ask him one other point. I hope that his words about my right honourable friend not having to stop and think for at least three years will not come back to haunt him. Be that as it may, the noble Lord, Lord Williams, referred to a letter which he had received from my right honourable friend concerning my right honourable friend's willingness to re-open the lists as regards the bidding. We know now that the Report stage of the Bill cannot be held until the overspill Session of this Parliament. A number of us have expressed some concern about the thinness of the list—I put it in no other terms. It would be nice if more British firms expressed a firmer interest. It may be that, as a result of the amendments which my noble and learned friend has tabled and to which I hope the Committee will agree, other British firms will then become interested. Therefore, can my noble and learned friend say whether my right honourable friend is now willing to re-open the lists, and if not, why not?

Lord Fraser of Carmyllie

As I indicated at the outset, the terms on which reinsurance is likely to be available to the preferred purchaser have not changed throughout the sale process. The terms and conditions of the privatisation and of the tenders submitted to the Secretary of State reflect that position. My noble friend is correct in that the remaining stages of the Bill cannot be considered until the spill-over period of this Session. I cannot indicate to him that I envisage that the process will be re-opened. As he appreciates, we are not at the stage of a concluded contract. The Secretary of State has indicated that he has a preferred purchaser.

Lord Taylor of Gryfe

Like the noble Lord, Lord Prior, I too prefer the wording of Amendment No. 51 which seems to be entirely straightforward. I am delighted that the Government have reacted to the very considerable concern expressed at Second Reading by speakers in all parts of the House. In my experience I cannot recall a debate on a major government Bill where there was no support of any kind for particular legislation apart from that given by the Minister. It is a tribute to the Chamber, and its ability to influence legislation to some extent, that the new Amendments Nos. 52 and 53 are available.

As regards the discussions with industry—particularly with the heavy engineering side which is engaged in the export business and which is finding it extremely difficult —there is universal welcome for the amendment proposed by the Government. I certainly support it. I was not quite sure of the reply, but that is entirely my fault. I confirm the point made by the noble Lord, Lord Williams of Elvel, concerning the fact that this amendment is a very important one. It might change the attractiveness of the privatisation to some of the people who looked at it in the first instance and who decided that they could not take it on their books. The consequence was that the number of bidders fell to two, both of them being foreign.

As this is such a fundamental amendment affecting the risks in export credit insurance, I am not sure whether the Minister will now look again at giving British companies and others the opportunity of bidding for what is an entirely different product from that which was offered in the first instance.

Lord Williams of Elvel

I am grateful to all Members of the Committee who have taken part in the debate. I am particularly grateful to the noble and learned Lord who has striven to explain as carefully as he can the government amendments. I am sure that he recognises that they are rather complicated in their drafting. I believe that we can now be quite clear that the Government have done what they said they were going to do, and that is to accept the spirit of the amendment tabled by the noble Lord, Lord Trefgarne, and to put it into proper parliamentary language.

I still have some residual difficulties as regards Amendments Nos. 52 and 53. The noble and learned Lord quite rightly said that the Report stage will take place during the spill-over Session. At that time I may seek to persuade your Lordships that the amendments can be tightened up. At this stage I do not intend to oppose Amendments Nos. 52 and 53 when they are moved.

However, I make clear to the noble and learned Lord. if I have not done so before, that I agree wholeheartedly with my noble friend Lord Taylor of Gryfe and the noble Lord, Lord Trefgarne, that these amendments change fundamentally the value of the business that is going to be sold. But without any guarantee on political risk reinsurance or continued top-up reinsurance after a three-year period, the business had a value significantly less than the value of the business at the moment. I urge the Government in their Own interests to reconsider the decision not to go out to tender again. I believe that if they do not accept our advice they will find themselves in very considerable difficulty. However, I can do no more than warn the Government of that problem and, like the "stop and think" expression, it will come back to haunt them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 51A: Page 5, line 20, at end insert ("Such a certificate shall be subject to scrutiny by the National Audit Office and no scheme shall be made until written approval of the certificate has been issued by that body".).

The noble Lord said: This is one of a number of amendments designed to inject greater transparency into these issues than perhaps otherwise would be the case. The intention behind this particular amendment is to permit a proper audit to be undertaken and published before the sale of ISG takes place to a private buyer. Through the National Audit Office the public will become aware of the profit involved in the sale and of precisely what is to be sold or has been sold. The point is that the public will determine whether, out of the privatisation measure, value for money is obtained. Another important point to which we shill be adverting later in a number of amendments —and which my noble friend will also be pursuing on clause stand part—is the whole question of sweeteners. I wait with interest to hear what the Minister has to say in answer to this point. I beg to move.

4.30 p.m.

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

The invitation to tender already provides considerable detail on the scope of the property, rights and liabilities involved in the sale. This will be further developed in detailed negotiations with NCM. As part of the transfer process the Bill provides that the Secretary of State may issue a certificate to clarify the scope of the business to be sold. This would be issued to complement the contractual arrangements, following discussion with NCM and its advisers and in light of the advice of the Government's professional advisers, who include accountants and solicitors. Scrutiny by the National Audit Office would not be appropriate since it would effectively make it part of the executive process and would potentially prejudice its subsequent position as auditors. The National Audit Office would be free to examine the certificate, and the basis on which it had been prepared, at a later date.

In any event, and in accordance with normal practice, the Comptroller and Auditor-General has already advised ECGD that the NAO plans to examine the privatisation of insurance services and to conduct a value-for-money study on the privatisation. I hope with that assurance and that brief explanation the noble Lord will accept this amendment is, if not redundant, unnecessary.

Lord Clinton-Davis

I have listened to what the noble Lord has said. I shall consider his words very carefully. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 51B: Page 5, line 27, after ("scheme") insert ("hut no day shall be specified unless that day has been agreed following consultation with the relevant trade and exporting organisations and the accredited representatives of the employees' trades unions".).

The noble Lord said: The purpose of this amendment is to ensure that ISG is not transferred into the private sector until exporters and ISG's trade union members are confident that their needs will be met by the privatised company.

One of the difficulties about Clause 8 as it stands is that the powers which are accorded to the Secretary of State are extremely wide and in some respects rather vague. When it comes to interpretation—possibly by the courts—that gives rise to some difficulty. Yet despite that fact, the Secretary of State could introduce these undefined provisions without reference to Parliament, or to trade and exporting organisations, or their staff and their trade unions. Subsection (5) states: A scheme under this section may contain such supplementary, incidental, consequential or transitional provisions as appear to the Secretary of State to be necessary or expedient".

What would be deemed to be expedient? What does that mean in law? How does the Minister envisage its interpretation? We on these Benches are seeking to make the point that the wider and more vague these provisions are, the more important it is that a consultation procedure should be built into the Bill along the lines that we are suggesting. Quite apart from whether the Secretary of State should be under a duty to consult, consultation in itself can be positively advantageous. Ministers in this and another place have asserted that the consultation procedures have been satisfactory. However, that is not the view of the people who are entitled to be consulted. Therefore, we say that consultation is a critically important element in running an enterprise successfully quite apart from the obligations that we seek to impose.

Listening has not always been a faculty perceived to be important by this Government. However, they need to be able to listen to customers and employees in order to ensure that they maximise good will and efficiency and indeed help to avoid errors. We are dealing with a staff that is singularly experienced in this field; it is certainly able to proffer useful advice —advice that in some respects it might be folly to ignore. Nobody has ever disputed the fact that they are an extremely loyal and hard working staff. Yet they are deeply worried that although the Government say they are proposing to effect the transfer of staff to the government company on a voluntary basis, there is a distinct possibility—even a probability—that insufficient numbers of staff would he prepared to volunteer. The Government accordingly may have to resort to coercion. Therefore, a commitment to meaningful consultation might help to dissipate those very real anxieties. I simply cannot understand why it should not be conceded to be on the face of the Bill.

On 5th March the Minister of State argued in Committee in another place (at col. 191 of the Official Report) that Clause 8, and subsection (5) in particular, were merely technical issues. I am not prepared to accept that that is the case. The onus is on the Minister to divulge to the House what are the issues to be considered here and in particular under subsection (5).

Having regard to all those circumstances, we think it appropriate that a provision of the kind we envisage should be included in the Bill. I beg to move.

Lord Fraser of Carmyllie

In our view it would not be appropriate or necessary to have a further round of consultation before setting the day for the scheme to come into effect. I should explain that the scheme provides the structure for implementing the sale and privatisation. It will not specify those detailed aspects of the process of which consultation involving the trade unions might be appropriate.

Since the outset of discussions leading to the proposal for privatisation, ECGD has been careful to involve and consult interested parties including the staff, their trades unions and relevant exporting associations.

Before the decision to privatise was taken, both Mr. Kemp (during his review) and the inter-departmental working group of officials set up to study the options in the Kemp Report invited and received comments from all interested parties, including the trades unions.

Major exporters and exporting organisations submitted their views to the Select Committee when it examined the future of ECGD, and numerous written representations have been taken into account. The trades unions also submitted evidence to the Select Committee through the Council of Civil Service Unions.

Since the intention to privatise Insurance Services was announced on 18th December 1989, the trades unions have been kept informed of developments and have had numerous occasions for making their views known to ECGD's management at meetings of the departmental Whitley Committee and its subcommittees, including a special sub-committee relating to privatisation issues. That committee meets monthly.

They have also had meetings from time to time with management and with the chairmen of various sub-committees dealing with particular aspects of the privatisation. Topics covered include personnel records and preliminary staff projections for the new company as well as the proposed organisation of ECGD post-privatisation. Also, as I think the noble Lord will appreciate, the ECGD trade unions will continue to be fully consulted, as required by the TUPE provisions. With that explanation, I hope the noble Lord will feel that he can withdraw his amendment. He addressed specific remarks to possible redundancies. As I understand the matter, there are amendments down for discussion later in Committee. So, if he does not mind, I shall not address myself to them at this stage.

Lord Clinton-Davis

I have listened with care to what the noble and learned Lord said and, if the position as regards consultations was quite as roseate as he has suggested, one would have thought that anxieties would not have been raised with us and other Members of your Lordships' House about the way in which the consultations have been undertaken. The conclusion I have been advised to draw is that they have been less than satisfactory: otherwise we would not have come forward with these propositions. I do not think any words that have been uttered by the noble and learned Lord this afternoon will have assuaged those anxieties.

He is quite right: we shall be coming to questions of redundancy at a later stage. However, they are germane to this particular point because nothing could be more appropriate in dealing with the anxieties that have been expressed, which go to the very heart of people's problems about whether they are going to be redundant or not together with the basis of their employment in the future. These matters have not been in any sense satisfied by the scope of the discussions that have taken place. They have been kept informed, yes, but there is a world of difference between people being kept informed and having opportunities to present views in writing and having the opportunity to engage in wholehearted discussions and consultations with the people who are making the decisions. We do not think this has actually taken place.

We are dealing here—I do not think the Minister has ever suggested otherwise—with very loyal and hardworking staff. I would ask the Minister to look again at the procedures which have taken place to see whether they might be improved so that the anxieties to which I have alluded may be allayed. I will not press the matter to a vote but I would ask the Minister to reply to that point before I beg leave to withdraw the amendment.

Lord Fraser of Carmyllie

I should be grateful if the noble Lord would consider what I have said in responding to him immediately. What is of concern, it seems to me, is to understand what this scheme is. Obviously there will continue to be consultations, but the idea that it is the preparation of the scheme that is the crucial step for consultation seems to me, if I may say so to the noble Lord, to be misplaced. However, I hope he will be reassured that there will be continuing consultation both before and after the scheme's preparation.

