Export and Investment Guarantees Bill

HL Deb 14 October 1991 vol 531 cc968-96

4.38 p.m.

Consideration of amendments on Report resumed on Clause 9.

Lord Clinton-Davis moved Amendment No. 6:

Page 6, line 17, at end insert: ("( ) No person shall be seconded to the employment of a transferee unless—

1. (a) he has previously consented in writing to such a secondment; and
969
2. (b) he has received a written undertaking from the Secretary of State that suitable employment will be offered to him in the service of the Crown on the termination of that secondment; and
3. (c) he has received a written undertaking from that transferee that any permanent employment subsequently offered to him by the transferee will be on no less favourable terms than those applying to equivalent permanent employees of that transferee.").

The noble Lord said: My Lords, I beg to move Amendment No. 6 standing in my name and that of my noble friend Lord Williams of Elvel.

The NCM is very reluctant to state exact figures but has indicated its intention to set up the new company with 590 permanent staff.

I understand that that number will include some 200 secondees drawn from the clerical trades—the Minister can, if necessary, put me right on the figures later—and that the purpose in seconding staff is to allow flexibility: to reduce the complement as new working practices are introduced and if the new company's insuring of United Kingdom domestic business is not as successful as NCM expects.

Secondment, as it comes within the NCM offer, is not a very good option for the staff of the ECGD. At the outset, they will be given no idea of the period for which they will be seconded. My understanding is that that could be anything from six months to three years. Absolutely no guarantee is provided that posts will be available for them once the company decides to return them to the Civil Service, particularly in view of the progressive reduction in staffing in most government departments. Should they be offered permanent posts in the new company during their period of secondment, those posts will be offered on less favourable terms than those which apply to staff occupying permanent new company posts from the outset.

As I understand it, the ECGD management is presently analysing the results of an exercise in which staffin Cardiff and regional offices were asked to opt to join the new company or remain in the Civil Service. They were asked to indicate whether they were prepared to join the company as secondees. I believe the Minister said that 590 staff had volunteered. The amendment seeks to ensure that no ECGD staff will be forced to accept secondment, that suitable Civil Service posts will be found for returning secondees and that any new company posts offered to secondees will be on the same terms as those offered to the original permanent staff.

I look forward to hearing the Minister deal with the specific points that I have raised. In those terms I beg to move the amendment.

Lord Fraser of Carmyllie

My Lords, I must immediately make sure that we have our figures right and that I understand what the noble Lord seeks to ascertain from me. I should indicate that it is anticipated that the number of staff required by NCM would be around 600 initially. As the noble Lord subsequently appreciated, the figure of 590, which I intenvened to give, is the number of existing ECGD staff who have volunteered to transfer to the new company. It is unlikely that there will be secondments on any scale because that figure of 590 does not include secondments; it represents volunteers for permanent transfer.

If secondees were needed, preference would be given to those who had already expressed an interest. However, we cannot rule out entirely that some non-volunteers might be needed to go on secondment to the new company. They would remain civil servants attached to ECGD and in due course would return to that department. If the return of secondees generated a surplus of people in ECGD, then ECGD would do its best to find jobs for them in other departments, if possible near their homes, but no guarantees can be given.

It would be wrong to give any section of ECGD's staff preference for jobs over the rest, as the second part of the amendment suggests for secondees. All should be considered equally, whether or not they have been on secondment. If the new company wishes to offer a permanent job to anyone on secondment, the terms and conditions of employment would be a matter for discussion and agreement between them at the time. There could be no compulsion on the secondee—who, as I said, would be a serving civil servant at the time—to accept what is offered by the private company if he or she were to consider that what was on offer was not satisfactory.

In those circumstances and with that explanation, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Clinton-Davis

My Lords, I have listened with care to the Minister. However, I shall need to study further what he 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. 7:

Page 6, line 17, at end insert: ("(3) No person shall cease to be employed in the service of the Crown and become employed by a transferee unless he has previously consented in writing so to do.

The noble Lord said: My Lords, this amendment stands in my name and that of my noble friend Lord Williams of Elvel. It may be for the convenience of the House if we deal with Amendment No. 8 at the same time.

Subsection (3) seeks to ensure that there is no question of compulsion so far as concerns ECGD staff in terms of being required to transfer to the new company. It is very specific in its terms. The purpose of subsection (4) is to prevent the management of ECGD from invoking what is known as the mobility clause, under which a civil servant of executive grade or above may be obliged either to transfer to a government department in any United Kingdom location if management deems that to be right, or be deemed to have resigned from the Civil Service.

In view of the fact that a number of ECGD staff in Cardiff—perhaps this situation may also apply to regional offices—have evidently opted to remain in the Civil Service rather than transfer to the new company, ECGD can be expected to need to place surplus staff in other government departments or force transfers to the residual ECGD based in Cardiff or in London. The difficulty experienced in placing surplus staff following the regional office review in 1989 indicates that suitable vacancies are not readily available in those locations. The situation is likely to be better in Cardiff where the surplus is expected to be greater. Four regional office staff are still unplaced following that review and in one case the mobility clause has been invoked.

I hope that the Minister will view these amendments with sympathy. I beg to move.

Lord Fraser of Carmyllie

My Lords, it has been and remains the intention of ECGD and the preferred purchaser NCM that the new company should be staffed by volunteers from ECGD staff so far as possible. To that end undertakings have been given to ECGD staff that their own preferences will be taken into account and honoured wherever possible, having regard to the business needs of ECGD and the new company. Now that staff have expressed their final preferences, it appears likely that, broadly speaking, the new company will be staffed by volunteers. However, I have to say that until all the responses have been analysed and matched against the jobs to be filled, we cannot be certain that in every area we shall be able to exclude the possibility that one or two non-volunteers may be needed. Again I stress that both organisations will seek to avoid that.

To pass the amendments would impose a requirement which might prevent the new company from operating efficiently. As for the requirement in Amendment No. 8 that anyone who has refused to volunteer must be found another Civil Service job near his home, here too ECGD will try to achieve that wherever possible but we cannot be certain that it can be done in every case. It remains to be seen whether there will be a surplus of people not needed by the new company or by ECGD. If there is one, ECGD will approach other departments in search of vacancies for everyone concerned. However, if they cannot be found locally, people in mobile grades may be asked to move to where jobs are available. The amendment also appears to seek preference for those who had refused to volunteer over those, if any, who might have done so but could not be found a post in the new company or in ECGD. That would clearly be inequitable. On that basis I invite the noble Lord to withdraw his two amendments.

Lord Clinton-Davis

My Lords, again I listened carefully to what the Minister said but I express some concern about his ambivalence (albeit, as he said, there is perhaps a small number of cases) that the possibilities which I envisaged in my earlier remarks may not be avoided. That will give rise to a great deal of concern on the part of the staff. The Minister considers that limited numbers will be involved. Nonetheless each individual case has to be viewed with concern against that background.

I find it difficult to appreciate the arguments as to why the Minister has been unable to accept these amendments. I cannot accept the argument that the amendments would make it difficult for the company to subsist and would impose a blight upon it. That argument does not bear up to any examination.

I understand that the employees have received legal advice to the effect that under the TUPE regulations any staff occupying ISG posts at the time of transfer will automatically become new company staff. I should have asked the Minister about that matter and would be happy to give way to enable him to answer now. The issue is highly relevant.

Lord Fraser of Carmyllie

My Lords, I believe that matter arises more happily in relation to Amendment No. 9 which deals specifically with TUPE.

Lord Clinton-Davis

My Lords, very well. I shall consider with my noble friend what the Minister has said in order to determine whether to return to the matter at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 8 not moved.]

Lord Clinton-Davis moved Amendment No. 9:

Page 6, line 17, at end insert: ("( ) Where, by reason of the operation of the Transfer of Undertakings (Protection of Employment) Regulations 1981 in relation to a transfer of property, rights and liabilities by virtue of a scheme under section 8 of this Act, any selection is made of persons to cease to be employed in the service of the Crown and become employed by a transferee such selection shall only be made in consultation with the accredited representatives of the employees' trades unions.").

