Class Vi. Vote 4 – in the House of Commons at 12:00 am on 26th January 1953.
Motion made, and Question proposed,
That a Supplementary sum, not exceeding £14,818,000, be granted to Her Majesty, to defray the charge which will come in course of payment during the year ending on the 31st day of March. 1953, for the salaries and expenses of the Export Credits Guarantee Department, and for payments under guarantees given after consultation with the Export Guarantees Advisory Council.
I can see that I shall have to be very careful to keep within the bounds of order, but I am genuinely very anxious to give the Committee as full an explanation as I can of this very large Supplementary Estimate and to state as fully as I can what is the situation which has arisen and how it has arisen.
The Vote for export credits has for many years been a token one, the receipts from premiums and other items which are brought to account as appropriations in aid being more than sufficient to meet all the Export Credits Guarantee Department's administrative expenses and payments under its commercial guarantees. Except for the early years of the Credit Insurance Scheme and the war years, when deficiencies inevitably occurred, a substantial contribution has been made to the Exchequer. The net total of the contributions, after offsetting the deficiencies referred to, amounts, during the period of the years 1928–29 to 1951–52, to nearly £11½ million.
In order that the situation which has given rise to the need for this Supplementary Estimate may be seen in its correct perspective, it is necessary to trace briefly but in some detail the history of the Department's experience in connection with Brazilian trade, for it is the Brazilian trade which is responsible for this very large Supplementary Estimate.
It must be said that the present kind of situation is not altogether unknown, but of course it occurred in different degrees. It happened in 1950 and 1951 as it happened in 1952. During 1950 the Department paid about £450,000 in claims. mainly due to import licence difficulties, and only a proportion of this sum has so far been recovered. In 1951 approximately £2 million was paid, most of which has now been recovered. During 1952–53 a much larger sum will be be paid, but it is expected that most of this will eventually be recovered.
In the 1951 crisis the Export Credits Guarantee Department, after very careful consideration and in consultation with its Advisory Council, decided that notwithstanding the serious delays in payment, the situation could be met by maintaining cover with a sharp increase in premium. The reasons for this were that, although heavy transfer claims were being paid and delays were not expected to diminish substantially for some months, the signs generally were favourable. In fact, arrears of payment did begin to come in and the position was more or less brought up to date.
The Department accordingly reduced its premium on Brazil, but made it clear to its policy-holders that the new rates should not be taken to imply that the Department considered the risk of non-transfer of sterling from Brazil to be non-existent. This warning was given because it was considered that, in spite of the favourable outcome of the difficulties encountered during 1951, certain factors, notably the running down of wartime reserves, which meant that Brazil would be faced with annual seasonal deficits with many countries, were still operating against complete recovery. Subsequent developments have confirmed this forecast, and at the end of December, 1951, delays were already beginning to become apparent. This was thought to be no more than the usual seasonal tendency, it being quite usual for Brazil to run a deficit in the winter and to earn sterling when the spring comes and she starts selling her cotton crop.
Brazil fell into sterling arrears in the winter and the main Estimate for 1952 was placed at the usual token sum of £100; but by the end of May, 1952, transfer delays had reached five or six months. After the most thorough investigation and careful consideration, the Department was forced to the conclusion that the risk of loss arising from import exchange restrictions was beyond the scope of normal commercial underwriters; that no premium adjustments could cope with the financial implications of the short-term situation—as had been the case in 1951–and that, based on liabilities existing at the time, heavy claims payments by the Department were likely to be involved.
It may be asked by the right hon. Member for Ipswich (Mr. Stokes), and other hon. Members taking an interest in this matter, why the Department did not first put up the premiums before suspending cover as it had done in 1951. There are two or three answers to this. The position in May, 1952, was much more serious than in 1951. Owing to the seasonal adverse balance of Brazil it is only possible late in the year to see how the position develops. By May transfer delays had reached five or six months.
The second point is that there are limits beyond which it is not possible to use high premiums as a deterrent. The third point was the necessity for acting quickly. Some quick-acting remedy was very necessary. I think the Committee will agree that since May developments have shown clearly that any other action would have resulted in the E.C.G.D. having to pay out a much larger sum than the £14.8 million for which this Supplementary Estimate is asking. Consequently the Department, after consulting its Advisory Council—which, as hon. Members know, is drawn from men with great experience in many walks of life—decided that it could no longer continue to assume liabilities to an unlimited extent until the Anglo-Brazilian payments position showed signs of improvement.