Lord Clinton-Davis

I will confer with those who have Invited my noble friends and me to put down this amendment, and I will see what is their reaction to what the Minister has said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Lord Clinton-Davis moved Amendment No. 51C: Page 5, line 27, after ("scheme") insert ("but no day shall he specified until the Secretary of State has laid before Parliament, for approval by both Houses of Parliament, a report on the proposed operation of that scheme including the name of any transferee and the arrangements proposed by that transferee for the future operation of any property, rights and liabilities transferred to him.").

The noble Lord said: I beg to move this amendment standing in my name and that of my noble friend Lord Williams of Elvel. The amendment provides for parliamentary accountability for the sale of ISG to a private buyer. It will ensure that parliamentary scrutiny of the accepted bid and the future business plan for the privatised ISG will take place. It may also have the effect of creating greater transparency as regards any possibility of "sweeteners" being offered to induce the buyers to complete the purchase. There have been a number of occasions in the past when the Government have been in the business of offering bags of saccharine and "Sweet 'n Low" to all sorts of people. It is right that there should be maximum transparency as regards such issues, and that has not always been the order of the day. It should not be a matter that is left simply to probing by the Opposition or by sections of the media to ascertain whether in fact sweeteners have been used. We are saying that here is another possible opportunity for introducing greater transparency. The amendment would facilitate that.

Lord Fraser of Carmyllie

The areas identified in the proposed amendment have naturally been of key concern to the Secretary of State in his assessment of responses to the invitation to tender. In selecting the preferred purchaser, the Secretary of State has been satisfied that NCM, which is one of the largest private credit insurers in the world, is committed to the business as well as to its development into other areas such is domestic credit insurance, to the benefit of United Kingdom companies.

The Secretary of State has also taken into account the financial robustness of the proposals and it is significant that NCM is prepared to buy ISG and to operate it as a business in the private sector broadly on the basis proposed in the invitation to tender. The establishment of adequate reinsurance arrangements will of course be a matter of primary concern both to the Government and to the purchaser.

It is intended that further information about NCM and its plans for the business, together with details of the proposed terms and conditions of employment, will be provided to ECGD staff. As with the previous similar information, copies of this further written information will be made available to Parliament, through copies being placed in the Libraries of both Houses.

The noble Lord seems particularly concerned that there might be provided by Government what he described in a colloquial way as "sweeteners". I have to say to the noble Lord there is no question of that. The sale price and the sale process have been fully commercial, and value for money will be achieved. I should also say to the noble Lord that in any event the National Audit Office has already indicated that it will be conducting its audit during 1992–93, so, if that is his primary concern, I hope he will accept my assurance on the point. However, if that is not enough for him he will at least know that the matter will be examined by the NAO in due course.

Lord Clinton-Davis

I am grateful to the noble and learned Lord for indicating that further information is to be provided for staff and for others also by NCM, if indeed NCM is to be permitted to proceed alone. Perhaps the Minister can indicate when it is intended that information should be available, both externally and within this Chamber.

So far as sweeteners are concerned, I know of no situation where the Government have voluntarily conceded that sweeteners are going to be permitted or made available, so I do not find the information given by the noble and learned Lord in that regard in any sense satisfactory. I accept it from him, of course, but then he is not the Minister primarily concerned. Perhaps the Minister will indicate his answers to the specific points that I have just raised.

Lord Fraser of Carmyllie

I regret that I do not think I can give him any specific date for the provision of this information. Had we been able to proceed with this Bill as I had wanted, it might have received the Royal Assent before your Lordships rose for the Summer Recess and I think I would have been able to have given him a more precise and definite answer. However, he will appreciate that the Secretary of State has indicated his preferred purchaser and in those circumstances discussion and negotiation continue. I hope the noble Lord will take it from me that, although I cannot give him a precise time or date, my original assurance stands and, when it is available and appropriate, the information I have indicated will be made available. It will not only be made available to ECGD staff but will also be placed in the Libraries.

Lord Clinton-Davis

I am grateful to the Minister for that reply. I shall simply conclude on the following note. When the noble and learned Lord refers to NCM being committed to the benefit of United Kingdom companies, and so on, one has to say that UK companies remain deeply worried. They are deeply worried that NCM appears to be the favoured company so far as concerns the Government. The noble and learned Lord will know that from the various reports which have appeared in the press.

As regards exporters, my understanding is that they have not been consulted or approached in any way. I should have thought that it would have been timely for some discussions to have taken place up to the present time. However, I have taken note of the Minister's remarks. I shall further consider the matter with my noble friend in due course. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 51D:

Page 5, line 32, at end insert: ("(5A) A scheme under this section shall contain a provision that the government shall retain control of the Insurance Services Group for a period of not less than three years and during that period no private capital shall be introduced.").

The noble Lord said: When the Kemp Review made its recommendations that ECGD's insurance service business should be turned into a government-owned company with a minimum lifespan of three years, it did so for three reasons. Those three reasons were essentially as follows. First, that a three-year period would permit the company to establish a market identity and a trading record, in preparation for the eventual introduction of private capital. Secondly, it would also have the advantage of retaining some flexibility for the Government in the event of any new European Community legislation in the area of export credits emerging. Thirdly, it would reduce the amount of capital the Government would have to inject into the privatised company because the government company's profits during its three years of existence could be used as start up capital for the private company.

Existing European Community legislation on official export credit insurance—and by the word "official" I mean state backed—does not prohibit the ECGD from providing insurance for United Kingdom exporters which are exporting to other European Community markets. If new legislation were to be introduced to prohibit such insurance, or if the restrictions under Article 92 of the treaty were to be interpreted in relation to official export credit insurance in a way that has not been envisaged up until now, then official export credit insurers like ECGD would have—as is the case with existing single market legislation—sufficient time in which to adjust to the necessary extent. They would probably have two or three years in which to do so. I made that point on Second Reading. I do not know whether those words are imprinted on the noble and learned Lord's mind. I see that he is nodding his head in assent. I am stupefied that he has done so. However, I am glad that they made their mark.

Bearing the results of that situation in mind, I believe that it is unnecessary at this particular juncture to push ahead with full privatisation of ISG so far as concerns European Community legislation. If it were to be changed to a government-owned company, the Government could continue to provide full, but not as direct as present, backing for United Kingdom exporters while retaining flexibility to effect a full privatisation if—and I emphasise the word "if—any new EC legislation in this particular area were to arise.

The question of increased competition for ISG's services to United Kingdom exporters from other EC export credit insurers is somewhat different. As from 1st July 1990—that being the date when the second non-life insurance directive came into force—European Community insurers have been able to provide insurance for exporters in one member state in the Community without needing to have a representative or branch office in that member state.

On the other hand, it is true that some state-backed credit insurers, notably Coface in France, have had offices in the United Kingdom for many years without causing any impact on ECGD. But the directive has certainly forced the pace of change. It has meant that ISG could face greater competition for its services. However, that has not yet happened. Nonetheless, it is a factor that must be taken into account because its future viability could be threatened and it would be unable to counter the situation. That is because the Act under which the ECGD operates relates only to United Kingdom exporters. The Government are very unlikely, in any event, to agree to a change of the Act to allow the ECGD to insure exports from other European Community countries and so compete on an equal basis with other credit insurers within the Community. Although such other Community business would probably be profitable, the insurance provided for it by the Government would be regarded as an additional contingent liability.

It must be the case that a government-owned company could provide such a service. Indeed, as it is currently constituted, ISG could provide export credit insurance for other European Community exporters just as easily as a privatised ISG. Such insurance could be provided under a separate account operated on a strictly commercial basis. We believe that this is a relevant amendment. We hope that it meets with the Government's approval. I beg to move.

Lord Fraser of Carmyllie

The noble Lord was surprised that I recollected what he said on Second Reading about the possibility of some future legal challenge within the European Community. I do indeed recollect what he said. However, where we part company is that I continue to argue that there appears to us to be a problem of a possible future legal challenge to official credit insurance support for exports to the EC and OECD countries. It is possible that a government-owned company which differed from a private sector insurer, only to the extent that its capital was provided by government, would be proof against such challenge. Nevertheless, there has been an element of doubt about this which certainly does not arise in the event of privatisation.

I should like to make clear to the noble Lord the fact that that is not the primary reason for undertaking this approach to privatisation. We are concerned to provide a permanent solution to meet the real problems which currently face the organisation. The most serious of these is the need for the Insurance Services Group to remain competitive as the pressures arising from the creation of the single market increase. Failure here would be serious for both the organisation and its important customers; namely, the British exporters.

For it to compete fully, we would have to create a company which was free both to conduct domestic credit insurance in the United Kingdom and to provide credit insurance of other countries' exports. The first of these is an area which is fully commercial and the private sector is perfectly able to give industry the service it needs. It may be an acceptable approach to the noble Lord, but it will come as no surprise to him if I say that it would seem to me to be extremely difficult to justify creating a new public sector player in this field with the consequence that we were rolling forward the frontiers of the state rather than causing them to retreat.

I accept that there was a recommendation in the Kemp Report that such a government company status should be provided for and that it should be regarded as a stepping stone towards an eventual privatisation. Mr. Kemp saw the need for insurance services to operate as a government-owned company for at least three years in order that it could acquire reinsurance backing and a track record for profitable trading so that it could then be sold. But since he wrote that report discussions with the reinsurance market and advice from the Government's financial advisers have shown such a delay to be unnecessary and early privatisation to be a real possibility.

There is a further argument which I invite the noble Lord to contemplate very carefully indeed. He referred to the quality and calibre of the staff employed by ECGD. I wholeheartedly accept all that he had to say about that. But if we are to embark on the process of privatisation, an interim government company stage might prove to be particularly unsettling for the insurance services staff and customers. Under the one-step privatisation, the staff will have the opportunity to assess the new owner and the employment terms he is offering. They will then be able to express their preference for joining the new company or remaining in the Civil Service. Under the two-stage process, they would not know at the time of expressing their preference—in this instance, between the government company and the Civil Service—who their eventual employer would be. Such uncertainty might well mean that they would be less willing voluntarily to choose to join the new company than would be the case under the one-step route. I understand the apprehension that the staff may feel about a major change which lies before them, but I am confident that the way in which the process will be managed will provide the reassurance they need. That would be less easy to achieve under a two-stage approach and is a further reason for avoiding it.

To sum up, the Government do not accept that a case exists for establishing a government company in preference to a private sector solution. More importantly, as a permanent arrangement, it fails adequately to meet the real challenges and creates problems of its own; and as a temporary expedient it is simply unnecessary. We now have a preferred purchaser. In concluding his remarks on a previous amendment the noble Lord indicated that there had been some criticism of NCM. I would say that was not a wholly universal response. If he looked to see who commented on it he would find that a number of individuals indicated support for the Secretary of State's choice of a preferred purchaser. The deputy chairman of the British Exports Association said that the choice was excellent.

5 p.m.

Lord Clinton-Davis

I shall put the question back to the noble and learned Lord. Is he suggesting that the choice is universally popular? He knows that the criticism has far outweighed—

Lord Fraser of Carmyllie

I certainly do not accept that that is the position.

Lord Williams of Elvel

Does the noble and learned Lord accept that the choice lay between two bidders, one Dutch and the other Italian?

Lord Clinton-Davis

I am perfectly prepared for the noble and learned Lord to answer that question.

Lord Fraser of Carmyllie

I am not used to this system. I thought that I had intervened during the speech of the noble Lord, Lord Clinton-Davis. The noble Lord, Lord Williams, has now intervened in my intervention. That is at least unconventional and I am surprised that it is permitted.