The noble Lord said: My Lords, I understand that preference questionnaires were sent to members of staff at Cardiff and the regional offices. They were asked to exercise the option of joining the new company or staying in the Civil Service. The questionnaires were required to be returned by staff on 4th October and are now being analysed by the management. The Minister has already given a flavour of the results of the questionnaires.

NCM has said that the initial requirement of the company is for approximately 400 permanent staff and an additional 200 secondees. However, approximately 590 people have volunteered of whom 500 are permanent staff. Therefore, a selection must be made from the people who have volunteered to join the company as permanent staff. I understand that the management of the ECGD has not made reasonable arrangements for the trades unions to be consulted about the selection. If I am wrong I shall be happy to withdraw the remark because we are not in a position to know the exact up-to-date situation as regards the consultations. I understand that in that regard no consultation has taken place. However, it is for the Minister to inform the House of the current position.

I believe that some level of consultation is wholly appropriate and I should be surprised if the Minister were to demur from that. The trades unions wish to ensure that the consultations on this matter will be early and full. Perhaps at this stage the Minister will take on board the question that I asked in an earlier debate. I beg to move.

Lord Fraser of Carmyllie

My Lords, in an earlier debate the noble Lord raised the question of entitlement under TUPE. I can advise him that staff in post immediately before the transfer can argue legally that they are transferred under TUPE to the new company. However, that is likely to arise only if the person concerned has volunteered and has not been taken.

The noble Lord asked about the requirement for permanent staff and appreciated that the figure used was 400. That figure is currently under review by NCM in the light of the 590 volunteers and other developments.

I turn to Amendment No. 9. The noble Lord will appreciate that TUPE places certain obligations on the transferor—in this case the Secretary of State—which will be discharged in this area by ECGD. ECGD staff have now returned their final preference forms and the process of the selection of staff for transfer on vesting day to the new company can begin. The preferences are being analysed and the next stage will be to determine the method of selection of staff to take account of those preferences. I assure the noble Lord 'bat ECGD's trades union side will be consulted about those methods. ECGD is expected to contact the trades unions about the matter in the near future. I am pleased to give the noble Lord that assurance and hope that on that basis he will withdraw his amendment.

Lord Clinton-Davis

My Lords, I am grateful for that assurance as I am sure will be members of the staff. I hope that the consultations will prove to be reasonable and full. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 [Vehicle companies]:

Lord Williams of Elvel moved Amendment No. 10:

Page 6, line 38, leave out paragraph (d).

The noble Lord said: My Lords, this is a probing amendment which we moved and discussed in Committee. I shall return to the question of whether the bidding for ISG should be re-opened. I do not wish to address that matter in relation to this amendment. Nevertheless, there arises the question of the terms and conditions under which the transferee will acquire the future operations of ISG. As drafted, the Bill will allow the Government to offer a facility to NCM if at the end of the day NCM is the chosen acquirer. It will be in 1he form of a loan, the conditions, term, maturity and interest rate of which we know not. Under the terms of the Bill as drafted it will be possible for the new organisation that is to be acquired by NCM—if NCM is to be the acquirer—to be sweetened by the Government, if I may use that rather indelicate expression.

During the Committee stage in this Chamber the Government left the matter to be considered at the end of the day by the National Audit Office after the sale is complete. I am not sure that that is right. A study carried out by the National Audit Office at that time—even if it acquitted the Government of any impropriety in the matter, as I am sure that it would—would be far too late to ensure that proper value for the business had been obtained. The whole question revolves around the terms and conditions of the sale of the new company which is to be privatised.

I should be grateful to the Minister if he would give the House an indication of the kind of terms and conditions and the price for which the Government will be looking from NCM, assuming that NCM is the only chosen bidder. I beg to move.

5 p.m.

Lord Fraser of Carmyllie

My Lords, this amendment seeks to remove the power of the Secretary of State to finance by way of loans the companies to be privatised.

The inclusion of this provision follows, as I am sure the noble Lord is well aware, the precedent which was set in earlier privatisation legislation. It is premature to speculate whether this provision should be used as that will depend on the terms of the sale contract which has yet to be finalised.

The noble Lord has sought to discover from me exactly what are the terms of the negotiations currently taking place. He will appreciate that those matters are still being discussed with the preferred purchaser. Therefore, it would be inappropriate for me to reveal any of the detail of that as the negotiations continue.

The precise arrangement for capitalising the insurance company has yet to be settled; for example, one option may be for the Government to capitalise the insurance company by way of loan rather than by a direct cash injection.

Lord Williams of Elvel

My Lords, I apologise for interrupting and I do not wish to abuse Report procedures. However, is the noble and learned Lord seriously considering a cash injection into the business before sale?

Lord Fraser of Carmyllie

My Lords, I was indicating to the noble Lord one of a number of options. I said that one option may be for the Government to capitalise the insurance company by way of loan rather than by a direct cash injection. That is another option.

Well established parliamentary controls on expenditure exist to check the use of spending or lending money by a government Minister. Any anxieties as regards whether the Secretary of State has acted wisely or correctly in making use of Clause 10(2) should be dealt with by those means.

The noble Lord was deeply suspicious before we rose for the Summer Recess and, in spite of the break, he remains as suspicious as he was at that time. Quite apart from those well established parliamentary controls on expenditure, he will appreciate also that the sale must be cleared with the State Aids Directorate in Brussels and any anxiety which he has that the provision may be used to convey hidden sweeteners is unfounded. The Government are seeking a fair market price for the business as a going concern. That is being achieved by competitive tender and proper commercial negotiations.

In Committee I gave an assurance that there is no question of a sweetener being given in this case and I take the opportunity to repeat that assurance.

I revert briefly to the noble Lord's anxiety that a direct cash injection may be an appropriate option. The company must exist as a properly capitalised insurance company before privatisation, but if it is to be transferred to NCM—if one takes that to be the preferred purchaser—it will have to pay back the capital which has been injected.

Lord Williams of Elvel

My Lords, I am grateful to the noble and learned Lord. He is right about one point; namely, that I left this House for the long Recess deeply suspicious of the Government's motives and after that long Recess I return still deeply suspicious of the Government's intentions.

As regards Brussels, although the formalities will require it, I cannot see that the Commission will have any say in the sale of ISG. I do not believe that Brussels would intervene if there were any sweeteners as happened, for example, in the Rover case. I mention the Rover case for reasons which the noble and learned Lord knows well. We are deeply suspicious about how the Government wish to privatise organisations which they wish to sell to their preferred bidder.

That leads me to the second point mentioned by the noble and learned Lord. I believe he said that the sale would be made by competitive tender. As I understand it—and we shall come to this matter later—there has been no competitive tender. There is one preferred bidder. The one preferred bidder has been in negotiations with the Department of Trade and Industry and the trade unions. I understand that it has been extremely sensible and accommodating as regards trade union involvement. There is no question of competitive bidding at this stage although there may well be in the future. That is a point to which I shall return.

On the capitalisation of ISG in its future incarnation, the making of loans to the future company does not affect the capitalisation of the company: it merely imposes an obligation on the company to repay those loans. That is what the Government did, for example, in the case of British Gas. I agree that there are precedents. However, that does not increase the equity capitalisation of the business; it merely imposes an obligation on the business to repay. In the case of British Gas, there was a sale price. The Government deemed that that sale price did not give enough money to the Treasury—possibly quite rightly, I know not—and they loaded British Gas with debentures which had to be repaid and which were repaid, thereby increasing the return to the Treasury.

If that is what the Government are going to do in this case, why do they not say so honestly? If the Government are proposing to sell ISG as a fully capitalised operation with a debt-free balance sheet which would allow the new ISG, under whatever control, to gear itself up, why do they not allow my amendment and say that they will not use this provision to extract more money from the privatisation? Why do they not say that they wish this to be a successful, fully operational business, properly capitalised with equity?

