§ Mr. Snapeasked the Secretary of State for Trade what changes he has been able to make in the scheme of cost escalation cover which he announced on 20th February.
§ Mr. ShoreThe Government have studied very carefully, in the light of experience of the scheme to date, the helpful comments of the CBI, trade associations and individual exporting companies but are not convinced of the need for major changes at this stage in the arrangements announced to the House on 20th February and 12th March. I believe that we have struck a fair balance between providing a measure of temporary protection where the need is greatest and imposing an excessive burden on public funds.
In the final analysis, only timely success in our counter-inflationary policies will bring certain relief. But I appreciate the concern which some companies feel about their export prospects in the present diffi- 532W cult situation, and intend to keep this facility under constant review. I have instructed ECGD to introduce at once a simplification which I know most exporters will welcome. Under the present arrangements, cover applies to increases in those United Kingdom costs which are acceptable under the scheme after item by item examination on each case. In order to streamline this system, for cash contracts wherever appropriate a standard proportion of 75 per cent. of the total basic United Kingdom costs net of fixed-price sub-contracts will be regarded as eligible. For appropriate credit business the standard proportion will be 70 per cent. This improvement will considerably speed up exporters' negotiations with ECGD. The method of measuring cost escalation on completion of a contract will also be modified.
In determining the precise amounts of the payments which it makes, ECGD will continue to take due account of the cost increases as declared by the exporter. But whenever it accepts a well established commercial price variation formula based upon Government indices as an appropriate means of setting objective limits to the escalation which it covers, the department will no longer insist generally on independent certification of these increases. The ECGD will, of course, pay regard to the effects of any abnormal occurrences during the contract which are not covered.
Finally, we have decided that a contract for the supply of several similar units will qualify for cover if, in addition to its meeting all the other access rules, each unit is worth £½ million or more. This seems the most practical way to limit the scheme to major capital goods.