An objective assessment was made of the Secretary of State's choice. I invite the noble Lord to look at what public comments have been made. A number of individuals have commented, including the one to whom I referred who regarded the choice as excellent. Whether there were 100 or two such comments is neither here nor there. The individual to whom I referred said that the choice was excellent. I stand by that.

Lord Williams of Elvel

We are in Committee and we are allowed to speak whenever we feel it appropriate. Members of the Committee can say at any stage what they feel they have to say. NCM is a perfectly respectable organisation. There is no doubt about that. However, in the end, the bidding came down to two companies, one Italian and the other Dutch. I come back to what I said in regard to an earlier amendment. With the amendments that the Government are about to move, the bidding should be reopened as the whole nature of the transaction has changed. That is the point which my noble friend was trying to make.

Lord Fraser of Carmyllie

I am sorry that the noble Lord should feel that his noble friend cannot answer the points that I am making as we deal with this amendment. From my previous experience, the noble Lord, Lord Clinton-Davis, is more than able to hold his own. I have indicated that the objective assessment of the preferred purchaser was excellent. It is not just that it is a well known company. The decision was considered to be an excellent one. In the debate on an earlier amendment the noble Lord indicated that there had been no support for that. I wanted to set the record straight. The British Exports Association, which is actively involved in exporting from this country, described the Secretary of State's choice as excellent.

Lord Clinton-Davis

With respect, I did not say that at all. I said that the Minister was seeking to suggest that the choice was universally popular. I am saying that substantial criticisms were launched. The Minister knows that only too well. Criticisms have been made in this Chamber. Those do not in any sense impugn the probity of NCM. One does not have to do that. We believe that the way in which the process has developed is less than satisfactory. That is why my noble friend has suggested that the process should perhaps be reopened. I fully support him in that.

The noble and learned Lord referred to the problem of an official legal challenge. I really do think that he has not begun to answer the points that were made previously and indeed today about the imminent effect of that. He will know only too well that the process undertaken by the Commission in relation to such matters in terms of changing the law will take a considerable period of time. There would be a substantial running-in period before any new law could take effect. The challenge in the courts is materialising but the fact remains that even then the judgment of the European Court of Justice would have to be carefully considered by the Commission. There is therefore no case for asserting that there is an imminent requirement for change. That is what the Minister sought to suggest on that point.

The Minister then went on to another point because he was defeated on that point. He referred to the merits.

Lord Fraser of Carmyllie

We shall progress a little more speedily and expeditiously if the noble Lord takes on board my points. I made it quite clear in seeking to answer his point that, whether I am right or wrong in the matter, that has never been put forward as the primary reason for privatisation. I appreciate that the noble Lord does not think that the primary reason I indicated for trying to bring the arrangements up to date is a particularly good one. Be that as it may, it is only fair and correct as regards the Government's position that he orders the priorities in the way that I have made it clear to the Committee they stand.

Lord Clinton-Davis

I am grateful to the noble and learned Lord for that intervention. I have read the Committee and Report stage proceedings in another place. I have seen Ministers' responses. They have never gone quite so far as the noble and learned Lord has just gone. He says that he may be right or he may be wrong. I think he is wrong, but I concede at once that the main point behind the Government's proposal is a political one. It is not based upon the legal propositions that have hitherto been defended.

The Minister suggests that somehow in the period since Kemp reported the recommendation for a government-owned company with a minimum lifespan of three years has become redundant. I see absolutely no evidence for that suggestion. Then he comes to the point that the staff would find the establishment of a government-owned company extremely unsettling. They would be full of apprehension about the consequences. We have gone to some trouble to undertake consultations within the limited possibilities that are open to us. I readily agree that we cannot consult everyone; we do not have the facilities. However, within the constraints there is absolutely no evidence to suggest that the staff have formed that degree of apprehension or have that feeling at all. Had proper consultations been carried out, perhaps the Government would have learnt more of the view of the staff.

We believe that the Government have not answered these points. However, I shall consider with care what the Minister said, and meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis: moved Amendment No. 51E:

Page 5, line 32, at end insert: ("(5A) A scheme under this section shall make provision to ensure that any transferee as specified in subsection (7) below shall operate to encourage, directly or indirectly, supplies by persons carrying on business in the United Kingdom of goods or services to persons carrying on business outside the United Kingdom.").

The noble Lord said: I beg to move Amendment No. 51E in my name and that of my noble friend Lord Williams. I keep almost referring to him as "learned"; indeed he is learned in the colloquial sense. It would be for the convenience of the Committee if we also considered Amendment No. 51Z.

Under the Export Guarantees and Overseas Investment Act 1978, a statutory duty is imposed on the ECGD to encourage United Kingdom trade by the provision of insurance and insurance-related export support facilities for exporters from this country. A privatised insurance services company would have a somewhat different motivation. Its paramount concern would be to maximise profit for its shareholders. I am not in any sense joining issue over profit-making being desirable in the private sector—of course it is. But there are other important considerations in this area of policy. There is a risk that the private company would reject export business which it considers to be somewhat too risky. On the other hand, or in conjunction with that, it may increase premium charges to exporters for engaging in such business.

The difficulty about that is that short-term export credit insurance would conceivably not be available for a number of overseas markets. It is equally conceivable that export premium costs could become prohibitive, with the result that exporters, particularly the smaller ones, may be in a position where they felt themselves unable to undertake export orders. However, their overseas competitors would be able to do so because satisfactory support had been made available to them through their governments. Frankly, it is a case of the level playing field gone mad. The 'Government are busy levelling the playing field well in advance of everyone else. I do not believe that it will be to the advantage of our exporters, particularly the smaller ones.

In moving the amendment, I ask the Government whether they take the view that the United Kingdom's economic recovery can safely be left to private institutions which are not committed to encouraging exports. Another question I ask is whether any statements or pledges given to the Government by the purchaser in respect, for example, of the future development of the insurance services business are in any way legally binding on the purchaser.

Those are important considerations, but even more important is the matter of the smaller exporter, to which I have already referred. It would be a serious state of affairs if the conjecture—because it can only be cc njecture—were to be translated into reality. It would be a blow to our export trade and to many businesses. The Minister too can only engage in conjecture because there is no hard evidence at this point. Thus it would be much more prudent of the Government to move more cautiously than they have opted to do so far.

5.15 p.m.

Lord Peyton of Yeovil

Before my noble and learned friend replies, I wish to intervene, if only to break the silence from this side of the Committee. I have not been deafened by the applause in the ranks of British industry for the Bill. I am still puzzled by the question to which I do not believe my noble and learned friend gave an answer just now. Can he tell us today that his right honourable friend is wholly satisfied with the range of choice of purchaser available to him, or is he ever so slightly disappointed?

Amendment No. 51Z seems to me to be a fairly mode it requirement to impose upon the Government. I have never looked with great favour upon legislation which enables governments to take actions without some idea of what they are doing. For that reason, I hope that when my noble and learned friend replies on the amendment he will be able to say something to the effect that Parliament will be informed at a later stage of the Bill, before matters have progressed too far. The requirement contained in the amendment is modest.

Lord Fraser of Carmyllie

I am grateful to my noble friend for joining this otherwise somewhat endless duologue. I can say no more than that the Secretary of State invited a number of companies to tender. At the end of the day it is true that there were only two. One has been selected by him at this stage to be a preferred purchaser. My noble friend will appreciate that as yet there is no concluded contract, for obvious reasons. No contract could be concluded to privatise this part of ECGD until the Bill has reached the statute book. The answer is yes, the Secretary of State is satisfied with the preferred purchaser that he has secured.

Lord Peyton of Yeovil

Will my noble and learned friend allow me to intervene? I asked whether he was satisfied with the range of choice that he had had or whether he was ever so slightly disappointed.

Lord Fraser of Carmyllie

I do not know whether my right honourable friend was ever so slightly disappointed. A number of companies approached him. If the noble Lord, Lord Peyton, were to try to sell his house for example, irrespective of how many prospective purchasers appear on the scene, the essential point is that the noble Lord should obtain a satisfactory purchaser. Although the Government have not yet reached a contractually agreed stage in this matter—and cannot yet do so—the preferred purchaser who has been selected by the Secretary of State meets with the latter's approval. That has been indicated in Written Answers both in this Chamber and in another place. My noble friend has said that he is not conscious of overwhelming support for this Bill or for NCM. However, I am sure he will have detected a suppressed xenophobia in some of the comments that have been made.

The commitment to ISG's business and to its existing customers has been a key factor in selecting the Government's preferred purchaser for ISG. NCM has stated publicly that, with its support, ISG in its privatised form will be able to strengthen further the range and quality of services it provides to UK companies. It would be quite inappropriate for the new company to be encumbered with statutory obligations which apply to none of its competitors.

In order to meet the competition, the company will be strongly motivated to provide the best possible quality of service to its customers. Privatisation will be good for exporters and other UK companies because they will be able to obtain combined export and domestic credit insurance, better service, greater flexibility and the ability to insure foreign subsidiaries, among other matters.

The interests of UK companies will, of course, continue to be protected by the continuance of ECGD, which is to remain a government department. As I have already pointed out, ECGD will continue to provide encouragement of medium and long-term exports and overseas investment through the provision of insurance against credit risks. It will also provide support for the new company's short-term business—we have dealt with that matter at some length this afternoon—including support in the national interest for certain higher risk markets to ensure no sudden change in the facilities available to exporters.

Amendment No. 51 E appears to seek a guarantee. Does that mean that the new company would be in breach if it refused to insure risks which it knew would produce a loss? The proposed amendment, as worded, could be held to oblige the new owners to provide credit insurance regardless of the risk. The noble Lord may not have intended that effect but that is the way I read the amendment. As I am sure the noble Lord would accept, that would constitute a ridiculous policy for ECGD as a government department, let alone a privatised ISG. What sanctions would the Secretary of State be able to exercise if the amendment were accepted?

Amendment No. 51Z concerns a further guarantee. As I have indicated, as this matter progresses not only will the employees of ECGD be kept fully advised but also full information of what is going on will be placed before the Chamber.

Lord Clinton-Davis

I am grateful for the intervention of the noble Lord, Lord Peyton. In a characteristic way he has done much to lift the veil over this unfortunate state of affairs. It is absurd for anyone to pretend that the Government could have been satisfied with a state of affairs in which only two undertakings have expressed an interest in this matter. There is less than full support—the Minister knows that —for the fact that the procedures which have been evolved have produced the result that they have. The noble and learned Lord said that there has been suppressed xenophobia in this matter. That is absolute nonsense. There is great disappointment, but one must ask why that is so. Surely even the Secretary of State on any reasonable showing must have been disappointed with the end product of this case.

The Minister has not begun to reply to the other points that I have raised in support of this amendment. It is not a question of whether risk is involved in this business—we all know that it is—it is a question of whether export business would be adjudicated on a somewhat conservative view (I emphasise "conservative" with a small "c") to be too risky in the circumstances. Will the Government be discouraging the kind of export possibilities that have hitherto occurred? That is the real issue we are discussing. With respect the Minister has dodged that issue, and I say that in the friendliest way. If that is to be the case, is it not likely that our exporters will be in a far inferior position compared with exporting companies overseas where governments will make satisfactory support available? The Minister has not answered those points. However, I do not propose to pursue the matter further at this stage. We shall consider what the Minister has said and in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 51F:

Page 5, line 32, at end insert: ("(5A) The Secretary of State shall ensure that the aim of equal terms of competition within the European Community is not in any way distorted by any scheme made under this section.").