I have serious doubts about the intentions not of the noble and learned Lord but of the Government. We are now in another situation in which the Government may well say, "Well, we got £20 million for the business because that was the price. However, we loaded it with £30 million of debt which must be paid back so the return to the Treasury is £50 million". The result is a cash flow deficit for the new company, which will disadvantage British exporters.

I recognise that this is a technical, financial argument. However, I hope that the noble and learned Lord understands that I am arguing this point seriously. This is a probing amendment which I do not wish to press to a Division. If the noble and learned Lord will seek the leave of the House to respond to what I have said, I should be most grateful.

Lord Fraser of Carmyllie

My Lords, I do not wish to add to what I said. I understand well what the noble Lord says as regards the approach which may be taken by way of a loan rather than a direct cash injection. I sought to emphasise that at this stage I shall not indicate which route may be followed. However, it seems to me appropriate that, as has been done in the past in privatisation legislation, the options should be left available to those who must take the decision.

Lord Williams of Elvel

My Lords, we have now clarified one point; that is, that the Government do not have a serious intention to sell ISG properly capitalised with equity and therefore they open the doors to loading ISG with debt. Having established that fact I understand where they stand. It is wrong. It is disadvantageous to British exporters. However, if that is what the Government want, no doubt that is what they will receive. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 11:

Page 7, line 12, at end insert: ("( ) Any property, rights or liabilities transferred by virtue of a scheme under section 8 of this Act shall be retained by the transferee for a period of not less than five years from the date of transfer unless the Secretary of State has given his written consent for a subsequent transfer to be effected.").

The noble Lord said: My Lords, Amendment No. 11, which stands in my name and that of my noble friend Lord Clinton-Davis, seeks to investigate certain aspects of what has become known as the "invitation to tender" document. As I understand it, that document, although I have not officially received a copy, precludes the subsequent sale of ISG within three years without reference to the Secretary of State. However, after that three-year period there would be nothing to prevent the purchaser—which the Government insist will be NCM—from selling the privatised ISG to a non-European Community buyer. If I am wrong, no doubt the noble and learned Lord will correct me. Not only may it be a non-European Community buyer; it may be an enterprise without experience in the field of export credit insurance. That gives rise to insecurity for exporters.

Thy: amendment seeks to delay any subsequent sale, under the conditions I spelt out, for an additional two years. I should like to know whether the Government consider it fair and proper that the future of short-term insurance for UK exporters should be left to the motivation of a private sector insurer.

The Government will do well to consider my amendment on the grounds, first, that there is no security to guard against anyone of any description after three years buying the business. Secondly, the future of export credit of a short-term nature is not properly ensured. It is an important amendment.

We have not seen the "invitation to tender" document. I suppose we never shall see it. When it came to your Lordships' House we asked for all kinds of details in regard to the articles of association and so on. We did not receive them. I hope that the Government will be able to give us the reassurance we need in order to ensure that the interests of UK exporters in short-term insurance will be protected and will not be sold off after three years. I beg to move.

Lo rd Fraser of Carmyllie

My Lords, the purpose of this privatisation is to convey the business of insurance services into the environment where it can best flourish and respond to the needs of its customers in the context of the single market. Given that purpose, perhaps I can say, reverting to our last brief debate, that the noble Lord referred somewhat pejoratively to the idea that the Government may wish to put the company into the private sector "loaded with debt". I want to make clear that the loan to which I referred was one of a number of possible mechanisms to provide the capital of the company. If it were to be adopted, the repayment of the loan would take place at the time of the purchase by the preferred purchaser, if that were the one to be concluded.

The environment is the private sector. It is the requirement of that environment that businesses should respond dynamically and commercially to the ever-changing demands of the market place. As we have discussed before, the market for credit insurance is already highly competitive and will become more so as it becomes increasingly international.

Against that background, it would not be appropriate to launch insurance services into the private sector with its hands tied. And yet the effect of the proposed amendment would be to require the company's management, over a period of five years and through the company's new owner, to obtain the Secretary of State's written permission each and every time i t wished to take action to dispose of any of the property, rights or liabilities transferred to the company on privatisation. That would slow down the business process, introduce delay and uncertainty into the planning process and create an unnecessary further layer of bureaucracy within government.

Lord Williams of Elvel

My Lords, I apologise to the noble and learned Lord for intervening. Can he say to what property, rights or liabilities he is referring?

Lord Fraser of Carmyllie

My Lords, the ones to which the noble Lord refers in his amendment. The amendment states: Any property, rights or liabilities transferred by virtue of a scheme under section 8 of this Act shall be retained by the transferee for a period of not less than five years from the date of transfer unless the Secretary of State has given his written consent for a subsequent transfer to be effected. I was simply taking up the language introduced by the noble Lord in his amendment. That is not my approach. I hope that I have clarified the matter.

Before the intervention, I was asking what was the intended purpose. Is it likely that the Secretary of State will be in a better position to judge the commercial requirements of the situation than the company's management and its owners? Even, therefore, if there were any justification for the amendment, it is almost certain that it would be ineffective. It would be tantamount to privatisation of ownership while leaving control in the public sector. That would clearly be unacceptable and the business could not be realistically sold on such a basis.

Lord Ezra

My Lords, perhaps the noble and learned Lord will clarify one point arising out of the remarks made by the noble Lord, Lord Williams. Is there a condition laid down in the invitation to tender that the purchaser shall retain the business for three years? If so, are we arguing about the difference between three and five years?

Lord Fraser of Carmyllie

My Lords, I shall come to that matter because it is a point I wish to elaborate.

On the other hand, the proposed amendment may reflect a fear that the business might be sold to an entity which was solely interested in asset stripping for a short-term profit. However, within the sale process the Government have gone to great pains to avoid such a scenario. There has been extensive and fair competition among interested trade purchasers and consortia. The Government's selection of preferred purchaser has taken into account such important factors as understanding of, and commitment to, the business, including its existing customer base, as well as the price. NCM, the preferred purchaser, is one of the largest and most experienced private credit insurers in the world. It is a specialist institution and plainly committed to the business. Its selection as preferred purchaser was greeted by the British Exporters Association as "excellent". Its stated intention to develop the business from its existing base is clear and assurances have been obtained in that regard.

As I have already indicated, the great majority of the staff working in the Insurance Services Group have indicated their willingness to join the new company on an entirely voluntary basis. It was either the noble Lord or his noble friend who indicated that there has been some appreciation of the open and constructive stance that has been adopted by NCM. If it has not persuaded him, it is clear that a very significant proportion of the staff are prepared to volunteer to transfer to this company. It seems unlikely that they would adopt such a course if they were truly anxious that all that the firm was likely to engage in was the process of unacceptable asset stripping.

I now come to the point raised by the noble Lord, Lord Ezra. In the sale negotiations it is the Government's intention to ensure that the buyer may not dispose of his interest in the business within a period of three years without the prior written permission of the Secretary of State. In the view of the Government that is likely to prove a much more effective and workable safeguard than the approach envisaged by the proposed amendment. It is one that can be negotiated without a detrimental impact on the sale itself.

Lord Williams of Elvel

My Lords, I am most grateful to the noble and learned Lord for what he has said. I have three points to make. First, I referred to the property rights and liabilities. In the process of privatisation these are transferred, first, to the transferee company, and then they are sold on to the bidder. Therefore, we have to use the expression shown in the amendment. There is a second stage when the new owner of the business might be able to sell all kinds of things which we have tried to describe. That is why I pulled up the noble and learned Lord. Some of these things may not be shares.

Secondly, I understand that the Government are committed to NCM as the preferred bidder. I do not want to make any pejorative remarks whatever about that company. The noble and learned Lord is right in that NCM has been very open with the trades unions in the negotiations to date. However, to describe it as a competitive tender simply because the Secretary of State designates one firm, does not seem to justify allowing that designated bidder to sell off whatever portion of the business he likes after three years.