The Department's policy-holders were therefore notified at the end of May, 1952, that, while cover would continue to be given for contracts then in hand and, in addition, to shipments which could be completed by the end of July, 1952, further cover would, except for certain special transactions, be withdrawn. The E.C.G.D. undertook to fulfil its current contracts and exporters were given two months to make their shipments.
This decision was naturally extremely unwelcome to exporters. From 29th May onwards, when I assumed my present appointment, heavy pressure has been put on my Department, on my right hon. Friend and myself, to reverse the decision and to continue the E.C.G.D. cover to Brazil. I make no complaint about that; it is only natural. The pressure came from many reputable firms, trade associations, chambers of commerce, hon. Members on both sides of the House and Members of another place but, much as we dislike and have disliked having to adopt this policy, I think it will now be seen that it was the right one and that we really had no alternative than to stand firm. It has not been easy.
These events were reported to the House on 9th July last, in the Adjournment debate to which I replied. I mentioned then the principal reasons for this development in Anglo-Brazilian trade, notably the over-pricing of cotton and other commodities Brazil has to sell. I made it clear then that the Government were just as anxious about the situation as the Brazilians, but that it would not be proper for Her Majesty's Government to interfere with the day-to-day working of the Raw Cotton Commission or direct them to make a non-commercial purchase of Brazilian cotton. I do not think anybody could argue, in the position which Lancashire was then facing, that the industry should not get cotton at the most suitable prices.
I understood the Minister to say that one of the reasons there was this excess was the cost of Brazilian cotton; but surely, in the period under review, cotton prices have dropped by about 30 per cent.?
The point which the right hon. Gentleman has missed is that Brazilian prices have been artificially held very much above world prices. I am speaking without a note, but I think I am right in saying that they were as much as 16d. a lb. more. Discussions have taken place in Rio de Janeiro about the problems of Anglo-Brazilian trade.
The discussions were conducted between Her Majesty's Government, the Ambassador, the Commercial Minister and the Brazilian authorities. My right hon. Friend the present Minister of Materials, then in the Treasury, has also had discussions in Mexico with the Brazilian Minister, and since then the Government have been having informal discussions here with the Brazilian Ambassador, and it is hoped that more formal consultation will be started at an early date. I cannot say more than that, as I told the House on 22nd January.
When the Department came off risk, its liability was estimated at £32 million. Up to the end of December, 1952, it had paid out £5.8 million to its policyholders, while claims totalling £3.2 million were under examination. There are further claims, amounting to £5.8 million, which are expected to come forward in course of payment during the last quarter of the financial year; so that the payments directly attributable to these exports to Brazil amount to £14.8 million and the Supplementary Estimate as now presented is almost entirely due to the claims paid or expected to be paid by 31st March in respect of these exports to Brazil.
In the debate on Anglo-Brazilian trade which took place in July, 1952, the Department was charged with taking panic action, but part of the effect of remaining on risk to the limited extent which was then the subject of criticism can now be seen. It is, however, not the complete cost and I must be careful to mention that in the main Estimates there is another considerable sum to cover further claims.
That is not a bright picture to have to give to the Committee, but there is a brighter side to it. There is no doubt that Brazil is a great country, that she will expand, and that her expansion is at the moment only in its infancy. It must not be forgotten that these payments are almost entirely due to the fact that sterling is not available to effect the transfers of the payment to the British exporter. They should not, therefore, be regarded as irrecoverable loses and the Department fully expects to recover in due course substantially all the amounts paid out.
But it is not anticipated that sterling is likely to be available in any quantity until the next financial year at least, and no credit can therefore be taken for such receipts in this Supplementary Estimate. It will be seen that the present situation arises partly from the fact that the Department is bound by the ordinary budgetary rules and vote-accounting procedure.
In conclusion, I should like to stress one point. The payments which the Department have made or have to make, which are covered by this Supplementary Estimate, have assisted many United Kingdom firms to keep their production going, and they have maintained full employment. A considerable proportion of our trade with Brazil in past years has been conducted under the E.C.G.D. guarantee and the Department have played a valuable part in many parts of the country in maintaining exports of a wide variety of goods and full employment.