The noble Lord said: As regards credit insurance, we need to address two aspects of the concept of a level playing field within the European Community. First, we need to consider the question of a level playing field between official and private export credit insurers. That matter is being pushed by the Government, the private insurers, and, according to the Government, the European Commission. We dealt with that matter earlier.

Secondly, we need to examine the question of a level playing field between the United Kingdom and other exporters. Kemp gave great emphasis to the requirement for the level playing field between official and private export credit insurers in the Community; that is to say that the perceived advantages enjoyed by official credit insurers such as ECGD should be removed and complete parity should be introduced. It is the private sector insurers who are placing great emphasis on the whole concept of the level playing field. We have a situation where a Belgian insurer, Namur, is litigating before the European Court of Justice. That firm is arguing that the Commission has breached its duty in relation to the first non-life insurance directive which exempts official credit insurers and also ECGD's major rival in the UK, Trade Indemnity.

Kemp has stated: the arguments about a level playing-field do not all run in one direction. The state insurers generally provide a much wider scope of cover than do those in the private sector many of which focus on a fairly narrow area of specialisation in which they are confident of operating profitably. The state agencies, on the other hand, have a responsibility to support national exports generally and a constitutional duty to treat all applicants equally. For those reasons, they regularly have to provide cover for risks or to types of client that the private sector would reject as not commercially interesting. Advantages such as freedom from corporation tax enjoyed by the official agencies could be seen as no more than reasonable compensation for the more onerous duties laid upon them. As a matter of fact, there is no evidence that the official agencies are regularly and significantly undercutting the private companies in price at the present time".

Those were cogent arguments. At no time have the arguments adduced by Kemp been replaced by the cogency of government submissions. There are markets in which private market reinsurance could pose enormous problems—for example, the Soviet Union, China or India. However, in another place the Minister of State seemed to deny that self-evident proposition.

In answering the debate will the Minister give a categorical assurance to anxious exporters who wanted their anxieties ventilated that they face no peril and that they will not lose out in risky markets or in non-traditional markets? Those are the anxieties. It is high time the Government began to address them. I beg to move.

5.30 p.m.

Lord Fraser of Carmyllie

The amendment would require the Secretary of State to ensure that the aim of equal terms of competition within the European Community is not in any way distorted by any scheme made under this clause. The Government conclude that privatisation will assist United Kingdom export competitiveness.

I accept, and the Government accept, that the insurance services business already provides a first-class service to United Kingdom exporters. That is under threat from competitive and legal challenges which, without a change of status, the insurance services business cannot meet.

The noble Lord said that our apprehension about legal challenge was premature or misplaced. As he well knows from his long experience in Europe, whether that is right or wrong most of our competitors within Europe are taking steps to reduce state involvement in the provision of export credit and guarantees. The Government are concerned, particularly because of the competitive challenges that lie ahead, that failure to make such a change would lead to a gradual deterioration in the quality of service which British exporters enjoy.

The primary objective is not only to avoid such a deterioration but also to free the insurance services business from public sector constraints so that it can provide a more comprehensive, flexible and up-to-date service. The short-term export credit insurance market is fiercely competitive. To thrive in it as a private sector organisation the insurance services business will need to offer services which are at least as good as those of its competitors. That can only be of advantage to United Kingdom exporters.

Privatisation of the insurance services business will allow the successor company the same freedom as other private sector credit insurers, including many of ECGD's European counterparts, to offer cover for all the types of business from which it is presently excluded. That will enable the company to provide complete one-stop packages for credit insurance, including cover for domestic and foreign business, which many of its customers, particularly large international companies, seek.

After privatisation the UK structure for providing export credit insurance will mirror that in most other EC member states, namely, a company providing export credit insurance partly on its own account and partly on account of the state. Therefore, far from putting us out of line with the practice in the rest of the EC, the new set-up will place us in the mainstream of EC development.

The "national interest" reinsurance facility will be the UK equivalent of the state account arrangements in other EC countries. It will ensure that insurance services customers will continue to have the support to enable them to compete for business in the more risky markets.

While the noble Lord may be sceptical about what we shall achieve, there can be no doubt that the Government intend to achieve that very competitiveness and to provide the opportunity to operate on the level playing field to which he referred.

Lord Taylor of Gryfe

I am interested in the proposition that has been put forward that the purpose of the exercise is to assist exporters by giving them "one-stop shopping", greater encouragement and so on. If that were so one would expect the exporters of this country to be lining up to support the Government in this exercise, but exactly the opposite is taking place. The noble and learned Lord has not convinced the export industry that these changes are desirable. He has said that the proposals are forward looking, that they will help exporters and that private enterprise will do the job. The state-supported export credit insurance service is highly regarded by industry. Industry seeks to retain the present arrangements. To maintain that selling off the service to a private company in Holland will in some way give British exporters a better deal than they presently enjoy is a fantastic proposition.

Lord Fraser of Carmyllie

Perhaps the noble Lord will do me a favour. That is the fourth time that he has said that no one supports the principle of privatisation. I should like to make one small request. Perhaps he will examine the Second Reading speeches of those of my noble friends who are engaged in exporting. He will find that so far as concerns the privatisation of this part of ECGD there was general support in principle. The noble Lord can look at the Official Report, and he can write to me with an apology if I am right.

The noble Lord is confusing the fact that concern has been expressed by British exporters regarding the changes to portfolio management. Noble Lords took the opportunity of the Second Reading of the Bill to express their anxieties. However, I cannot accept that there has been such universality of disapproval of what we are attempting to achieve in the privatisation of this short-term business of ECGD.

Lord Clinton-Davis

The Minister continues to say that this proposal will be enormously beneficial and will be a panacea for export trade. With the greatest good will in the world, that optimism is not shared by very large numbers of exporters, particularly smaller exporters. I agree with my noble friend Lord Taylor of Gryfe. If the Minister read into the Second Reading debate that there was overwhelming support for the proposed privatisation of the sector to which he has just referred, he is looking at the matter in a somewhat partial manner. Of course major anxieties were expressed by virtually everyone in the Chamber, but I did not sense that noble Lords who spoke in that debate greeted the idea presented in the Bill with great acclamation. The Minister is deluding himself if he comes to that conclusion.

The Government have decided to go much further than most other countries in the European Community. Of course different procedures are being evolved in individual member states. However, the British Exporters' Association said in a letter to the Financial Times that there was serious concern among United Kingdom exporters at the seemingly precipitate rush to privatisation and the dangers which that poses in terms of retaining a competitive edge in the harsh world of exporting. That was the voice of the British Exporters' Association itself.

The Government are hell-bent on this idea. They do not listen and they ignore the anxieties of exporters and of the staff. We shall press matters further, but ultimately it will be for the Government to determine whether this exercise in ideology is to be pursued, because that is what it is all about. I shall read with care what the Minister has said. We may well come back to the issue later, but meanwhile I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 51G:

Page 5, line 32, at end insert: ("(5A) The Secretary of State shall ensure that no scheme shall be made under this section such that any United Kingdom exporters requiring insurance against losses as specified in Part I of this Act shall be disadvantaged by virtue of the amount of business for which insurance is required.").

The noble Lord said: In moving this amendment we seek to ensure that the smaller exporters are not faced with discrimination by the privatised ISG. The expectation is that small exporters will not be considered to generate adequate income to justify the administrative costs involved in handling their policies. That expectation is based on the practice of other insurers at the present time. Excessively high premium rates which discourage smaller exporters from seeking cover are frequently charged. That matter was raised in Committee in another place and the Minister of State then argued that a privatised ISG operating in a commercial market would be unlikely to increase its prices in a way that would discourage its customers and result in their seeking cover elsewhere. He included the smaller exporters among those customers, but he agreed that ISG already operated in a competitive market.

At a conference held in May this year, a prominent exporter expressed a view of ISG's operations in that market. I refer here to a speech made on the impact of the Export and Investment Guarantees Bill on the future of export credit insurance. The speaker, Mr. David Perry, listed a number of safeguards which exporters should attempt to secure from the Government should ISG be privatised. Among the safeguards was, an assurance that they will not discriminate against the small volume insured (more so than they are now).

That gentleman was the Export Finance Director of the Massey Ferguson Group Ltd., a prominent exporter, and someone who knows what he is talking about. Those anxieties should now be addressed by the Minister. I beg to move.

Lord Fraser of Carmyllie

Small exporters represent by far the greater proportion of ISG's customer base. Because of their number, the diversity of their trades and the export markets in which they sell, they help considerably in creating the desirable spread of risk in the ISG portfolio. ISG also makes available a variety of managed credit insurance schemes via banks and other intermediaries designed to offer the small exporter an administratively simple means of obtaining the cover required.

There is no intention that that comprehensive support for smaller exporters will be changed to their disadvantage after privatisation, though obviously decisions about the new company's business strategy will be for its owners to take. For the reasons that I have mentioned, it would not be in the company's interest to do so, particularly since ISG already has, unlike some of its competitors, the facilities and systems to provide that support.

The commercial interests of ISG and its privatised successor company will best be served by continuing to support the smaller exporters. It is therefore unnecessary, even if it were practical to do so, to seek statutory protection for them in the manner proposed in the amendment.

5.45 p.m.

Lord Clinton-Davis

We are dealing with assertion and counter-assertion and we are entering into conjecture. Basically, our case is that the system was working well, helped by smaller exporters, did not prejudice them and did not put the question of the paramountcy of profit above their interests in all circumstances. The Government say that none of that will be prejudiced, but they have not been able to resolve the doubts and anxieties that have been expressed, notably by people who are in the smaller area of the exporting trade. If they insist upon going ahead blindly, ignoring those anxieties and not carrying out proper consultations, it is all very well to say that the damage will be on their heads. Unfortunately, the damage will be caused to this country. It is obvious that I shall not be able to persuade the Minister to make any movement here. We may well come back to the matter, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 51H:

Page 5, line 32, at end insert: ("(5A) A scheme under this section shall contain a provision that there should be a period of not less than three months for consultation and agreement on employment terms and conditions at transfer between the transferee and the employee's trade unions. This period shall commence from the day specified under subsection (4) above.").

The noble Lord said: We embark here on a series of amendments which concern the staff of ISG who are to be transferred, assuming that the Bill is enacted, to a vehicle company under terms and conditions which remain to be decided.

I must tell the noble and learned Lord that to date there has been little consultation between the ECGD trade union side and the department's management. It was necessary for a start to go to the Central Arbitration Committee to require management to release a report prepared by Coopers & Lybrand Deloitte on the terms, conditions and pension arrangements that are likely to apply to existing staff who agree to transfer to the newly privatised company. Subsequently, management argued that the report had not been completed at the time of the request and, once published, the report was released in full. However, the report was unavailable some time after the deadline imposed on the consultants had expired and there was a suggestion that the terms of reference had been changed.

More recently, the trade union side has again prepared an approach to the Central Arbitration Committee, seeking release of information which has been made available to the shortlisted bidders for ISG —a shortlist which, as we know, disappeared rather rapidly, like the snow in springtime. Consultation within the department has been effected by a committee of the departmental Whitley Council which acts as an interface between the management committees handling various aspects of the ISG privatisation. The trade union side naturally requested a seat on each of those committees. That was refused. Subsequent attempts to arrange meetings with representative committees have largely been fruitless. Little information is passed from those committees to the trade union side via the departmental Whitley Committee, so there is no real opportunity for trade union input or serious consultation.