Thirdly, I do not wish to get into a wrangle with the noble and learned Lord the Lord Advocate on the question of whether the bidding should be reopened. I shall return to this matter as regards Amendment No. 17 which seems to be the appropriate place to do so. Nevertheless, I accept that the noble and learned Lord has taken a position on behalf of the Government. As he well knows, there is a difference of philosophy between us on this matter and a difference of political ideology. I accept that he had a convincing majority earlier, thanks to his Whips. Therefore, if that is what the Government want, then that is what they will get. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 12 not moved.]

Clause 11 [Reinsurance of ECGD risks]:

Lord Williams of Elvel moved Amendment No. 13:

Page 7, line 26, at end insert: ("( ) In exercising his duty under subsection (2) above the Secretary of State shall pay particular regard to the position of persons carrying out business in the United Kingdom as compared with their competitors outside the United Kingdom.").

The noble Lord said: My Lords, I do not apologise for returning to a theme which has dominated our discussions throughout the passage of the Bill. The theme is quite simple; namely, whether United Kingdom exporters are going to have the same treatment and operate on the same level playing field and not be disadvantaged by competition with their counterparts in the EC as regards the provision of reinsurance by host governments to the national credit insurer covering their countries' short-term exports.

The noble and learned Lord has mentioned NCM a number of times. We have been through the position of that company as regards the Dutch Government, what that government does and how NCM acts as an agent for the Dutch Government. They reinsure the political risk that NCM undertakes. We are anxious to ensure that UK exporters are not prejudiced by anything that the Government are doing under the privatisation arrangement. I want a further assurance from the noble and learned Lord that that is to be the case. I beg to move.

Lord Trefgarne

My Lords, before my noble and learned friend replies to this amendment, I must tell him that this is a point on which I, too, have had some anxiety. During the course of the Summer Recess I have corresponded with my honourable friend the Minister for Trade. I received a letter from him quite recently which those of your Lordships who are interested will no doubt have seen because I presume that a copy was placed in the Library, as is the procedure. As I understand it, the preferred bidder for the Insurance Services Group is required, by the statute under which it operates in its own country, to give priority to Dutch companies.

We are duty bound to ask my noble and learned friend to explain quite clearly that it is required to treat British companies on all fours with the other companies with which it does business. After the passage of the amendments which the Government proposed and which were agreed during Committee stage, it occurred to me that it would have been wise for the Government to have considered reopening the competition in order to see whether the passage of those amendments affected the views of those British companies which had earlier expressed an interest in acquiring the Insurance Services Group but which in due course had not felt able to make a proposal.

To my regret my honourable friend was unable to agree to that. He was not even able to say that he had further informally contacted the companies concerned to see whether the position had changed. I regret that. My honourable friend referred to the views of the Government's advisers in this matter which were not particularly convincing. My noble and learned friend must assure your Lordships quite plainly that if the Dutch company, which is said to be the preferred bidder for the Insurance Services Group, becomes the owner in due course, it will be in a position to treat British companies in exactly the same way as it treats every other company with which it does business. This is an important point. I hope that my noble and learned friend can give the necessary assurances.

Lord Fraser of Carmyllie

My Lords, this is an amendment which seeks to require that, when the ECGD determines the provision of reinsurance for the benefit of companies operating in the United Kingdom, it should pay special regard to the facilities enjoyed by overseas competitors. I note carefully the wording that the noble Lord has introduced into the amendment—that is to say, "particular regard". It is noted that it is not to be the dominant or sole factor or any thing of that kind. I recall that during our long and sometimes vexed debates on what is now Clause 11(2) the noble Lord clearly appreciated then that there could be no requirement imposed on a Secretary of State to take up reinsurance in the national interest regardless of what the risk or the cost might be to the taxpayer. Accordingly, I approach the matter appreciating that it is not the noble Lord's intention that it should be the sole or dominant factor in making the assessment.

It seems to me that there are many factors that ECGD needs to take into account when determining the provision of reinsurance support. For that reason it would be invidious to emphasise only one particular aspect in statute. Perhaps I may refer the noble Lord to the statement I made in Committee on 16th July at col. 119 of the Official Report. I said: I am sure that one consideration for the Secretary of State when determining the national interest case for reinsurance 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 the UK exporters at a significant competitive disadvantage. I do not see how the national interest [case] can be judged without such an assessment being made, but I see no need for that to be specifically included in the Bill. My noble friend Lord Trefgarne has raised a number of points which concern him about the preferred purchaser, NCM. With respect, I would say to him that while there are a number of other amendments which we shall come to and which may deal with the anxieties that he has, at this stage we are dealing with the position that the Secretary of State should adopt when he is having regard to the reinsurance that he may take up as a long-stop.

The passage I have quoted from what I said at Committee stage I hope clearly demonstrates the Government's view that when determining the nation al interest case an important factor which the Secretary of State will take into account will be the competitive position of UK exporters. I am sure that position will be welcomed on all sides of the House. I am happy again to confirm that position. There will be other factors. One can think of aspects on diplomatic trade and industrial fronts as well as the financial risk to the taxpayers. However, I hope that your Lordships will agree that it is inappropriate to single out any one of these for special mention. They are all likely to carry greater or lesser significance at different times and in various circumstances. The alternative of defining all the factors which the Secretary of State should take into account would not only be extremely difficult but would also risk the exclusion of factors which we cannot at present foresee but which might well become very important in the future.

As has been the case under Section 2 of ECGD's current enabling legislation all in all it seems much more sensible that the factors to be taken into account and the weight to be given to them in determining the national interest should be a matter for the Secretary of State to decide. With that explanation I hope that the noble Lord can withdraw his amendment.

Lord Trefgarne

My Lords, may I have the permission of the House to make another brief intervention concerning this matter? I do not agree with my noble and learned friend that this is not the right place to raise the point to which I referred earlier. There are only four more amendments on the Marshalled List. If my noble friend can indicate which one he thinks will be more appropriate for the topic I have just raised than the one to which we are now addressing ourselves, I shall be greatly obliged to him. In the meantime, I again ask him to give a much clearer assurance on the issue that I have raised, and the issue on which I have corresponded with his honourable friend, than he has been able to give so far. As I said, my honourable friend wrote to me during the Recess. However, I do not regard the letter as satisfactorily meeting the point which I raised and I ask my noble and learned friend for a better assurance.

Lord Fraser of Carmyllie

My Lords, with the leave of the House I shall try again. The noble Lord may think that this is the appropriate moment but I have to say I have some difficulty in seeing that. Nevertheless, if the matter has been raised we might as well deal with it now and, I hope, satisfy my noble friend. Indeed, NCM do have a reinsurance relationship with the Dutch Government to support Dutch exports where those risks are uncommercial. The new company under NCM ownership would have a similar relationship with Her Majesty's Government under the national interest reinsurance facilities. I hope that that is what the noble Lord is seeking. There is a relationship in Holland between NCM and that government and once Clause 11 is in place there will be a similar relationship.

For commercial risks there is no reason for NCM to have, or to want to discriminate in favour of its Dutch customers as opposed to its UK customers. I should emphasise that NCM is a private company. It is certainly not controlled by the Dutch Government, as is sometimes misunderstood due to the relationship which exists between that government and the company. Nevertheless, the company is not controlled by the Dutch Government and is not constrained in the way it deals with its various customers. I therefore assure my noble friend that there will be a future relationship and that it will look very much like that between the Dutch company and the present Dutch Government.

Lord Williams of Elvel

My Lords, before the noble and learned Lord sits down—again, I hesitate to abuse Report stage procedures—I do not think that he has quite answered the point made by his noble friend. NCM has a duty to encourage Dutch exports. It has certain relationships as agent for the Dutch Government on political risk insurance. There is no guarantee whatever that when NCM takes over ISG that the obligation that NCM has will be modified or mitigated in any way unless the noble and learned Lord tells us so today.

