ECGD: Premium Rates (Hansard, 15 May 1991)

Viscount Astor
My Lords, the level of Export Credit Guarantee Department premium rates for medium and long-term business will be kept under regular review to seek to ensure that they continue to achieve the balance which Ministers wish to strike between the national interest reasons for supporting such exports and the risk to the taxpayer that the ECGD's premium income will not be able to cover its underwriting losses.
The aid and trade provision budget for 1991–92 is£97 million. The budget for 1992–93 will be set following the outcome of the annual Public Expenditure Survey.

§ Lord Taylor of Gryfe
My Lords, is the Minister aware that I have in my hand a letter from the Chairman of the Overseas Project Board which represents the major contractors in Britain engaged in export? He points out that there is no new money available this year under the aid and trade provisions whereas other countries, like Germany and France, have resources in that area. Secondly, is the Minister aware that the increased premiums that are now charged on export credit business are on top of the highest rates of export credit insurance premiums in the world? How can British exporters continue to improve when their hands are tied behind their back in that way?

Viscount Astor
My Lords, that is true about the aid and trade provision budget, but it is because of the recent successes of British firms that the budget has been heavily overcommitted. It has been decided that we can take no further commitments involving ATP expenditure in 1991–92, but discussions are under way with a number of firms on the way in which projects should proceed in 1991–92 with ATP expenditure deferred until later years. One must accept that rates are high, but they are necessary for the type of business concerned and the Government are committed to providing a viable and stable framework for the ECGD support for project exports.

§ Lord Trefgarne
My Lords, is my noble friend aware that the increase in premiums which has recently been effected in respect of ECGD will be very damaging from the point of view of our exporters? Will he undertake to look at the matter again and see whether it is possible for our exporters to be put on an equal footing with their overseas competitors?

Viscount Astor
My Lords, as I said, it is important to strike the right balance. Rates are going up. French rates have already gone up. We are campaigning vigorously to press other export credit agencies to charge economic premium rates for medium and long-term export credit support. We are making good progress.

§ Lord Williams of Elvel
My Lords, is it enough for the Minister to say that the Government are pressing other export credit guarantee agencies to charge the same rates as ourselves when we are charging uncompetitive rates to industry and thus affecting British exports? Furthermore, can the Minister tell the House why the aid and trade provision was suddenly capped without any warning to anybody? Was that a Ministerial decision?

Viscount Astor
My Lords, I do not believe that it was capped; it is my understanding that it reached the full extent of its budget. With regard to short-term rates, my honourable friend the Minister for Trade made it clear in another place at Report stage of the Export and Investment Guarantees Bill that the Government, through the ECGD, will be providing 100 per cent. reinsurance to the privatised insurance services in respect of risks arising in respect of a handful of countries which are unlikely to be acceptable to the private reinsurance market. He gave an assurance that it was the Government's intention that, subject to satisfactory financial performance, the facility would continue for as long as the Government consider it essential to meet the reasonable needs of exporters.

§ Lord Williams of Elvel
My Lords, is the Minister aware that he is trying to widen the Question to the short-term insurance services group which the Government are trying to privatise? That was not the Question that my noble friend asked. It was about premium rates for insurance cover for long-term exports to the world. Are not the Government aware, and is not the noble Viscount aware, that we are now becoming seriously uncompetitive in our insurance premium cover and it is about time the Government did something about it?

Viscount Astor
My Lords, I have already said that although our rates are high, premium rate increases have been justified. However, they were tempered to take account of the rates charged in other countries. While premium rate increases are unpopular most exporters would prefer to have cover available on the market than none at all.

§ Lord Jay
My Lords, is the Minister aware that for many years the policy of previous governments was that the ECGD should match the facilities available to 1610 exporters in other countries? Is he further aware that the present Government policy is likely to deal a serious blow to British exporters?

Viscount Astor
My Lords, I have already said that our rates are high, but they are competitive. We are taking the lead in tackling the problem of subsidised premium rates. Other EC countries have problems and have shown great interest. We feel that they will want to take similar steps in the future.

§ Lord Elton
My Lords, will my noble friend draw the views expressed in your Lordships' House, particularly those of my noble friend Lord Trefgarne, to the notice of his right honourable friend?

Viscount Astor
My Lords, I shall certainly do that.

§ Lord Taylor of Gryfe
My Lords, is the Minister aware that we are running a substantial deficit in our balance of payments and there is increasing unemployment in heavy engineering industries? Will he try to understand how difficult it is for British exports, particularly in capital goods, to compete with those of the French, the Germans and others who are offered much more favourable credit terms than our exporters are offered? Can he not do something in the national interest to improve the situation?

Viscount Astor
My Lords, as I said earlier, we believe in providing strong support for our exporters. They are an extremely important part of our economy. We know that the rates are high and we are looking at them but we feel that they are justified in view of the increasing risks involved.