I understand that it was management's intention that, once the purchaser of ISG had been selected, the package of employment terms and conditions offered by the purchaser would simply be presented to ISG staff, who would then have only one month to consider the package and decide whether to join the privatised company or remain in the Civil Service. Under some pressure, management has agreed to allow a period of at least two weeks, apparently for clarificatory discussions with the preferred bidder, before the release of the employment terms package to ISG staff. However, we on this side do not believe that that gives the staff sufficient time to obtain proper advice on the terms and conditions offered or for serious consultation to take place.

I understood the noble and learned Lord to have said earlier that at the moment members of staff can express a preference as to whether they will continue with the privatised ISG or remain within the Civil Service. But will they be able to express that preference? Will they have a serious choice or will they be forced out of the Civil Service against their will, as happened with the Property Services Agency? If they do not wish to work for NCM—if at the end of the day NCM is the purchaser—will they be allowed to stay on in the Civil Service? Under what terms and conditions will they be re-employed? All these matters require a period of consultation which is rather longer than the department, the management or indeed the Government have proposed at present.

I do not intend to press the amendment. It is a probing amendment to discover the Government's view c f the matter. But this is an important point. As we go through the amendments which deal with staff, I hope that the noble and learned Lord will accept that there is serious disquiet on the staff side that the trade unions are not being given the opportunity for proper consultation. I beg to move.

Lord Fraser of Carmyllie

This amendment would provide for three months' consultation and agreement between the intended new owner and the trade unions on the terms and conditions to be offered to transferring staff after the transfer of the business had taken place. That would have the effect of the stafis existing Civil Service terms and conditions transferring across when the business transfers, instead of staff knowing at the outset, before expressing a final preference as to whether they wish to join the new company, what their eventual terms and conditions would be.

As the noble Lord appears to have understood from previous statements, it has always been the intention to present to staff a package of terms and conditions on offer before they are requested to express their final preferences about joining the new company. The trade unions will continue to be fully consulted, as indeed is required under the 1981 TUPE regulations. Once the proposed package of terms and conditions on offer is finalised, the trade unions will be given a period in which to discuss them with the intended new owners before the package is formally presented to all staff. When that has been done the staff will be given at least one month to express their individual preferences.

In our view that will be an adequate timescale and there is no need to specify one in the Bill. Indeed, it is unreasonable to leave the staff in doubt as to their terms and conditions before they express their individual preferences. It is also unreasonable to include in the statute a requirement that the parties involved should reach an agreement on terms and conditions within a set period, whether the period for achieving it was a matter of days, weeks or months.

The noble Lord indicated that he begins this series of amendments on trade unions with a probing amendment. Although it is in fairly short compass, I hope that I have explained to him what has seemed to be an appropriate timetable for discussion and why it has been thought best to approach it in this way.

Lord Williams of Elvel

I should like to ask the noble and learned Lord for clarification on one point. He reiterated that at the end of the day (if I may use that expression) staff would be able to express a preference as to whether they wish to remain in the Civil Service or join the newly privatised transferee company. What happens if a significant number of staff decide that they do not wish to go into the private sector but want to remain in the Civil Service? Can the noble and learned Lord give me an absolutely clear undertaking that the preference expressed by each member of staff will be properly respected?

Lord Fraser of Carmyllie

I shall deal with this matter now although there are other amendments which may also bring it into focus. As the noble Lord will appreciate, staff who do not transfer will remain as civil servants on Civil Service terms and conditions. Volunteers will be transferred only so far as that can be achieved. But regard will have to be paid to the new company's need for sufficient numbers and staff who have the right range of experience.

Lord Williams of Elvel

We may have to pursue this matter. I am afraid that I am not entirely satisfied with the noble and learned Lord's reply. I understood that if staff were able to express a preference and preferred to take course A rather than course B, that preference would be respected. The noble and learned Lord said something slightly different; namely, that they may prefer to take course A, but may be pushed into course B. I understand that is what he said. We shall come back to that point when discussing later amendments. It is a very important point and one which will give us a great number of problems. We shall return to that point.

Leaving that matter aside for the moment, I still hold the view that the trade unions need to have a much more serious period of consultation on all these matters than the management and the department propose to give them. I hope that the noble and learned Lord will accept my point that ISG is not a company with major physical assets. Its assets are staff and the expertise of staff. Unless the staff are kept happy and they and their representatives are happy about the way in which the transfer is being handled, the business will be worth very little to the purchaser.

I shall come back to this matter in later amendments because I wish to pursue the thought that the noble and learned Lord has introduced. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 51J:

Page 5, line 32, at end insert: ("(5A) No scheme shall be set up until such time as the pension arrangements in the new organisation have been agreed with the relevant trade unions. Such arrangements shall be no worse than those described in the Principal Civil Service Pension Scheme.").

The noble Lord said: This amendment stands in my name and that of my noble friend Lord Clinton-Davis. It may be for the convenience of the Committee if I speak also to Amendments Nos. 51R and 51V. We embark here on the vexed question of the pension scheme which will be available to staff in the new organisation. The Committee will know that the terms and conditions of employment of ISG staff who decide to transfer to the privatised company will be protected by the regulations known by the shorthand term of TUPE 81. I hope that that shorthand language will be acceptable in Committee.

Those regulations specifically exclude pensions. The principal Civil Service pension scheme is generally considered to be better than pension schemes available in the private sector, in particular because it is index-linked. There has been a great deal of discussion about index-linked pensions. I should like to draw the Committee's attention to the fact that the chairmen of both British Gas and British Telecom, who have announced substantial pay rises for themselves, continued to enjoy index-linked pension arrangements when those bodies transferred from the public to the private sector. What is good for the chairmen of British Gas and British Telecom should be good for the staff of ISG.

We simply seek to ensure that the pension scheme that is agreed has been fully discussed with the trade unions and that the terms are no worse than those described in the principal Civil Service pension scheme. The point is that civil servants are not necessarily paid salaries as high as those in the private sector. They forfeit some of their potential worth as private sector employees because they have the benefit of index-linked and properly funded pension schemes. The Government and the state stand behind the payment of those pensions. Once employees transfer, either they will be paid more or they will retain their Civil Service pension arrangements or the equivalent thereof.

Amendment No. 51R addresses the provision of benefits and index linking of benefits. During 1990 the Skills Training Agency was sold somewhat piecemeal to a number of private buyers. Many of those small offices were sold to a company. Since then consultation on the terms and conditions of employment has become acrimonious, and still continues. Amendment No. 51R therefore seeks to prevent such action being taken by the privatised ISG.

Amendment No. 51V, which also stands in my name, makes sure that the added years which can be purchased voluntarily by staff under the principal Civil Service pension scheme are respected. That will enable staff who join the scheme late in life to enhance their eventual pensions by increasing their own pension contributions.

They are important and fundamental amendments. I do not intend to press them to a Division. However, I expect a serious response from the Government. I beg to move.

6 p.m.

Lord Fraser of Carmyllie

The concerns reflected in these amendments are likely to be covered in the discussions between the various parties during the course of this privatisation. That is the proper place to resolve these issues.

The noble Lord will appreciate that it is unlikely that a private sector pension scheme on offer would be identical to the principal Civil Service pension scheme. It can be expected to be better in some details, and not so good in others.

The potential new owners have been required to offer a pension scheme which overall is at least comparable to the principal Civil Service pension scheme. The Government Actuary will certify that both the pension scheme and the overall package of terms and conditions are at least equivalent to those which staff presently enjoy. I hope that that general indication of the principles on which the discussions are properly carried forward between the various parties is helpful to the noble Lord.

The trade unions will be involved in the discussions about the terms and conditions, including pension arrangements, and will no doubt take an early opportunity to raise those issues. They will include the question of continuing purchase of added years—referred to in Amendment No. 51V—which I am afraid under the rules of the PCSPS, are precluded from continuing under that scheme after a person has left the Civil Service but, depending on the nature of the private sector pension scheme agreed, it may be possible for staff who had been buying added years under the PCSPS to continue doing so under the private sector scheme, in relation to that scheme. With regard to Amendment No. 51V there is clearly a substantial technical objection with reference to the Civil Service scheme.

I hope that I have reassured the noble Lord, not least by what I said about certification by the Government Actuary.

Baroness Phillips

I wish strongly to reinforce what my noble friend said. I saw the terrible trauma that people experienced when the metropolitan counties disappeared and the pensioners of the Greater London Council had to fight to retain in particular the index-linked pension. My father was a civil servant. I remember that when my mother complained about the low salary he comforted her by saying, "I shall receive a pension". The position cannot be different now. In many cases when people accept lower salaries they have in mind that they will receive some pension. I recall that it was only due to the concentrated efforts of many people that those pensioners were able to achieve a satisfactory arrangement. The present situation seems all the more important because it will involve even more people.

Lord Williams of Elvel

I am grateful for the support of my noble friend Lady Phillips with her great experience in these matters. She reinforces what I said earlier and what the trade unions have been saying all along.

I am grateful to the noble and learned Lord for the assurances that he has given so far as they go. I hope he has understood that it is a matter of intense interest to the staff and we shall not simply let the matter go at that. Having taken advice on what the noble and learned Lord said, I shall consider how we may proceed in the future and whether it will be necessary to put some provision in the Bill at Report stage. I am grateful to the noble and learned Lord for going so far as he has done. We may have to push him rather further at a later stage of the Bill. In the meantime, I beg leave to withdraw the amendment.

On Question, amendment, by leave, withdrawn.

On Question, Whether Clause 8 shall stand part of the Bill?

Lord Williams of Elvel

Before we leave Clause 8 I should like to put some questions to the Government. I have had difficulty in framing amendments around the issues. The major point that I wish to explore is the nature of the scheme outlined in Clause 8. It seems essential for Parliament to understand how the scheme will work. We need to know what net sum the Government will receive for the sale of the securities they hold in the vehicle company. There are many ways of skinning this particular cat—if I may use that rather vulgar expression. For instance, the Government could inject a substantial capital sum into tie company and then sell off the company for exactly that capital sum. In that case the net proceeds to the taxpayer will be zero. The company will have to maintain solvency requirements because it will be in the private sector. As I pointed out at Second Reading, the solvency requirements in the private sector will be rather more onerous under the new European arrangements than some companies understand.

In the view of some experts, the injection of capital required could be of the order of £35 million. If NCM —if it is the final bidder—pays £50 million the net sum to the taxpayer is only £15 million. There is then the question of what happens if there is no capital injection but some requirement by the purchaser for future support in some manner. The Bill provides that the Secretary of State is empowered to make loans to the vehicle company on such terms and conditions as he may determine. Is it the idea that the Secretary of State will make loans to the company? Will the Secretary of State introduce debt into the company's balance sheet and redeem it immediately? How will the system work? Will the noble and learned Lord give us some idea how it is proposed that the scheme should operate?

Furthermore, will he give us an absolute and categoric assurance that we shall not have a repeat of some previous privatisations on which the Government have offered sweeteners to companies in order to encourage them to take public assets off their hands? The noble and learned Lord will be aware that the issue has engaged a good deal of public attention during the past two years. We need to know that this deal will be clean.

My final point relates to the transfer of good will and the way in which it will be valued. For example, ISG is to be sold as a going concern. If NCM had to begin to sell export credit insurance to UK exporters from scratch it would need to invest enormous sums of money and resources in establishing a viable customer base. It is difficult to quantify how much NCM would have to spend to compete effectively with ISG but in our view it would be a large sum of money.

I instance those matters in order to explore with the noble and learned Lord the way in which the scheme might operate. My only requirement is that we must have an assurance from the Government that the sale will be clean and will not involve underhand dealings such as we have seen in a number of previous cases.