Lord Trefgarne

My Lords, perhaps I may have your Lordships' permission to speak a third time on this matter. I apologise for seeking leave to do so. I am looking for a plain and unvarnished assurance from my noble and learned friend that British exporters will be treated in exactly the same way as are Dutch exporters by NCM. What will happen when NCM is faced with requests for cover from both British and Dutch companies for a single project? Which company will have preference? Will it be the Dutch one or the British one?

Lord Fraser of Carmyllie

My Lords, I confess to being somewhat concerned that while noble Lords have indicated that they have no wish to abuse the process of Report stage we are getting pretty close to it. The answer to my noble friend, as I think he appreciates, is that in such circumstances it depends upon the assessment of the risk. If it is a commercial risk that is being assessed there is no reason why that company—and I understand that it is regarded on the Opposition Benches as a very well established and well respected company internationally—should discriminate against British Companies. Where it is a matter of an uncommercial risk, then we pass to what, so far as concerns the United Kingdom, is to be found in Clause II. We have been over this ground fairly extensively. It will then be for the Secretary of State to determine whether it is expedient in the national interest for him to exercise his powers to make arrangements for reinsurance.

Lord Williams of Elvel

My Lords, I shall not abuse Report stage procedures further. I shall wind up the debate. I say in all friendliness and in good spirit that I do not think that the noble and learned Lord has really answered the point that we have been pressing. That point is that there should be no conflict of interest at all; that whoever purchases ISG should have some sort of obligation to encourage UK exporters in exactly the same way, and without any prejudice, as they may encourage exporters of their own home country. From what the noble and learned Lord has said, I do not get that impression. If NCM is the final purchaser—we shall come to that—a conflict of interest will be set up. It is that conflict that will disadvantage United Kingdom exporters.

We have had an interesting debate on this matter. I have no doubt that the noble and learned Lord will respond to further interventions from the noble Lord, Lord Trefgarne, on amendments which are perhaps rather more suitable. I believe that Amendment No. 13 was the most suitable one for the noble Lord, Lord Trefgarne, to raise the matter. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 14:

Page 7, line 26, at end insert: ("( ) The Secretary of State shall make arrangements with any transferee under which all companies carrying on business in the United Kingdom for whom the transferee may make available export credit insurance or similar assistance shall have the right of access, and the opportunity to make representations to, the Secretary of State in relation to any aspect of the conduct and operations of the transferee.").

The noble Lord said: My Lords, a number of exporters have expressed concern over what they regard as the expected loss of access to Ministers should ISG be sold to a private buyer. In that context one of the main issues which is normally raised quite properly with Ministers by United Kingdom exporters is, for instance, the non-availability of cover for particular markets. We discussed that question earlier today, but it would be particularly relevant were ISG to be privatised and if the new company stopped providing cover for certain markets. It would only be right for United Kingdom exporters to be able to go to Ministers to say that they were disadvantaged.

Another issue raised is the non-availability of cover for a particular piece of business. I recognise that this is unusual for ISG, which on the whole has taken the risks which one would have expected, but nevertheless it is a possibility under a privatised organisation. A third issue is the conditions of cover if the privatised ISG imposed conditions of cover such as guarantees by state central banks, irrevocable letters of credit or other instruments which would protect its risk. Fourthly, there may be a question of premium rates where a privatised ISG is charging premium risks which are over and above those which the United Kingdom finds acceptable.

In moving the amendment I recognise that the great majority of representations which companies make to Ministers relate to the longer-term business of ECGD. However, we have yet to experience the performance of the privatised short-term ISG. It would be a mistake to remove the possibility of exporters being able to go to Ministers to say that something is wrong, that the system is not working, that the premiums are too high, that they are not being given cover and that a central bank guarantee is being required. It would be sensible of the Government to allow access to Ministers on a statutory basis in order to ensure that the privatised ISG does exactly what the Government are now saying it will do. I beg to move.

5.45 p.m.

Lord Trefgarne

My Lords, I do not go along with the noble Lord, Lord Williams, on this amendment. If we decide to privatise a function, to leave it still possible for representations to be made to Ministers or for questions to be asked in Parliament would not be a very happy way to proceed. Either we privatise, or we do not. If we privatise, as is the intention of this measure, it is probably better that Ministers no longer have their fingers in the pie and that Ministers are no longer able to dig up the plant to examine the roots. Be that as it may, my noble and learned friend may think this a more appropriate moment to give me the kind of assurance that I was seeking on the previous amendment. If, perchance, my noble friend Lord Henley is to answer instead, perhaps he will be able on reflection to consider the points that I made on the earlier amendment and to give me an assurance—I ask only for a simple assurance—that British exporters will be treated in exactly the same way as Dutch exporters by this new enterprise owned by a Dutch company.

Lord Ezra

My Lords, before the Minister replies, perhaps I may, in pursuance of that point and of what the noble and learned Lord the Lord Advocate said earlier, be quite clear that, in the case of the Dutch Government in relation to NCM, we have been advised that the kind of support it gets would be entirely in line with what is here proposed in Clause 11(2). May I be quite clear that once Clause 11(2) is put into effect the position of the two governments in relation to this company would be entirely the same and that it would follow that whether the client happenred to be in Britain, Holland or another country he would not be in a beneficial position regarding one country or another.

Lord Henley

My Lords, my noble friend Lord Trefgarne will be unhappy that my noble and learned friend is not responding to this amendment. My noble and learned friend will certainly consider whether he wishes to give the assurance sought by my noble friend when he deals with some of the later amendments.

Perhaps I may begin with possibly the most obvious point in relation to this amendment. To the extent that any individual, company or representative body wishes to make representations to Ministers, either directly or through a Member of Parliament, about government policy towards the provision of official support for export credits in the wake of privatisation of the insurance services, they will remain perfectly free to do that. No statutory provision is necessary to preserve those rights.

Perhaps I may make one or two other points in response to the noble Lord's amendment. The first and most obvious one to make is that the privatised group will have to comply with the requirements of the Companies Act and the insurance company will have to be authorised by the Secretary of State under the Insurance Companies Act. As the Secretary of State is responsible for the administration of this legislation, anyone is free to make representations to him about issues arising under it without any special arrangements being made.

The amendment apparently seeks to go further than that by facilitating rights of access to the Secretary of State about the company's operational activities. In relation to companies taking credit insurance or other assistance from the group, these activities will be carried out under commercial contracts freely entered into. The normal commercial and legal remedies would be available to customers who had differences with the privatised company about I he performance of those contracts. It is not the Secretary of State's function to interfere or to act as a source of appeal or arbitration between parties to commercial contracts.

The amendment does not take into account the keen competition that exists in the credit insurance market. Privatisation of the insurance services business has become necessary to meet the increasing competitive challenges of the single market. If an exporter is not satisfied with the service offered in the private sector or its terms, he is quite free—the noble Lord, Lord Williams, shakes his head—to take his business elsewhere. I think that that is a much more effective discipline than rights of appeal to my right honourable friend the Secretary of State.

Finally, I believe that to make special arrangements in the legislation to that effect would be to discriminate against the privatised company in a manner which could inhibit its freedom to operate in the best interests of its shareholders, its staff and, obviously, its customers at large. To do so would also distort the competitive nature of the credit insurance market. I hope, therefore, that the noble Lord will feel able to withdraw the amendment.

Lord Williams of Elvel

My Lords, I am most grateful to the noble Lord, Lord Henley, for his response. I did not hear him reply to the question put by his noble friend Lord Trefgarne. Perhaps, with the leave of the House, he would like to make a further contribution.

Lord Henley

My Lords, with the leave of the House, I should point out that if the noble Lord had listened to my response carefully he would have heard my reply. My noble friend asked for further assurances from me. I said that I would leave the matter to be considered by my noble and learned friend when he came to respond later to further amendments.