We must face the fact quite frankly, however, that we cannot go further now, and it is with regret that I have to ask for this very large sum.
The Secretary for Overseas Trade has given us a clear explanation of the reason why he has to come to the Committee tonight and asked for this Supplementary Estimate. I do not think it would be fair to pass any criticism on him or his Department. If we are to level criticism tonight—and I think it is justified—it should be directed to the Government as a whole because of the policy which they are now pursuing. A restrictive trade policy can do no other than bring about results such as this. If other countries are stopped sending goods here, in due course they will put up barriers which will st
I should be out of order if. I developed that theme much further, but I am bound to say that the failure of this Government is shown by the measures introduced which are against public enterprise, and I fear that this might be a surreptitious device for again destroying another public enterprise. I recall on an earlier occasion that the Department had to come to the Committee for a Supplementary Estimate. The then Opposition, now the Government, criticised the Department and said that it ought not to exist and someone else said that if it were run with due efficiency there could not be a loss. All that is untrue. It is a mistake to expect any insurance company—and that is what this Department is—to give all its profits each year to some other corporation, and then to start afresh in another year. That clearly has got to be looked at some time or another, but is not a matter to develop tonight.
As the Secretary for Overseas Trade has told us, the cause of the troubles here arise with trading from Brazil, and I should like to put one or two questions to him. First of all, he might explain more fully why his Department did not close the risks earlier than the end of May and why, in fact, they allow other contracts to be taken up until the end of July. He has given us some explanation, but I should have thought that, having in mind Government policy, somebody like the President of the Board of Trade, who is a member of the Cabinet, would have been able to say to the Export Credits Guarantee Department, "We are going to have these difficulties and you ought to fix your premiums higher or you should not accept liabilities at all." The Government have not given a direction of that kind, and I do not think they have considered it. If they had given such a direction, then, of course, we would have a criticism to make of the Department for which the Secretary for Overseas Trade is responsible.
I should also like to know whether there is any truth in the statement made in the House by a Member on the Government side that the Government interfered with the sending to Brazil of railway equipment, made to the country's specification. If the Government did interfere that certainly was hindering trade, and we ought to be told something more about it and whether this is one of the cases where a firm is making a claim upon the Department.
It was a statement made by a Member on the Government side of the House, and as yet I have not seen an answer to it. I hope the Secretary for Overseas Trade will be able to tell us something about it.
In the middle of last year a group of businessmen came from Brazil and made a tour of Europe. What happened then? I can well understand the difficulties in the Department. The Department of Overseas Trade, which is now a subsidiary to the Board of Trade, is an important part of Government administration. It is responsible for our export trade, and we all know how vital that is. Yet in a short time we have had two Ministers at the Department, the second being appointed before the first had a chance to understand the nature of the Department.
These Brazilian businessmen came here. Were they received by anyone at all, or were they left alone? I should have thought that it would have been a good opportunity to get hold of them and say, "Look here, there are trading difficulties between our countries and we should try to straighten things out." We could have sent them back as propagandists in their own interests as well as in ours, with the result that we might not have had the difficulties with which we are confronted today.
I should like to be told also what is the estimate of the result of the salvage operations. Not all the goods being turned back from Brazil will just be left to lie about. They will be sold, but what efforts are being made to sell them, and will the Board of Trade give all the help possible to industry to enable them to sell the goods either in Brazil or in some other countries or even on the home market? Have we any idea what the return will be? I accept what the Secretary for Overseas Trade says, but I should like him to give us some idea of what he expects in returns either now or in the not too distant future.
I quite expected the hon. Gentleman to tell us something about the tour which the Joint Under-Secretary of State for Foreign Affairs, the Marquess of Reading, is making in that part of the world. Has he gone to Brazil and, if so, what is he doing? I must say I would not leave it to the Foreign Office to carry out a job of this kind. It would be much more useful if the Secretary for Overseas Trade made the journey himself. Latin America is so important to our trade that it ought to be done.
Finally, may I ask the Secretary for Overseas Trade if he himself will closely look into the Department and its work in order that he can clearly understand what is meant by a well run, efficient Department. He will then be able to make the strongest possible representations to the President of the Board of Trade. He will see that this public enter-price serves the country well, and it ought not to be put in the invidious position of having to come to this Committee as a scapegoat to ask for a Supplementary Estimate of this kind.