Lord Fraser of Carmyllie

I shall attempt to answer briefly the queries that the noble Lord has raised in this short debate. Copies of the draft scheme have been placed in the Library and perhaps Members of the Committee will find it helpful to refer to them. In the current proposals for the capitalising of the company it is not envisaged that there will be loans. The noble Lord's Amendment No. 51W seeks to address that proposal. I shall combine my comments on that amendment with those relating to this debate because the two matters are interrelated.

We have allowed for the flexibility that was provided in other privatisation legislation to allow for loans. However, I cannot say at present whether loans will be required or whether the capitalisation of the company will be by loan rather than direct cash injection. It is a possibility and I can say no more than that at present. The proceeds of the sale of the company will represent an inflow to government funds.

The company's capital requirements will be determined in discussions between the preferred purchaser and the DTI regulatory authorities in the light of the profile of the business to be privatised. The noble Lord indicated that £35 million might be necessary. For reasons that he will appreciate, discussions between the preferred purchaser and the regulatory authorities are confidential and it would not be appropriate for me to confirm or deny that figure at this stage. It is envisaged that the capital amount will be subscribed initially by the Government so that the company may be authorised before it is sold. The amount of the capital will be recovered by the Government in the sale of the proceeds. I can assure the noble Lord in the terminology that he used, as did his noble friend, that no "sweeteners" will be involved in the arrangements with the preferred purchaser.

Lord Williams of Elvel

Perhaps the noble and learned Lord will give me an assurance about one issue. I understand that under the proposed scheme the initial purchaser of ISG will be required to hold the shares for three years. Will there be any restriction on resale after three years or will it then be up for grabs?

Lord Fraser of Carmyllie

If the noble Lord would like me to return to the matter at a later stage or to write to him I shall do so. I should be careful about commenting on the matter without advance warning.

Lord Williams of Elvel

Perhaps the noble and learned Lord will consider my question and respond in due course. We shall then consider whether to pursue the matter in a more formal manner on Report.

Clause 8 agreed to.

Clause 9 [Transferred stuff]:

6.15 p.m.

Lord Williams of Elvel moved Amendment No. 51K: Page 5, line 39, leave out ("Transfer of Undertakings (Protection of Employment Regulations 1981") and insert ("EEC Directive 77/187 (The Acquired Rights Directive)").

The noble Lord said: We return to the status of the staff who arc to be transferred. I am advised that there is a discrepancy between the TUPE 81 regulations and the EC Acquired Rights Directive No. 77/187 under which they were introduced in the United Kingdom. Article 6 of the directive states: The transferor and the transferee shall be required to inform the representatives of their respective employees affected by a transfer within the meaning of Article 1(1) of the following: the reasons for the transfer, the legal, economic and social implications of the transfer for the employees, measures envisaged in relation to the employees. The transferor must give such information to the representatives of his employees in good time before the transfer is carried out".

We return to the thrust of an earlier amendment about the period of time required for consultation. The directive continues: If the transferor or the transferee envisages measures in relation to his employees, he shall consult his representatives of the employees in good time on such measures with a view to seeking agreement".

TUPE 81 regulations only require employees to inform recognised representatives long enough before a relevant transfer to enable consultations to take place and make no reference to the requirement to seek agreement. I am advised that if the management of ISG takes no steps to reach an agreement, it will be possible to apply to an industrial tribunal under the acquired rights directive. However, since the whole issue is untested in the courts it is probable that it would go to the European Court in order to be resolved. I doubt whether anyone in this instance will want that because it would destroy the value of the business.

The amendment seeks explicitly to invoke the acquired rights directive to cover the transfer of ISG to a private buyer. It imposes a greater obligation on the ECGD management to consult the unions about the transfer. However, we believe that that is in keeping with the directive and that it is right to bring ourselves into line with the rest of Europe. We do not believe that TUPE 81 truly reflects the directive. I beg to move.

Lord Henley

The Government recognise the good intentions that lie behind this amendment and they share the desire to ensure that the interests of the transferred staff are protected on transfer. It is for that reason that Clause 9, which is a perfectly normal provision in a Bill of this nature, exists. Despite what I said about the amendment's intentions, it is misguided, unnecessary and will not have the intended effect.

The Committee will be aware that the transfer of undertakings regulations—that is, TUPE 81—were passed to implement the EC acquired rights directive. The regulations already require the transfer of the transferor's rights, powers, duties and liabilities on completion of a relevant transfer. Nothing would be gained by inclusion of the directive that is not already covered by the regulations, which are well established in our law and which have the benefit of interpretation by the courts. To substitute the directive for the regulations in the way proposed in this amendment would inevitably create uncertainty and confusion. In so doing it would be detrimental to the interests of transferring staff. For that reason alone I hope that the noble Lord will not pursue the amendment.

However, I must also comment on the allegation made by the noble Lord and made at the Report stage of the Bill in another place that the information and consultation provisions of the regulations are an inadequate implementation of the requirements of the directive. It has been said that Article 6 of the directive provides a greater obligation to consult meaningfully than do the regulations. The Government do not accept that view. The criticism is based on the requirement in the directive for employers to provide information "in good time", whereas the regulations use the term: long enough before the relevant transfer to enable consultation to take place". It is also said that the regulations make no reference to seeking agreement in the consultations.

Any concerns on these points are easily dispelled. On the first point, the words "in good time" are not defined in the directive. The words themselves are unspecific. In order to give them some meaning the regulations were drafted in a way which would be generally understood to require information to be given in sufficient time for meaningful consultation to occur.

As to the second point, I must agree that the regulations do not state explicitly that consultations should be, with a view to reaching agreement". However, the words were omitted because they are unnecessary. It is clearly implicit in the regulations that agreement should be reached if at all possible. Otherwise there would be no purpose to the regulation. Our courts are sensitive to these issues. The Employment Appeal Tribunal, for example, has stated that, consultation must not be a sham", and has referred to the need for "meaningful consultation".

Those points bring me back to my earlier remarks. The amendment, however well intentioned, is unnecessary and will only cause uncertainty. I hope that the noble Lord will feel able to withdraw the amendment.

Lord Williams of Elvel

I am grateful to the Minister for that reply. I perceive that there is a difference of opinion between us as to the status of the regulations and whether they fulfil the acquired rights directive. We have legal advice which says something rather different. However, two lawyers can disagree, and that is no great problem.

The essential point which I wish to get across to the Minister and the Committee is that, following TUPE 81, any negotiations must be with a view to seeking agreement. The noble Lord has gone a little way towards me, but on the Atomic Weapons Establishment Bill the Minister concerned said that in applying TUPE 81 regulations nothing would happen, without the consent of the workforce". That is the way to pursue this matter. If it is true that agreement is being sought, matters should not take place without the consent of the workforce. I hope that t le noble Lord will follow his colleague on the Front Bench and put that assurance into the Committee's proceedings.

Lord Henley

I should have thought that what I have said has gone far enough for the noble Lord. I said that consultation must be meaningful. It cannot be meaningful if it has no end point in its process and if it is not designed to achieve something. We believe that consultation must be meaningful; that is, at the end something must be achieved.

The noble Lord will know that the TUPE regulations require that the trade unions shall be consulted. They must be informed and any representations which they make must be considered. There is no firm requirement to reach agreement but obviously we prefer to reach agreement; that is the point of meaningful consultation.

Lord Williams of Elvel

I am sorry that the noble Lord was not able to take the extra step which I should have liked him to take. I emphasise that the main assets of this business are the staff. We are not selling factories but people's lives. It is essential that the staff remain happy and contented. They should agree to any attempted changes to their terms and conditions. I understand that the noble Lord feels constrained. Perhaps he will reflect on what I have said and I shall reflect on what he has said. At a later stage in the Bill we may have another run round this course. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 51 L:

Page 5, line 42, at end insert: ("( ) The Transfer of Undertakings (Protection of Employment) Regulations 1981 shall apply to the transfer of the Equal Opportunities Policy and all Agreements made under that Policy between the Export Credits Guarantee Department and the Export Credits Guarantee Department's Trades Union Side and in force on the day of any transfer made under Part II of this Act and no changes shall be made to this Policy or these Agreements by the transferee without the agreement of the employees through their trades unions".).

The noble Lord said: The trade union side of ECGD has been extremely successful in negotiating an effective equal opportunities policy in the department. I understand that that would transfer, along with other departmental agreements under TUPE 81 regulations, to the new company.

However, those regulations are only effective—and this is the point that I made as regards the last amendment—on the day of transfer. Subsequently the new employer is free to make changes without consulting the unions. On the last amendment the noble Lord went some way to reassuring me that there will be "meaningful consultation" with the unions. We wish to ensure that if there are to be future changes in equal opportunities policy—which has been carefully negotiated by the trade unions inside ECGD—they will be made not only after consultation but with the agreement and consent of the recognised trade unions.

I hope that the noble Lord will appreciate the importance of this and will take the extra step which he was unable to traverse on the last amendment. I beg to move.

Lord Henley

The noble Lord is mistaken. ECGD does not have a formal equal opportunities policy agreement with the trade unions. The purpose of this amendment thus appears to be to try to ensure that ECGD's policy and practice in this area is adopted by the new company despite the fact that there is no tangible agreement for TUPE to bite on. We hope that the new company will follow similarly good practice on equal opportunities.

Where formal agreements on any aspect of ECGD's policy towards its staff do not exist but instead best practice is followed, TUPE 81 does not cover the situation explicitly. It would be wrong—and very difficult to enforce—to extend the ambit of TUPE to cover such inexact matters. We can expect the new owners of the insurance services business to be enlightened employers who will also follow the best practice in this area.

The noble Lord pointed out that the employer will need to take the staff with him in order to have a viable business. Therefore it is in the employer's interest to follow the practice and policy which have been built up by ECGD. When the business is privatised it will be subject to all the anti-discrimination legislation relating to sex and race. I am confident that staff transferring need have no fears on that account. Therefore, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Williams of Elvel

Perhaps I may tell the noble Lord something about the equal opportunities arrangements inside ECGD. The Civil Service is an equal opportunities employer and we should insist that ISG—whoever purchases it—should remain an equal opportunities employer. An equal opportunities employer means only that the employer must comply with equal opportunities law, which is by no means comprehensive.

The Race Relations Act 1976 states that it is unlawful to discriminate on the grounds of, colour, race, nationality or ethnic or national origins". The Fair Employment (Northern Ireland) Act 1976 states that it is unlawful to discriminate, on the ground of religious belief or political opinion". The noble Lord referred to the Sex Discrimination Act.

The ECGD currently has an equal opportunities policy. I do not know whether it is at the moment enshrined in a formal agreement. It states that it is a disciplinary offence to discriminate unfairly on the grounds of race, sex, marital status, sexual preference, religious belief, disablement or political opinions. Also, offensive personal behaviour including racist remarks or sexual harassment is a disciplinary offence. That is the policy operating in the ECGD and it is a strong one.

In the ECGD there are also agreements and policy statements which need to be protected, such as those concerned with part-time working, maternity leave, paternity leave, job-sharing arrangements, special leave for domestic purposes, sexual harassment, racial discrimination and reinstatement priority for those who leave for domestic reasons. Negotiations took place with the trades unions on the precise status of the agreements. Agreement was reached between the two sides but was not formalised. Although there was no formal signature, I hope that the provisions of the agreement will he brought through the transfer process into the newly-privatised company. That is something which should be supported by the Government. I hope that the noble Lord will consider my remarks and perhaps give me a little more comfort.

Lord Henley

I can go no further. As I said, there is no formal policy agreement. ECGD has policy and practice in this area but best practice is not a matter that TUPE 81 covers explicitly. I hope that the assurances I gave when I first responded satisfy the members of staff that they need have no fears on that account.