Lord Williams of Elvel

My Lords, very good. We have indulged in a game of ping-pong between Ministers on the Front Bench. I have no doubt that, sooner or later, the noble Lord, Lord Trefgarne, will receive his reply. However, it will need the help of a few carrier pigeons before that happens.

I do not wish to pursue the matter. I am most grateful to the noble Lord, Lord Henley, for his exposition of the Government's position. I shall take the matter away and think about it. I accept the fact that there is always a case for companies going straight to the Secretary of State or through their Members of Parliament. I very much hope that the companies will read in Hansard what the noble Lord said. I say that because, if anything goes wrong with ISG in the future, that may be the right avenue for them to seek redress. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Amendment No. 15 not moved.]

Lord Williams of Elvel moved Amendment No. 16:

Page 8, line 14, at end insert: ("( ) The basis of the charges to be levied by the Export Credits Guarantee Department in relation to any arrangements made under sections 1 to 3 of this Act shall be reviewed annually no later than 31st March in each year.").

The noble Lord said: My Lords, we return here to a problem which we discussed during earlier stages of the Bill. I refer to the problem of ECGD charges. At present, as I believe noble Lords on all sides of the House have specified previously, the ECGD charges significantly higher premiums for medium and long-term business than other export credit agencies in the European Community; in other words, United Kingdom exporters are disadvantaged. I shall quote examples of premium rates charged by the main export credit agencies in the Community for project business across a range of markets. I stress that they are across a range. The figures are: France 2 per cent., Italy 2.3 per cent., and Germany 3.2 per cent. The figure for the United Kingdom is 5.3 per cent.

We return again to the question of whether UK exporters are disadvantaged, in this case for medium and long-term business. Those high rates will certainly result in business being lost by United Kingdom exporters to their European Community competitors. In our view, such rates should be reviewed annually with the objective of keeping them as low as possible and at least not disadvantaging our exporters. I beg to move.

Lord Fraser of Carmyllie

My Lords, as we go through the last rally in this game of ping-pong over the relationship of NCM to the Dutch Government and British exporters, perhaps I may invite my noble friend to read what I say about the reinsurance relationship with the Dutch Government. He approached the matter on the basis that there was a general obligation upon NCM to encourage Dutch exporters. The relationship entails support for Dutch exports where the risks are uncommercial. I have been seeking to emphasis to him the fact that once we have NCM—if it is to be the actual purchaser—and Clause 11 in place, there will be a similar relationship between that company and the British Government through the Secretary of State with regard to uncommercial risks.

However, where it is a matter of commercial risks, I find it difficult to understand on what possible basis this company would wish to discriminate against British exporters in favour of Dutch ones. I do not believe that any real example has been given to me. At any rate, the special relationship which has been emphasised is only in the area of uncommercial risks.

I am grateful to the noble Lord, Lord Williams of Elvel, for at least prefacing his remarks with a matter that I know he understands. However, it is good to hear him being explicit about it. The problems that concern him about the ECGD's premium rates do not flow directly from the provisions in the Bill which allow for the privatisation of insurance services.

The effect of this amendment would be to impose an obligation upon the Secretary of State to carry out an annual review of the ECGD's premium rates. While I understand the intention behind the amendment, I have to tell the noble Lord that I consider it to be superfluous.

Perhaps I may stress first that there has been no general increase in medium-term premium rates since 1984. Moreover, during that period, the ECGD claims on such project business—I have given this figure before—have been about eight times the level of premium income. I should also like to stress that PMS is a forward looking system and that no attempt is being made to recover past losses. My noble friend may snigger, but I believe that it is important for exporters to appreciate that fact. Clearly, the Government cannot ignore such losses, especially since claims on project business have resulted in the ECGD now having a deficit with the Consolidated Fund of over £billion. The Government have to strike a balance between the needs of the exporters and, on the other hand, the risks involved and thus the interests of the taxpayer. The inescapable fact is that exports that are not paid for where the risks are high are of dubious value whatever competitor countries do. The Government have embarked upon a vigorous campaign internationally to focus attention on premium rates on medium-term business. The campaign is taking place in the EC and the OECD. It was specifically referred to during the last ministerial OECD meeting. The campaign has got off to a good start; for example, it is worth noting that last week there was a significant increase in Japanese premium rates for medium-term business.

As part of its own internal business planning arrangements the ECGD has for many years now carried out annual reviews of the financial performance of its trading activities in order to determine the accuracy or otherwise of its premium rates. The ECGD is now required, under Treasury guidelines for all departments, to carry out an annual financial review on all aspects of its activities. The results of the annual review will continue to inform both ECGD's parliamentary estimates and public expenditure survey requirements and the basis of its framework of premium charges and cover availability for the forthcoming year. In addition, the annual report which Clause 7(1) of the Bill requires the Secretary of State to prepare on ECGD's activities will deal with a variety of financial aspects relating to its performance. In other words, the obligation to carry out a review of the kind proposed by the amendment already exists and, accordingly, there is no need to repeat it.

6 p.m.

Viscount Weir

My Lords, I have the greatest sympathy with the amendment. I wish only that it had gone further and not merely sought a review but sought that the review be published. The noble Lord, Lord Williams of Elvel, gave modest statistical examples of the disadvantages our exporters suffer as compared to their continental competitors. Mexico, for example, has clearly made a most remarkable recovery from a dreadful economic situation. Most forward looking exporters would consider it a place in which there were many reasons to try to build up their businesses.

Recently I was told that on a typical medium-term credit, UK premiums are 10.5 per cent., Italy 4 per cent., Germany 3.25 per cent., and France 3.5 per cent. I am aware that your Lordships weary easily of statistics, but I am equally aware that you all realise that the difference between what our continental competitors are charged by their government organisations and what we British exporters are charged, which in this case is something like 7 per cent., comes off the exporter's profit margin if he wants to compete. I do not know how many British exporters there are who find it easy to make a 7 per cent. profit in such a market. Those figures speak very much for themselves.

When the issue of relative premiums is raised we continually have from the Government what I suppose one might call "crying poor": "Oh well, we have a £3 billion deficit piled up here or there on this account, but somehow we as a country always imply that we suffer more than other exporting countries". That is not the case.

If we look at the book of ECGD's business, and take what are called the "good markets", we find that it has 39 per cent. of its business in "good markets". That is a far larger percentage than Japan, Germany, France, the United States or Italy. There is no justification to "cry poor" so to speak.

If we then look at British exposure to the worst-debtor countries, we find an equally illuminating statistic. We find that in terms of millions of dollars ECGD exposure is 14, which is half the average of France, Japan and Germany. I shall say no more because those figures speak for themselves and they deserve an answer.

Lord Trefgarne

My Lords, at the outset of his remarks my noble and learned friend sought to explain—I hope that I understand him aright—that the assurance I had sought was not necessary and so he saw no reason to give it to me. I did not hear the assurance in the terms for which I had asked. My noble and learned friend has risen to high and distinguished office in the legal profession, and rightly so. He may have less experience in exporting. I do not have much either, but I have been busy in that field for the past year or so. One of the things that I soon learned was that it is a dirty business. Contracts are sometimes—indeed often—awarded merely upon the basis of the credit terms available, which in turn are often wholly responsive to the provisions that can be made by the state credit insurer concerned.

The new company that is to acquire ISG may occasionally have to judge between British and Dutch exporters. British exporters are entitled to ask for an assurance from the government that they will be treated on all fours the same as their Dutch competitors. If there is any chance that the new owner of ISG will find itself in a position of being able to favour one country or another, British exporters should be clear that it will not always be the Dutch. The assurance that I have sought is a simple one. I hope that on reflection my noble and learned friend will be able to go further.

Lord Williams of Elvel

My Lords, the noble and learned Lord does not, as I understand it, wish to seek the leave of the House to intervene further, and so I shall wind up. I shall be less strong than the noble Viscount, Lord Weir, on the disadvantages to UK exporters in international markets of ECGD premiums merely because I have not been in that market for six years. I spent 15 years trying to negotiate export credits as a banker. I have not done that for the past six years, so over the past six years the figures that I was quoting may have been replaced by the figures given by the noble Viscount.