There is just one question I should like to ask my hon. Friend. I suppose that his Department is subrogated to the rights of exporters in these contracts and is precisely like any other insurer. For that reason he has all the legal rights of any ordinary insurer as to taking action for breach of contract, and I hope he will pursue these to the utmost. In all these matters the feeling is abroad among those with whom we do business that, although individual traders may insist on their rights under the arbitration clauses or in the courts of whatever country the contracts provide, the Government for some reason have inhibitions about taking legal action and, therefore, are in a weaker position that the private trader. They are not nearly so concerned at taking legal action as would be the case if the private trader had to bear the brunt of the loss himself.
That carries me to one further point. Does the Department, when underwriting the risks, examine the contracts entered into to see that they are as legally binding as such things can be made to be? I hope it does, because otherwise in the end it will be the public who has to bear the burden.
Behind this Supplementary Estimate lies what I should think is the most fantastic story of international trade ever revealed to the House, and the most extraordinary classic example of how export trade, international trade and international affairs should not be conducted. I was very glad indeed that my right hon. Friend the Member for Rochester and Chatham (Mr. Bottomley) took the line he did in a speech which was all too short, because the first thing that must have surprised the Committee was the attitude of the Secretary for Overseas Trade in presenting the Supplementary Estimate.
I do not disagree very much with what he said, but it was the emphasis that he made. He apologised for this Supplementary Estimate with an air of deep regret and in the hope that no one was going to be rude to him for having to present this Supplementary Estimate. Then, in conclusion, he gave a few facts, which are strong facts in favour of the Supplementary Estimate but he also gave them with an air of apology. If he had come to the Committee and boasted that he had got away with this combined attack on the boneheads of the Treasury, he would have received some cheers from this side of the Committee.
What is the particular position about this, because it concerns us all in that it has grave implications for the future. The Export Credits Guarantee Department, when initiated and when in very able hands for some years, was regarded as a classic example of a first-class public authority which was helping to open up new markets, helping to underwrite new markets and helping with commercial research into the exploration of the new markets. It was doing a very good job of work. It was never intended that it should exercise precisely the functions of a bank which held out an umbrella in fine weather which was to be packed up at once when it was raining. Indeed, once it has taken that function it ceases almost at once to be the first-class authority we hoped, and to be able to discharge the functions which it was hoped it would perform.
One of the very big items involved in this matter, and certainly one of the industries vitally affected, is the textile machinery export industry. I think I am right in saying that at the time of the closure and cessation of export guarantees there was £3 million worth of textile machinery made and almost ready to send in compliance with orders from Brazil, and that the machinery had to stay in this country and seek other markets. As a result of that, and because of an administrative decision, two great firms in Oldham were closed down. One of the firms is changing hands and being turned into a store, or something of that sort. The other is due to close down in March. Both firms have operated in Oldham for more than a century and they were the lifeblood of this industry.
The Minister was very courteous and helpful about this. I make no criticism of him at all, except to say that he ought to be boasting about his achievements. He comes along and says, "This is due to a lack of sterling." We ought to consider the Brazilian point of view of this matter as well. As I understand it, the prime difficulty arose from the devaluation of the £. I gather that the Treasury now say, "Why do not the wretched Brazilians devalue the cruzeiro in accordance with our currency so that we can trade with them on the old terms?" One reason is that the principal creditor of Brazil is the United States of America. They owe a great deal more to the United States of America than they owe to us, so that if they devalued the cruzeiro they would make their debt to the United States Government go up out of all proportion to their present indebtedness.
We are faced with the position that if we wish to continue the export trade with Brazil we have to try to evaluate, and obtain a position in which we have some of the things to which the hon. Member for Orpington (Sir W. Smithers) often refers, bulk purchase and bulk sale agreements. I should have thought there never was a more classic example of the need for some such arrangement and it seems quite lamentable that it has been left to an aircraft firm to go over there and try to negotiate on its own, because of the failure of Her Majesty's Government to do anything effective and successful about it.
Let us look a little more into the situation as we know it. We are told that our vital need is raw cotton. We are told that one of our really vital needs is raw cotton either from non-dollar sources or from a dollar source with which we can do a reciprocal export and import trade without worsening our balance of payments position. There, in Brazil, is the raw cotton. We are told that one of the vital necessities for building up the export trade, which the armament programme reduced, is to export more textiles and textile machinery. There is a country which says that it is prepared to place orders for vast quantities of textile machinery, at a time when there is unemployment here in the textile machinery industry. We reply that we cannot do it, and that the Brazilians are most unreasonable people because they want too much for their cotton while we are asking very little for our textile machines.
