ECGD: Insurance Services Group Sale (Hansard, 4 June 1991)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay)
My Lords, no. Responses to the invitation to tender made by AG of Italy, NCM of Holland and Trade Indemnity are currently being evaluated. It is the Government's intention to proceed with the sale as quickly as possible, subject to the successful passage of the Export and Investment Guarantees Bill through Parliament.

§ Lord Williams of Elvel
My Lords, I am most grateful to the Minister for his Answer. Is he aware that the Trade Indemnity bid is nugatory in the sense that it has not proposed an outright purchase, has itself lost many millions of pounds last year and must therefore be ruled out as a purchaser? Is he further aware that the Dutch company which is bidding for the insurance services group has a political risk reinsurance facility with the Dutch Government which will not be available under the present arrangements? Is he further satisfied that British exports will be encouraged if a Dutch or an Italian company takes over this vital part of the export effort?

§ Lord Reay
My Lords, the names of the short-listed bidders were announced to Parliament on 5th March. They were invited to submit tenders by 30th April. Three responses were received by the closing date. NCM and AG have tabled an offer to pay for the acquisition of the short-term business and Trade Indemnity has submitted an alternative proposal which aims to meet government objectives for the privatisation of the business. All three responses are being evaluated. NCM is an independent private sector company which is not under Dutch Government control. It insures certain Dutch exports for the account of the Dutch Government, but that is equivalent t to the national interest reinsurance arrangements which would apply between ECGD and the new company after privatisation. On foreign owners, there is no reason why the nationality of the owner should be seen as a key factor. The main issue should be the facilities and services to be provided.

Lord Morris
My Lords, do my noble friend and Her Majesty's Government detect any national interest for exporters in the foreign ownership of the short-term insurance services?

§ Lord Reay
My Lords, my noble friend is right to point out that we are talking about the short-term and not the project business. The decision to privatise grew out of the independent Kemp review of the ECGD's work which recommended privatisation for the short-term business.

§ Lord Bottomley
My Lords, as a former Minister with the ECGD which did so much to boost British exports after the war, I feel that it is scandalous to think that that export boost, achieved through British knowledge and persuasion, should be entrusted to foreign agents. They will not do the job half as well as the ECGD, which came into existence under a Labour government.

§ Lord Reay
My Lords, the Government will be continuing their support for project insurance on a medium and long-term basis. I do not agree with the noble Lord's remarks about privatisation. Privatisation will enable the insurance services group to be better placed to face increasing competition from the private sector insurers, especially as a single market becomes a greater reality and as the distinction between domestic and export credit risks becomes blurred. For example, there is a move towards insurance policies combining cover for domestic and export risks. ECGD is restricted by its own governing legislation from doing that. The risk therefore is that ECGD would lose the better quality business and be left only with the risks which competitors would not want to take on.

§ Lord Taylor of Gryfe
My Lords, am I right in assuming that the Minister believes in market forces and that this service was advertised for sale; that six companies applied; and that there are only two genuine bidders at the moment, both of them foreign? Does that suggest that the market for this enterprise has collapsed? Secondly, as the Minister has quoted with approval from the Kemp report set up by his department in 1989, will he confirm that the report includes a paragraph which states that no pressure from the UK exporting community, or the commercial sector in the United Kingdom, generally supported a change in the status of any part of the ECGD? Will he please listen to business?

§ Lord Reay
My Lords, we are keen to listen to business. We have taken various measures to try to meet the concerns that business has been expressing. For example, the private market is expected to take on the bulk of the current short-term business reinsurance portfolio. Good progress has been made, but the arrangements cannot be finalised until the Bill becomes law. To ease the transition the Government remain willing to provide supplementary top-up reinsurance for up to three years after privatisation. In addition, the Government recognise that there are a few countries for which ECGD cover is currently available which are unacceptable to the private sector under present circumstances. To avoid the risk of a sudden reduction in the facilities available to exporters in those cases, the Government will, in the national interest, provide 100 per cent. reinsurance support for the company to enable it to maintain those facilities. That facility will be kept under close review but it will not be time-limited.

§ Lord Mulley
My Lords, can we have an assurance that, notwithstanding the change in the planned arrangements, the Government will continue to accept 541 responsibility for those credits and that Ministers will be willing to answer Questions in Parliament about them?

§ Lord Reay
My Lords, on medium and long-term project insurance, the ECGD's position will remain as it now is. We are talking only about the short-term insurance credit facility.

Lord Bruce of Donington
My Lords, while I appreciate that the term "public interest" has uniquely been enunciated from the Government Front Benches, is the Minister aware that the proposed steps cannot be justified on any economic grounds; are of no assistance to this country's export trade; and that the decision is entirely doctrinaire, mainly dictated, I suspect, by a desire to build up negative expenditure —a delightful accountancy term—to diminish the public expenditure total?

§ Lord Reay
My Lords, I could not agree less with the noble Lord. In the private sector, the insurance services group will be able to offer its customers a more flexible, comprehensive and up-to-date service. There is a threat of a legal challenge to the continued operation of official export credit schemes on the grounds that they constitute unfair competition incompatible with the Treaty of Rome. All EC Governments, not just ours, are taking that threat seriously. Most of them are also taking steps to lessen the degree of state involvement.

§ Lord Clinton-Davis
My Lords, notwithstanding the blandishments, amounting almost to bribes, on the part of the Government, why does the Minister think that the business community has found the Government's explanations so unconvincing and, by and large, is opposed to the proposal?

§ Lord Reay
My Lords, I am not sure that I accept what the noble Lord says. We believe that we have gone a long way towards meeting the concerns of industry which have been expressed to us.