Like the noble Lord, Lord Trefgarne, I have been involved in financing exports as a banker, but for rather longer than the noble Lord. It is a dirty, unscrupulous, underhand, scurrilous business. The Government do not start to understand what people have to do. I have done it myself. I have travelled for six weeks throughout the United States, Mexico, Guatemala and Peru, staying night after night in a different hotel, trying to sell my clients' exports and financing them for a bank. I have personal experience of that. I do not believe that the Government collectively understand what the whole business is about. That is why we object to their approach. It is not a question of a free market ideology, and all the rest of it, but of getting out there and doing the business; staying in dirty hotels when the rain is pouring down, when one has no breakfast because one has to take the morning plane to the next place. That is what it is all about.

Our exporters should be encouraged, not delivered lectures about the market saying this and that, and, "We are sure that the Dutch would not benefit Dutch exporters over and above United Kingdom exporters". I can tell the noble and learned Lord that they jolly well would, and so would the French and so would the Germans.

Lord Trefgarne

My Lords, and so would we!

Lord Williams of Elvel

My Lords, yes, and so would we if we had half a chance, and quite rightly so. We are not in the same debate. Nevertheless, we must get on with the Bill. I believe that the Government's attitude to exports and export credit guarantees is, as I hear it from the noble and learned Lord—I make no personal attack on him—quite pathetic. I believe that they will pay the price. I beg leave to withdraw the amendment.

The Deputy Chairman of Committees (Lord Ampthill)

My Lords, is it your Lordships' pleasure that the amendment be withdrawn?

Lord Trefgarne

My Lords, no.

6.10 p.m.

On Question, Whether the said amendment (No. 16) shall be agreed to?

Their Lordships divided: Contents, 42; Not-Contents, 92

Division No. 2
CONTENTS
Ailesbury, M.	Halsbury, E.
Ampthill, L.	Hampton, L.
Aylestone, L.	Hughes, L.
Bonham-Carter, L.	Jenkins of Hillhead, L.
Brookes, L.	Jenkins of Putney, L.
Carmichael of Kelvingrove, L.	Judd, L.
Carter, L. [Teller.]	Kissin, L.
Cledwyn of Penrhos, L.	Lockwood, B.
Clinton-Davis, L.	Mallalieu, B.
Donoughue, L.	Mason of Barnsley, L.
Dormand of Easington, L.	Merrivale, L.
Ezra, L.	Morris of Kenwood, L.
Foot, L.	Nicol, B.
Galpern, L.	Pitt of Hampstead, L.
Graham of Edmonton, L. [Teller.]	Sefton of Garston, L.
	Serota, B.
Grey, E.	Stoddart of Swindon, L.

Taylor of Blackburn, L.	Underhill, L.
Taylor of Gryfe, L.	Weir, V.
Thomson of Monifieth, L.	White, B.
Tordoff, L.	Williams of Elvel, L
Trefgarne, L.

NOT-CONTENTS
Arran, E.	Kenilworth, L.
Astor, V.	Kimball, L.
Auckland, L.	Kinnoull, E.
Balfour, E.	Lauderdale, E.
Blatch, B.	Lawrence, L.
Blyth, L.	Lindsey and Abingdon, E.
Boardman, L.	Long, V.
Borthwick, L.	Lyell, L.
Brabazon of Tara, L.	Mackay of Ardbrecknish, L.
Brougham and Vaux, L.	Malmesbury, E.
Butterworth, L.	Margadale, L.
Caithness, E.	Marlesford, L.
Caldecote, V.	Mersey, V.
Campbell of Croy, L.	Montgomery of Alamein, V.
Carnegy of Lour, B.	Morris, L.
Carnock, L.	Mountevans, L.
Cavendish of Furness, L.	Munster, E.
Cochrane of Cults, L.	Napier and Ettrick, L.
Colville of Culross, V.	Nelson, E.
Colwyn, L.	Norfolk, D.
Constantine of Stanmore, L.	Norrie, L.
Craigmyle, L.	O'Cathain, B.
Crickhowell, L.	Orkney, E.
Davidson, V. [Teller.]	Palmer, L.
Denham, L.	Park of Monmouth, B.
Denton of Wakefield, B.	Pender, L.
Derwent, L.	Peyton of Yeovil, L.
Dilhorne, V.	Portsmouth, E.
Ferrers, E.	Reay, L.
Flather, B.	Saint Albans, D.
Fraser of Carmyllie, L.	St. John of Bletso, L.
Gardner of Parkes, B.	Seccombe, B.
Glenarthur, L.	Shannon, E.
Gray of Contin, L.	Soulsby of Swaffham Prior, L.
Gridley, L.	Strange, B.
Grimston of Westbury, L.	Strathcarron, L.
Harmar-Nicholls. L.	Strathclyde, L.
Harmsworth, L.	Strathmore and Kinghorne, E.
Henley, L.	Sudeley, L.
Hesketh, L. [Teller.]	Swinfen, L.
Hives, L.	Thomas of Gwydir, L.
Holderness, L.	Trumpington, B.
Hooper, B.	Ullswater, V.
Howe, E.	Waddington, L.
Hylton-Foster, B.	Wise, L.
Jeffreys, L.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 14[Expenses]:

6.18 p.m.

Lord Williams of Elvel moved Amendment No. 17:

Page 8, line 22, at end insert: ("(3) Before the transfer of any property, rights or liabilities under Part II of this Act, the Secretary of State shall prepare a report on the financial expenditure incurred and income to be received as a result of that transfer. (4) The report prepared under subsection (3) above shall include details of any expenditure incurred by the Export Credits Guarantee Department in preparing for and effecting the said transfer. (5) This report shall be scrutinised by the National Audit Office and the findings of that office, together with the report, shall be laid before Parliament before any transfer is effected.").

The noble Lord said: My Lords, we now come to the last amendment at Report stage which is in many ways one of the most important with which we have to deal. Its aim is to ensure that the whole process of the sale of ISG and the net gain or loss to the taxpayer are open to parliamentary scrutiny and are also made public before the sale is effected.

The noble and learned Lord and I have corresponded during the long Recess on whether the bidding for ISG should be reopened. I shall resume a long argument relatively shortly. During the Committee stage the Government acceded to requests that there should be a political risk re-insurer of last resort. I hope that I do not misinterpret the Government's intention. Government amendments were moved and carried in Committee which achieved that purpose. As I understand it, the Government were convinced by the arguments that were put forward by Members of another place and by your Lordships and by the hostility that this Bill met on its Second Reading.

The tender procedure was opened before those government amendments came before your Lordships. It was on the basis of no political risk reinsurance of last resort that a number of UK companies which were initially interested in purchasing ISG dropped out. Even some continental companies dropped out. NCM stuck there in the hope that there might be some change in the Government view on that matter. There was a change. I believe that the value of the business—I say this as clearly as I possibly can—that is to be sold has been materially changed by the Government amendments that were passed in Committee. Under those circumstances it seems to me self-evident that the bidding procedure should be re-opened. I have written to the noble and learned Lord the Lord Advocate, requesting the Government to do that.

At the moment I am not concerned whether the company in question should be a Dutch company, an Italian company, a British company or a company of any other nationality. I am simply concerned that if the taxpayer is to sell public property to a private enterprise the taxpayer should be properly remunerated for that sale. I cannot see how the argument can be sustained that the value of the business has not changed. Dealing in short-term credit insurance without any political risk reinsurer of last resort is quite a different prospect to dealing in short-term credit insurance with a political risk reinsurer of last resort. That is a material change in the business and a material change in the value. As I have written in a letter to the noble and learned Lord, either the Government amendments tabled in Committee mean something in the sense that there is a fallback position of political risk reinsurance—in which case the value of the business changes—or they mean nothing. If the latter case is the position, the noble and learned Lord will no doubt wish to explain to us why the amendments mean nothing as we were led to believe that they meant something.