Lord Williams of Elvel

I do not think we can go much further on the matter. We shall return to it at Report stage because I do not believe that the assurances given by the noble Lord, Lord Henley, are the ones that we seek. It is something on which we shall ponder until the next stage. I hope that the noble Lord and his advisers will ponder on the matter also. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 51M: Page 5, line 45, after ("person") insert ("with his written consent").

The noble Lord said: In moving Amendment No. 51, standing in my name and that of my noble friend Lord Clinton-Davis, with the leave of the Committee, I shall speak also to Amendment No. 51Q. We touched on this matter in an earlier amendment and I want to explore it further with the noble and learned Lord who is to reply on behalf of the Government.

The problem is whether any of the staff in ISG will be compelled to transfer to the newly-privatised company. From our earlier debates we understand that they can express a preference either to stay in the Civil Service or to go into the private sector with the new company. If they prefer to stay in the Civil Service, the question arises whether they will be allowed to stay in the Civil Service.

I must advise the noble and learned Lord that many members of staff of ISG are worried that if too few volunteer to join the privatised company—this advice comes from the trades union side—in order to ensure its viability management will compel others to transfer. Our understanding of the TUPE 81 regulations is that employees occupying ISG posts at the time of transfer to the purchaser must transfer to the privatised company if so requested. The amendment seeks to ensure that nobody will be forced against their will to move into a job that they do not want; they will be allowed to stay in the Civil Service if that is what they wish. I beg to move.

Lord Fraser of Carmyllie

As the noble Lord indicated, this is a matter on which we have already had some discussion. It may be useful if I expand on it in part now.

Amendment No. 51M would have the effect of limiting staff to be transferred to the new company to volunteers only. It is possible that the number of volunteers will not accord with the business requirements of the new company. The matter must be seen in context. ECGD privatisation is unlike some others in that only about half the organisation measured by number of staff, is planned to be privatised. That gives more scope than is normal for meeting the preferences of individual members of staff.

The then Secretary of State indicated on 18th December 1989 that all ECGD staff would be asked to express a preference on whether or not they wished to join the new company and that, ECGD will use its best endeavours to meet their wishes where these are consistent with the business needs of ECGD and the New Company". That was reiterated during the Second Reading debate in another place.

It is worth putting on record that once it had been indicated that NCM had been selected as the preferred purchaser by the Secretary of State for Trade and Industry, the chairman said, I am delighted by the news and look forward to working towards the completion of the transaction … ISG is a strong business with an impressive record of experience and performance and an enviable business base serving Britain's export community. We have no doubt that, with NCM's support, ISG will be able to strengthen further the range and quality of services it provides to British exporters. We believe firmly that combining our complementary experience and resources can only be to the joint benefit of our organisations and of our customers in the increasingly international and competitive export insurance market place. We have long admired [and I echo this] the ability of the executive and staff of ISG. We look forward to working closely with them to establish a strong and productive base for our future partnership". NCM made very clear that if possible it would be its wish that those who go to the new company should be volunteers.

As has been indicated, the assets of the company are the staff and the experience contained there. However, while we fully recognise the desirability of avoiding an outcome that means not only volunteers would have to transfer, and while we regard that as a remote eventuality, the Government must retain the right to post people in order to meet the business needs of the new company and of ECGD.

The terms and conditions on offer to people transferring to the new company are expected to be at least as good as those they now enjoy. It is not unreasonable to expect them to transfer on a permanent basis and to show the sort of commitment to the business that I am sure they will expect from their new employer.

Acceptance of Amendment No. 51Q would mean, in effect, that everyone who transferred to the new company would do so on a secondment basis. Neither the Government nor the new company would have any clear idea about the eventual numbers of staff wishing to remain with the company or return to the Civil Service. Neither the Government nor, I am sure, the new company could regard that as a satisfactory position. The new company would have to face the possibility that many, or even the whole, of its workforce would suddenly decide to exercise that option. It could not run a business on that uncertain basis.

If they exercised such an option in large numbers, the Government would also face a very difficult situation and might even have to make some of the people redundant if they had not been found other Civil Service jobs within a reasonable time. I noted that the noble Lord's brow furrowed when I came to the kernel of the retention of the right to post people in order to meet the business needs of both sides. However, I hope that he and the trades unions will consider what I indicated at an earlier stage. The context of this particular privatisation must be regarded very carefully. Only about half the organisation will go. It is the clearly expressed desire on both sides that, if possible, it shall be volunteers only.

Lord Williams of Elvel

That is easy to understand because if they are not volunteers there will be nothing left of the business. However much the noble and learned Lord may like or dislike it, if people are compelled to go in a direction in which they do not want to go, they will tend to walk out of the door. The assets of the company walk out of the door at about half pest five each evening. The assets will disappear rather rapidly if there is not some arrangement with which they are satisfied. I do not believe that the Government can be at all complacent about the possibility of ISG staff being happy enough to volunteer in sufficient numbers to go to the privatised company.

The fact that NCM is the preferred bidder has been known for some weeks. I have to tell the noble and learned Lord that there has been no approach to the staff from that company. No formal talks have taken place, no offers have been made and no discussions have been embarked on. NCM claims that the Government are holding up matters. I do not know whether that claim is true or not. There is a genuine worry in the staff of ISG that quite a few of them will be forced into jobs that they do not want. That will be bad for them, bad for the business and bad for privatisation. I am sure that the noble and learned Lord will recognise that. Nevertheless, I believe that we have pursued this matter as far as we can at the moment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 51N: Page 6, line 1, leave out ("not").

The noble Lord said: In moving this amendment, it may be for the convenience of the Committee if I speak to Amendments Nos. 51P and 51U. Clause 9(2) (a) refers to the Superannuation Act 1972. Under Sections 1 and 2 of that Act a person transferring under Clause 9 which we are discussing, could be regarded as having been technically redundant by that transfer and thus be entitled, on transfer, to receive redundancy compensation. Subsection (2) of the clause removes the possibility of that technical redundancy compensation.

These are three probing amendments. If the noble and learned Lord is to respond, I hope that he will explain the concept of technical redundancy and how the Government can justify the withdrawal of the possibility of receiving such compensation from ISG staff, bearing in mind that redundancies could follow as a result of the purchase of ISG by a private buyer. Redundancy compensation terms currently applicable to ISG staff as civil servants could be altered by the purchaser without negotiations with the staff, the individual or the trades unions. I beg to move.

6.45 p.m.

Lord Fraser of Carmyllie

The noble Lord's information that the NCM has not met with the trades unions does not coincide with my information. I understand that NCM has already seen them and that the president of the company has addressed all the ISG staff and met a large number of them. Furthermore, I understand that about 50 of the ISG staff are flying to Amsterdam this week to meet with the NCM management and staff. I am sure that the noble Lord will welcome that opening of discussions directly with the trades unions if it has not already occurred.

Turning to Amendment No. 51N, if a civil servant is made redundant, compensation payments are funded from the principal Civil Service pension scheme. We cannot expect that any redundancy compensation payments in the private sector will be funded in this way. Instead, they would be a charge on the assets of the employer, or in the unlikely event he is unable to meet them, the redundancy fund would provide some compensation.

As regards pensions, we can expect that they will be funded through an exempt approved scheme established under a legally binding trust deed with funds separated from the new company's business and subject to the controls of the Inland Revenue and the Occupational Pensions Board. The standing of the new company is likely to be such that there is no basis for concern by employees about either job prospects in general, about the security of their pensions, or the payment of compensation if any individual were made redundant. Accordingly, Government and Treasury support are not appropriate.

As I have said previously, the Government will require the new owner to offer a basis of calculating pension entitlements and redundancy compensation payments equivalent to those applying in the Civil Service. The redundancy compensation will need to take fully into account the length of time people have already spent in the Civil Service. As the noble Lord appreciates, Clause 9(2) of the Bill will ensure that. This means it would be very expensive for the new company to make people redundant because it would have to compensate them in full for their length of time in the Civil Service as well as in the new company. Therefore it is to be anticipated that the new company will be unlikely to take on more people than it is quite confident it will need.

The proposed amendments could mean transferees were entitled to redundancy compensation payments now despite no loss of job, nor any loss of the protection they would have in case of redundancy during service with the new company. They would effectively confer windfall gains on the employees concerned at substantial cost to public funds and for no good reason. The proposed procedure that the Government have advanced will give adequate assurance to people transferring about their security of employment and about their pensions. With that explanation of the technical point, I hope that the noble Lord will feel that the amendment need not be insisted on.

Lord Williams of Elvel

I am grateful to the noble and learned Lord for bringing me up to date concerning the contacts that have been made between NCM and the staff of ISG. However, I am advised that NCM has met the staff only to hear what they want. There have been no offers, negotiations or anything of that kind. The company says that up to now it can only note the concerns of the trades union side and that of the staff and that all such notes are subject to the restriction placed on it by the Government. That is the state of play with NCM. I understand that the amendment as drafted would create certain difficulties. I indicated at the outset that it was not meant to be other than a probing amendment. I am grateful to the noble and learned Lord for his reply. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 51P, 51Q and 51R not moved.]

Lord Williams of Elvel moved Amendment No. 51S:

Page 6, line 7, at end insert: ("(3) No person who has ceased to be employed in the Civil Service and become employed by a transferee by virtue of a scheme under section 8 of this Act shall at any time following the transfer have his employment terminated by the transferee for the purpose of making changes to the rates of pay, pension scheme or other terms and conditions of employment offered to employees of the transferee".).

The noble Lord said: I referred to this amendment a little earlier. It is a question of whether at any time following a transfer and ceasing to be a civil servant, an employee can have his terms and conditions changed. I refer again to the Skills Training Agency which was sold rather piecemeal to private buyers. The result of that was quite appalling acrimony and aggravation between the staff and the new employers on the terms and conditions of employment. That acrimony still persists. We very much hope that that will not take place in the case of the privatised ISG. I should be grateful for the comments of the noble and learned Lord. I beg to move.

Lord Fraser of Carmyllie

I hope I can reassure the noble Lord by saying that in our view the amendment is unnecessary. Existing employment law will protect the position of employees at any time. TUPE 81 applies only at a time of transfer; but it establishes a basis of terms and conditions which will be included in binding contracts of employment. The new company can only amend these contracts by agreement or by appropriate notice, otherwise compensation could be sought. Also, if change were imposed and this amounted to constructive dismissal the noble Lord will appreciate that compensation could be payable. I hope the noble Lord is satisfied with that brief explanation.

Lord Williams of Elvel

I am grateful to the noble and learned Lord. We are coming to the end of a rather long series of amendments. I apologise for having wearied the noble and learned Lord with them. These are very important amendments which the staff have quite rightly asked us to put forward in order to probe the situation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 51 T to 51 V not moved.]

Clause 9 agreed to.

Clause 10 [Vehicle companies]:

[Amendment No. 51W not moved.]

Lord Clinton-Davis moved Amendment No. 51X: Page 6, line 31, leave out ("or partly").

The noble Lord said: This was an issue which was raised at Committee stage in another place. The Minister then explained that the words "or partly" were included to provide the opportunity for the successful bidder—ISG—to pay by instalments. What the Minister said was: If company A offered £100 million down and nothing more later and company B offered £100 million down and £20 million later, all other things being equal—and I stress that many other things must be taken into account, for example, commitments and financial resources—I should he inclined to take company B's offer. In these circumstances, it could he that partly-paid shares would be the best method of ensuring that the second instalment was paid".—[Official Report, Commons, Standing Committee H. 7/3/91: cols. 386–387.] I note that with some interest, particularly in the light of the situation which has arisen vis-a-vis NCM. Can the Minister say whether there is any question of a payment on the basis of instalments so far as concerns NCM? What happened in relation to the other bids —the bids of AG of Italy and Trade Indemnity? Was any suggestion made of instalments in those cases? Is the Minister able to tell us anything about the value of the bids at this stage?