If that really is the position of Her Majesty's Government in regard to international trade, the sooner they go out the better, from every point of view. If it really is the position that the men of Oldham are to be out of work because we are unable to send machines to Brazil, and that the men and women of Oldham are to be out of work because they have not the raw cotton from Brazil to keep the textile industry going, we have to face the most fantastic position that we have ever heard of in the history of our trade.
This situation is heightened by the fact that in the old days we very frequently had an export surplus with Brazil, and the surplus went into investment there, most of it very profitable. I have not the figures with me. I know there was some default in respect of some of the investments, but on the whole I think it can be shown that our investments in Brazil did very well.
Here is a great nation with about the same population as our own, with 35 times our area, and with vast natural resources which have never been fully geophysically surveyed. Even from the limited surveys which are now available, it is clear that the country could produce immense sums to add to the wealth of the world. The answer we are constantly getting is that it is impossible to get agreement: "We cannot agree on prices. Let the people stop out of work until we get an agreement. Something may happen."
In his opening speech, the Minister did not get very far from that position. As I understand it, when he came to the facts about the way in which the present position has come about, he made a rather remarkable statement. He said in respect of 1951 that it was not anticipated that in the end there would be any loss. If that be so, why not insure it? Why not go on? The Minister said that by May, 1952, they found that they were five months behind with their sterling transfers, and the result was that they had to make a sudden decision. By comparing that May with the previous year, they found they were five months behind and the situation had become serious.
Why have these decisions to be taken annually? Why cannot they be subject to considerations and representations from time to time? I take it that they knew in April that they were four months behind, and in March three months behind, and so on. The statement that we are now given is that when only two months' notice had been given, the export guarantees were cancelled, although export guarantees in respect of large export orders are very vital. The hon. Member for Darwen (Mr. Patrick Maitland) talked about taking proceedings. I should have thought that the Export Credit Guarantees Department was today, to say the least, of all the banks the very bankiest. They say to a firm that have a 12 months' delivery date for the building of big machines which take many months to construct—some of them about 18 months—"Unless you send the stuff out within two months, get it on shipboard and get it away, your export guarantee is finished." There could not have been a more drastic way of affecting the workers of Oldham.
I ask the Minister to admit quite frankly, so far as Oldham is concerned, that we were in this position in 1951: exports of textile machinery had reached a record. A new record was created and there was every indication of prosperity. Orders were taken and men were being fully employed. Some 6,000 or 7,000 men in Oldham—I am speaking from memory—were fully employed. This decision is suddenly taken, and in July we are faced with the prospect of closing two big works, with a whole scheme of re-organisation, and with skilled men who have been in the town for years being drafted out. They are leaving Oldham by bus to work at Squire's Gate, Blackpool, or in Huddersfield, or are being asked to go by bus to Sheffield.
I am very happy to say that there has been no very great increase in engineering unemployment, but men who have worked happily for years are travelling 20 or 30 miles a day to seek employment which, of its nature, may very well be temporary. The ultimate effects may be very bad indeed.
We come up against two more fantastic dichotomies in connection with this extraordinary situation. Everybody knows that the great trouble of the world today in terms of international trade is the huge export surplus of the U.S.A. I do not say that in any sense as one opposed to the American conduct of their own affairs because I do not think they can help it. They are not doing it deliberately or maliciously, but that export surplus with out a chance of paying for it is the most harmful thing in international trade today.
Yet we have the United States of Brazil with a huge import surplus at the moment. There is no dollar area in America as there is a sterling area in the British Commonwealth, so that countries here are suffering the worst of both possible worlds: they are having to battle to produce goods that the U.S.A. do not want and are having to force them into the United States market to balance the dollar situation. At the same time they are not able to send the goods that the United States of Brazil want, which would equally solve the dollar situation if there were a dollar area in America. It is the most fantastic of all propositions.
I should have thought that we had been moving over these last few months—not merely the great party on this side of the Committee but also men of good will belonging to all parties—towards the theory that if we as an island are ever to solve our international trade problem, we can only solve it by the creation and development of new markets. Here is a market that does not even need to be created, it only wants a little financing.
