HC Deb 28 June 1988 vol 136 cc164-5W
Mr. Page

To ask the Chancellor of the Duchy of Lancaster whether he has introduced any new arrangements in respect of large contracts for export of defence goods insured by the Export Credits Guarantee Department.

Mr. Alan Clark

While most contracts for defence goods will continue to be accommodated within ECGD's normal arrangements, the current procedures under which ECDG provides cover under section 2 of the Export Guarantees and Overseas Investment Act 1978 have not proved entirely suitable for handling certain large defence contracts. These are often very large in relation to the limits set by ECGD to control its exposure on individual overseas countries and, in addition to economic factors, involve special strategic and political considerations.

I have, therefore, authorised new arrangements to be introduced in connection with such contracts. Initially a ceiling of £1 billion has been set for business underwritten in this category. All cases will be subject to approval by Ministers. Where in future ECGD's normal limits for individual countries cannot easily accommodate specific contracts, cover will, where appropriate, be made available under these new arrangements outside the country limit, but within the overall £1 billion ceiling. In all other respects, ECGD's normal underwriting criteria, as well as its financial objective, will apply to business entered into under these arrangements.

The arrangements which will be made under section 2 of the Export Guarantees Act 1978 will conform with previous assurances given to the House that ECGD will not support unduly hazardous risks. The repayment record in the defence sector has, in the past, generally been a satisfactory one.

The outturn of guarantees given under these arrangements will be separately recorded in ECGD's trading accounts by way of a note. These changes will enable ECGD more effectively to support business in a highly competitive environment where keen prices and fast decisions on credit are playing an increasingly important part in winning orders.