In introducing this amendment, which I believe is of fundamental importance, I urge the Government to think again about reopening the tendering procedure. The memorandum on which the tenders were based is no longer true. It no longer presents a true and fair appreciation of what the business is that is to be sold. I therefore invite the noble and learned Lord not necessarily to accept this amendment but to give the House an assurance that the Government will reopen this procedure so that British companies who refused initially to enter this matter on the basis that there was no political risk reinsurance, and therefore they could not possibly engage their shareholders' funds, might be given a prospect of tendering. I beg to move.

Lord Ezra

My Lords, if in the passage of this Bill through its various stages a material change has been made in the conditions under which the transferred company would operate, I believe there would be strong support for the point which has just been expressed by the noble Lord, Lord Williams. What we really need to know from the noble and learned Lord the Lord Advocate is whether he considers there has been such a material change. It would certainly appear that there has been such a change as the noble Lord, Lord Williams, has described. In that case I should have thought that reopening the tender procedure would be a fair and proper way to proceed.

Lord Fraser of Carmyllie

My Lords, when we first cantered round the course on this issue I repeated on Second Reading what had been said by my honourable friend the Minister in another place responsible for trade. I said that the Government were willing. to provide political risk reinsurance and that that fact had been known from an early stage. I indicated then that I hoped the ministerial assurance given my honourable friend was sufficient. Noble Lords on the Opposition Front Bench and some of my noble friends behind me asked why, if the Government were prepared to give such an assurance, they were so reluctant to state that on the face of the Bill. I understood that noble Lords were suggesting such a step would have satisfied everyone. Everyone would have been satisfied that the Government could not retreat from that position.

Those arguments were advanced forcefully from both sides of the House and it was on the basis of those arguments that an amendment was eventually tabled Therefore, to that extent, a material change did occur i n as much as that amendment appeared for the first time on the face of the Bill. I accept that that was the case. However, it must be appreciated that the Government's commitment to the provision of transitional reinsurance and to the national interest facilities was embodied in the Government's original invitation to tender to all the shortlisted bidders. There is therefore no reason to reopen the tender process. If the bidders had entered the tender process unaware of any commitment from the Government, I could readily understand the force of the comments of the n able Lord, Lord Williams. However, the commitment was in place at the time the shortlisted bidders were invited to tender.

Noble Lords will appreciate that I have indicated on behalf of my right honourable friend the Secretary of State that NCM is the preferred purchaser. As I said, the policy commitments contained in the invitation to tender are consistent with the Bill as amended. Accordingly, it appears to the Government that there is no need or intention to issue a revised invitation to tender. The noble Lord will be aware from the fairly detailed correspondence that has been entered into that neither the Government nor their advisers have any reason to believe that the shortlisted bidders would wish to reconsider their position in the light of the Government amendment. Certainly none of the shortlisted companies have approached the Government or their advisers with such a proposition.

The noble Lord will appreciate that this Bill will pass. If the privatisation is to occur it is as well for those who are employed by ECGD at present, and who are possibly volunteering to transfer, that there should be as much certainty in this matter as possible. There is no question of the Government being willing to make the sale at any price. Value for money will be of central importance. That has been the case and will remain so in all future stages of the negotiations.

The amendment relates specifically to the introduction of NAO and parliamentary scrutiny into the sale process. While the noble Lord is concerned about the more general issue of reopening the bidding, perhaps I may point out to him in answer to his amendment that the involvement of the National Audit Office on the basis proposed is neither necessary nor appropriate since it could effectively make NAO part of the executive process and potentially prejudice its subsequent position as auditor. NAO will be free at a later date to examine details of the financial expenditure incurred by ECGD and income received as a result of the transfer. In accordance with normal practice, the Comptroller and Auditor General has already advised ECGD of the NAO plan to conduct a value for money study of the privatisation of insurance services. Financial details in respect of the sale will be reported to Parliament after the sale has been completed.

With that explanation, and in view of what was discussed in correspondence during the Recess, I hope that the noble Lord can now withdraw his amendment.

6.30 p.m.

Lord Taylor of Gryfe

My Lords, I have followed these discussions with great interest from the Second Reading through all the subsequent stages of the Bill. It is a matter in which I have a little experience and a good deal of concern. Will the Minister confirm the sequence of events and that the companies which were invited to tender did not know at the time of tendering that political risk would be underwritten? I seem to recall that while a verbal assurance had been given, the companies decided not to tender and that it was only subsequently that the Minister announced that that would be included in the Bill.

The noble and learned Lord may say that ministerial statements were made in another place. However, if one is making a bid and undertaking a substantial responsibility in business one hopes to see in the relevant prospectus a firm commitment that that particular risk is covered. As I understand it, that was not so at the initial stage when invitations were issued to the three or four companies which might have been interested.

The Minister said that he is very anxious that we should receive value for money. Would it not provide an additional assurance that we are getting value for money if the new provisions of the Bill were advised to the companies which might show interest? A very limited number of companies are interested now and it might be possible for the British companies to look at the matter once again.

What is the great hurry? What is the great urgency which does not permit the Minister to open up the matter and look at it again? This week television licences will be discussed. Companies were given specific terms of reference for bids. There would be an outcry if changes were to be made in the terms of the bidding and any amendment or adjustment to those terms were to be announced after bids had been refused or after people had decided not to bid.

I suggest that it might make sense to accept this reasonable amendment. It would give some assurance to the taxpayer that we are concerned about getting the best bargain.

Lord Fraser of Carmyllie

My Lords, for the last time, with the leave of the House perhaps I may attempt to respond. I should be grateful if the noble Lord would look at what I said in my previous intervention. I said then that the Government's commitment to the provision of transitional reinsurance and the national interest facilities, as stated in both Houses of Parliament, remained consistent with the terms of the Bill as amended. There is a material change, because that commitment is no longer a ministerial commitment but it is set out in statute.

The complete answer to the noble Lord is that I further indicated that that is the precise commitment which was embodied in the Government's original invitation to tender to all the shortlisted bidders. The situation is not that a material change was introduced at a later date: the shortlisted bidders knew what the Government's commitment was when they were first invited to tender.

Lord Williams of Elvel

My Lords, I believe that we have reached the end of the debate for the time being. However, I have to say to the noble and learned Lord that all the contributions to our Second Reading debate on the Bill from his side of the House were concerned with political risk reinsurance. Nobody on that side of the House believed that the Government were acting as political risk reinsurer of last resort.

Furthermore, British companies dropped off the tender list precisely on that point. Nobody believed what had been said in another place. That is why the noble and learned Lord had such a difficult Second Reading debate.

The fact that ministerial assurances of one form or another may have been made in one or other House of Parliament is not a matter which binds the courts, as the noble and learned Lord knows much better than I. It is only what is in the Act which binds the courts.

The noble and learned Lord has failed to point out to your Lordships that the material change, which he accepts, was not just a question of, "We shall put it in the Bill but it makes no difference at all." It was a question of satisfying all noble Lords on Benches opposite, who were so concerned about political risk reinsurance that they gave the noble and learned Lord a roughing up at the Second Reading of the Bill. It is all very well for the noble and learned Lord to say that there has been no material change. All those noble Lords opposite have vanished and there has been no opposition, except on one or two minor points. The basic issue has been resolved by the government amendments.

The parliamentary approval of the Government's position should now be made clear in a new tender document. I believe that if such a tender document were issued the Government would find that British companies would be interested, and we should not need the further assurance which the noble Lord, Lord Trefgarne, sought. I believe that that is what the Government should do. If they do not, I can tell them that the Public Accounts Committee of another place and the National Audit Office will be looking at the matter with great seriousness. I am sure that the noble and learned Lord understands that. I believe that the Government are selling a different ball of wax from the one they started off with. That is why I believe that they should re-tender.

I do not want to go on with this matter. I shall come back to it at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.