I once suggested that world trade would be better when people paid for their exports and not for their imports. Ever since then people have regarded me with some dubiety as one of those people who at times say humorous things without any foundation for them. No one seems to realise that this is exactly what the United States has done since 1945 and is compelled to do—she has to finance her exports. Some day the rest of the world will realise that. It is no use saying to the workers of Oldham, "Make more textile machines," saying to the workers of Pakistan, "Make more textile machines," saying to the workers of Switzerland, "Make more textile machines" or to the workers in all the textile industries, "Make more textiles," unless someone has some idea where the products are to go.
We have the fantastic situation in every textile country that trade union leaders, politicians and economists are urging the workers to work longer hours, to turn out more goods, to pile them all up. They are saying that we have to be more economical, that we have to be prosperous, that we have to make more goods when no one has the faintest idea where those goods are to go. And yet we can go to any part of the world and see millions of people who need textiles, who passionately want textiles, who are prepared to work for textiles, who are prepared to work to build up the prosperity of their country, but who are not allowed to do it.
This is the dilemma that faces the world today. I do not blame the Minister for his grave statement. Throughout the discussions on this matter he has met us with every courtesy, with every desire to give us information and, within the limitations of some old-fashioned ideas about economics, to try to seek a way out of this dilemma. But there the dilemma is —walking up and down the streets of the villages in Brazil today are cotton growers and workers who cannot sell their cotton; walking up and down the streets of Oldham today or taking buses to Huddersfield and Sheffield, are textile machinery workers who cannot make textile machines.
All over the world there are people who need the products of that machinery and the products of that raw cotton. And the Minister comes to us today and says, "Well, boys, we have probably lost a bob or two on this and I am sorry about it but I hope you will not be rude to me. I am glad to say I have stopped it now. We shall have unemployment in the textile machinery industry, in the textile manufacturing industry and on the cotton growing plains of Brazil. We shall have a little contribution to international misunderstanding. We shall have the fantastic dollar unbalance remaining unchanged when all those things could have helped to put it right. We shall have all that, but I have bunged up the leak and you should at least say 'Thank you' to me for having done it."
I, for one, am not prepared to say, "Thank you." I want the Minister to reconsider this matter in the light of all that has been said and to say that he will keep the channels of trade open and will battle to recreate full employment in Lancashire. He is the man who can make a substantial contribution to it if he will try a little harder in the future.
I also am interested in the problems of Brazil on account of the linen industry of Northern Ireland, because Brazil used to be one of our best customers. Today, however, when one goes to the Chamber of Commerce and asks about the Brazilian trade, they raise their hands and say, "Don't speak of the dead," because the linen industry in Brazil has been shrinking and shrinking.
I was extremely interested in the speech of the hon. Gentleman the Member for Oldham, West (Mr. Hale). He said that in the old days we used to invest the surplus money from our exports of machinery, linen and other textiles in the country to which we sent them. We built railways in India, in the Argentine and in Brazil. The hon. Gentleman said that those investments had done extremely well. However, I think he rather over simplified the position and many investments, such as the Bank of San Paulo and others, have paid very badly. At any rate, at the time we made those investments there was no serious unemployment in this country.
It seems to me to be really a battle of currency, of how we can keep up the value of the £ here or the value of the currency in Brazil. The hon. Gentleman said that the policy of restricting imports of cotton into this country, while it might save our British £, would have a bad effect upon our exports. I agree that the Gloucester Aircraft Company put themselves at the head of the queue in 1945 by their charter agreement for raw cotton, but I think we have to look farther than Brazil and farther than the United Kingdom for a cure. The recent reports of the chairmen of our banks indicate that until we re-value gold, these trading difficulties will continue.
I want to interrogate the Minister with a view to obtaining more information, and I hope he will make a note of my questions and give answers to them. Before doing so, may I make it clear that I am an admirer of his Department. It has done great work of a constructive character. It has a great past but, if this country is to play its part in world trade, it will need to have a greater future and more resources at its disposal.
This is a very serious matter. The Minister comes before the Committee and asks for £14,818,000. This is where we have got to in this country. Before the war, no Minister would dare to have stood at the Box and asked for such a huge sum. In these days, when we are asking industry to reduce its costs of production and to economise in every possible way, and the same thing with municipal government and with individuals, the Government should be most careful, when making up their Estimates for the forthcoming financial year, to try to visualise what is likely to take place.