I shall listen with great interest to what the Minister has to say. I beg to move.

Lord Fraser of Carmyllie

Clause 10(3) fulfils the technical purpose of providing a means by which the paid-up status of the shares of the vehicle companies can be established. This is particularly important in relation to the shares of the transferee company which are not issued in consideration of the injection into the company of assets or cash but in consequence of the transfer of ISG business to it. The normal Companies Act procedures for issuing shares do not apply as this clause provides for a special statutory issue. It is necessary to be able to classify shares so issued as paid-up fully or partly so that the Companies Act can then apply to them.

Little purpose is served in removing power to classify as partly paid. The subsection so amended would give a discretionary power to the Secretary of State to classify the shares as fully paid-up. The implication would be that if he did not they would be treated as partly paid; in substance the same as giving power to choose between these alternatives.

It is unlikely that the Secretary of State would wish to treat the shares as partly paid but it would be unwise. to foreclose any options at this stage of the privatisation process. It is difficult to speculate on circumstances in which the Secretary of State would wish to treat shares as partly paid. There is the possible use of partly paid shares in the sale of shares by instalments. However, as the noble Lord asked a direct question on this matter, I should emphasise that instalment sales are not presently contemplated. The important point is that the enabling power must be wider than any specific use of it that is envisaged to ensure the precise use within the scope of the power, and hat flexibility remains to deal with any eventualities. This is clearly a technical point concerning company law and the particular circumstances of privatisation. I hope I have answered the queries of the noble Lord.

Lord Clinton-Davis

I am grateful to the Minister for that reply. I assume from what he said that the answer to the specific question that I posed is in the negative. Is that right? I specifically asked about NCM. The Minister said that no question of instalments is contemplated. It therefore follows that in relation to NCM there is no question of instalments.

Lord Fraser of Carmyllie

I thought that I had indicated as clearly as I possibly could. I included the words "at present" or "presently" that is the state of affairs. I cannot advance on that.

Lord Clinton-Davis

I am obliged to the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 51Y:

Page 6, line 39, at end insert: ("(c) transfer any shares held on behalf of the Crown in any vehicle company unless he has made provision for that vehicle company or its subsidiaries to continue to operate through a regional network which assures an office in each standard planning region of the United Kingdom". ).

The noble Lord said: This is a probing amendment. At the present time there are nine regional offices all of which handle only ISG cases. Therefore they are destined to transfer to the private buyer. The question is whether the purchaser is likely to retain these regional offices. I understand that NCM has indicated that it will wish to review the cost-effectiveness of the regional network. This is a matter of considerable anxiety to the staff. However, it is more than the staff that one has to consider in this situation.

The fact that there are regional offices has stimulated the view that NCM has been invaluable as regards a local presence in enabling people within the areas of the regional offices to enter into meaningful discussions. If NCM was closed down that would no longer be the case. It is the view that there is a considerable need to contact a local office when it comes to processing applications for cover.

These are not just my views. They are views which are attributed to Bain Clarkson who are important brokers in this field. The even more forceful view was expressed by Mr. Granger, the former deputy chairman and current consultant with CIA. Mr. Granger believes that it is a question "of people dealing with people"; that the experience of staff within the regional office network was an important consideration and represented a fine source of education for most exporters.

Therefore the general view on the part of brokers and others is that it is extremely important to maintain a local representation. It enables people to feel at home, so to speak, in securing information that they want, in obtaining meetings with reasonable convenience, which may be extremely important in this area, particularly with regard to smaller exporters. Jardines go so far as to say that ISG will have to be careful not to try and service customers from different areas within too big a geographical location. We are not just thinking here of NCM. We are thinking in terms of the convenience of exporters and of the input they make to the national effort. Those are, frankly, quite as important as the interests of NCM, if not more important. I beg to move.

7 p.m.

Lord Henley

We went over some of this ground, or rather similar ground, in dealing with Amendment No. 5 last week. The ECGD network of nine regional offices is that which is best suited to meeting the reasonable needs of ECGD's customers and, therefore, to getting business. These offices handle only the insurance services business. As the noble Lord will know, the project group business is dealt with directly by the head office in London.

I am confident that the new owners will wish to keep the network that responds to these needs and also developments in business communications. However, it would be unreasonable to impose a statutory requirement to do so on a private company which is in competition with other private companies which are not subject to such requirements. The regional offices and their staffs will be among the assets transferred upon privatisation of ISG. Their locations are, of course, of long standing and were chosen to provide a balance between the needs of Insurance Services customers, the local service and contact and the costs of running a widespread regional network which is funded from the premiums paid by exporters.

Lastly, in relation to the amendment itself, I should point out that the regional office locations are not and never have been entirely consistent with United Kingdom standard planning regions; nor would it necessarily be appropriate that they should be, given the factors determining their location. Also it is not necessarily appropriate that the successor company should necessarily have standard planning regions imposed on it, as regions in which it should deal. With that explanation, I hope the noble Lord will feel able to withdraw his amendment.

Lord Clinton-Davis

I am not entirely reassured by the explanation. Has NCM intimated to the department the steps it proposes to take to give consideration to this particular matter?

Another point which gives rise to concern on the part of exporters, and most notably the smaller exporters—I should have thought that Ministers would want to know about it because after all NCM is the preferred bidder—is a matter which, although I entirely agree that it is not something that is written into the law, is nonetheless a subject of concern to the staff, to exporters and is of importance for the viability of our export business. I should like to ask the noble Lord what information he has gathered from NCM as to its intentions. Surely he will have extracted from them some undertaking to enter into a process of consultation in this connection. After all, it is not inconceivable that it will be cheaper to run a central office. On the other hand, that may not be in the best interests of the smaller exporter and there may be a conflict there.

Lord Henley

I do not accept what the noble Lord has said. As regards what NCM has actually said to my right honourable friend and to my department, it has expressed appreciation of the fact that there is a concern in the negotiations for taking over the regional offices. There is no reason to believe that it intends to change the regional pattern that it is proposed it might purchase.

The noble Lord said, I think, that it was not just NCM's interests we should look to, but I think he should remember that the company's interests are also those of its customers. If it cannot bring in the customers there is little point in buying the new company. NCM needs customers to make the company viable, and I am sure it will find it necessary to keep a regional network.

Lord Clinton-Davis

Here again there is a conflict of view between us. It is our view that it is not at all inconceivable that some customers may be dispensable and that NCM will not in fact be looking for customers so there could be some prejudice to our export trade if certain of the smaller exporters in particular are found to be unnecessary to NCM's overriding interests. However I have listened to what the Minister has said and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 51Z and 51ZA not moved.]

Clause 10 agreed to.

Clause 11 [Reinsurance of ECGD risks]:

Lord Henley moved Amendment No. 52:

Page 7, line 14, at end insert: ("(1A) The Secretary of State shall from time to time determine, in relation to such classes of risk determined by him as might be insured by him under section 1 of this Act, whether it is expedient in the national interest for him to exercise his powers under that section to make arrangements for reinsuring persons providing insurance for risks of that class.").

The noble Lord said: My noble and learned friend Lord Fraser spoke to this amendment with Amendment No. 51. I beg to move.

On Question, amendment agreed to.

[Amendment No. 52A not moved.]

Clause 11, as amended, agreed to.

Clause 12 [Delegation of assistance function]:

[Amendment No. 52B not moved.]

Clause l2 agreed to.

Clause 13 [The Export Credits Guarantee Department and the Export Guarantees Advisory Council]:

Lord Henley moved Amendment No. 53:

Page 7, line 40, at end insert: ("(4) In exercising his duty under section 11(1A) of this Act, the Secretary of State shall consult the Export Guarantees Advisory Council.").

The noble Lord said: I beg to move this amendment. My noble and learned friend spoke to the amendment when speaking to Amendment No. 51.

On Question, amendment agreed to.

[Amendments Nos. 53A and 53B not moved.]

Clause 13, as amended, agreed to.

Clause 14 [Expenses]:

[Amendment No. 53C not moved.]

Clause 14 agreed to.

Clause 15 [Short title, interpretation, commencement, etc.]:

[Amendment No. 53D not moved.]

Clause 15 agreed to.

On Question, Whether the schedule shall be agreed to?

Lord Williams of Elvel

I have indicated opposition to this schedule not because I have any reason to oppose it but simply because I do not understand what on earth it means. I should be most grateful if the noble Lord would explain in comprehensible language what it means.

Lord Henley

I am sure the noble Lord, Lord Williams, will find the schedule very easy to understand after I have given a brief explanation of its purpose. I can understand that it is possibly the legal language that the noble Lord finds somewhat confusing, although he is well versed in the skills and arts of the draftsman. I am sure he will ultimately find it perfectly straightforward.

The schedule contains useful supplementary provisions which tidy up some loose ends which will be left after the transfer envisaged by the scheme has taken effect. The purpose is to ensure that all references to the Secretary of State in documents and proceedings which relate to the properties and liabilities transferred are to read in future as references to the transferee, who will then own the property and be subject to the liabilities.

For example—it is very often by means of example that we can make things clear—if the ECGD is a party to a contract whereby a person provides cleaning services for Insurance Services Group premises which are to be transferred to the transferee company, the schedule ensures that, when the contract is transferred by the scheme to the transferee, the transferee is to be deemed to be the party to that contract—

Lord Williams of Elvel

I did ask for simple language to explain the system. Would the noble Lord be kind enough to observe my request?

Lord Henley

I apologise to the noble Lord. However, perhaps I may return to the beginning of my example.

I was trying to explain a situation where, for example, ECGD was party to a contract. I suggested that it might be party to a contract providing cleaning services for its own premises; that is, the premises of ISG. Those premises are then transferred to what I would describe as the transferee company, but I shall call it i he new company. The schedule ensures that the contract will be transferred by the scheme to the new company; in other words, the new company will be a party to the contract with the old cleaning firm which was providing those services to the ECGD. I believe that that is all perfectly straightforward.

Baroness Seear

Is the Minister saying that under these arrangements the new firm will go on using the old cleaners?

Lord Henley

As always, the noble Baroness puts the matter far more succinctly than I can. Indeed, she has it exactly right.

However, I shall continue with my explanation for the benefit of the noble Lord, Lord Williams of Elvel, whose skill in reading fairly simple and straightforward legislation is not the same as that of the noble Baroness. The schedule also enables a certificate to be provided by the Secretary of State conclusively establishing that any asset or liability was vested in the transferee company on a particular date. That is a useful provision for establishing title to assets.

I hope that that brief explanation will be sufficient to satisfy the noble Lord that the schedule is perfectly straightforward and that there is nothing sinister in its purpose. I trust that he will, therefore, feel able to withdraw his opposition to the schedule forming part of the Bill.

Lord Trefgarne

I wonder whether my noble friend is aware that, quite contrary to the look of puzzlement on the faces of those on the Opposition Benches, his explanation was almost as clear as the words in the schedule itself. Therefore, it has been of great assistance to the Committee.

Lord Henley

I knew that my noble friend would need no explanation. I am sure that he quietly read the schedule, as we all do from time to time, before going to bed. He immediately knew exactly what it meant.

Schedule agreed to.

House resumed: Bill reported with amendments.