That may be considered by those responsible in the Department to be a little unfair, because of the uncertainty in the world, but I will come to that. Since the Minister is asking for this large amount, why has no White Paper been issued? If the hon. Gentleman did not think that a White Paper should be issued, the very least that the Committee are entitled to expect—I hope that this will be borne in mind in future—is that an Explanatory Memorandum ought to have been issued when so large a sum is asked for.
If the Minister and the Department regard that as an unfair criticism, my reply is that the Navy and the Ministry of Defence are doing it, and the Army issue an Explanatory Memorandum. It is true that it is not satisfactory, but it is a big step in the right direction, and I think that in future if the Minister comes along for such large sums as this, the least that the Committee are entitled to expect is an explanation in the form of a White Paper or an Explanatory Memorandum accompanying the Supplementary Estimates with which we are dealing.
I take the point that the hon. Member is making, and will look into it. Of course, fairly full information is given in the Annual Report.
Yes, but when will that be issued? As soon as we part with this Vote tonight, the Minister has the £14,818,000. As it happens, I think that his Department are deserving of it because of their past record, but it might be a Department that is not worthy of it and in which we do not have the same confidence. This shows the correctness of what I am putting forward.
Under Subhead A is an item:
Further provision required mainly for 61 additional posts.
The Committee are entitled to expect some explanation of why these additional posts have been created. I do not carry this criticism too far, but we are living in very difficult and serious times and the country is trying to pull itself together economically; nearly everyone is doing his best. It may be that every one of the 61 additional posts has a satisfactory explanation, but before the Committee votes such a large sum as the £18,600 that is sought, we are entitled to some explanation of why these additions are required.
I had working with me for years students from India and China. There is enormous goodwill towards us in those two large countries. It may be that some of these additional posts have been created for the purpose of capitalising some of that goodwill to enable us to obtain orders there for power plant, electrical apparatus and other kinds of machinery that will be urgently required when China and India get going by setting us the example, and when they leave us behind because they are beginning to plan their economy in a modern 20th Century manner and do not deal with it in the backward way in which we deal with it. Therefore, I should like to know whether any of the men appointed to these additional posts have been charged with the responsibility of capitalising the enormous goodwill which this country has in China and India.
Was there any thought of using any of the additional sum to deal with the temporary economic difficulties in Australia and New Zealand? I am a great admirer of these two countries. They have come to our support in two world wars, and we ought to do all we possibly can to work with them as closely as we can. It would be out of order to go into an explanation of what created the economic difficulties in Australia, but those difficulties were there and, as a consequence, the Australian Government had to take action.
As soon as Australia took action, it reflected itself—fundamentally, this is the explanation of the temporary recession— in the cotton industry and also in the pottery industry. Were any of the men appointed to these additional posts charged with the responsibility of anticipating any future situations of that kind and of taking steps to prevent them? If they are charged with that responsibility, they will have no greater supporter than myself if that is the purpose of these additional posts.
I simply want to make use of the remarks of the hon. Member for Oldham, West (Mr. Hale), who led into what seems to me to be the fundamental matter that is at stake in this debate. The history of the fall in our trade with Brazil and of the attitude and actions of the Export Credits Guarantee Department and of the Department of my hon. Friend the Secretary for Overseas Trade throughout the whole of these events leaves us facing an immediate Supplementary Estimate of £15 million; and we do not know the size of the estimate that is to be presented for next year. That is the situation at the moment in terms of £ s. d.
We are not getting anywhere, either as a Committee, as a country or as a Government, if we regard this purely and simply as a matter to be assessed in terms of profit and loss on a Department's Estimates. The function of the Export Credits Guarantee Department is to enable or to help our industry to find its way into world markets and there to sell its products, and to provide our people at home, not only with jobs, but with a livelihood, with a means of maintaining themselves in dignity and independence. The Minister can come to the House as often as he likes and say either—as it was suggested he was saying—" We have stopped the leak," or, "We have got the money in our books and it will balance," but if the-position is that the Export Credits Guarantee Department are not continuing to help British industry to find its way into the markets of the world there is no satisfaction for this Committee, or for the country as a whole.
The situation which developed in Brazil did not begin suddenly in May, 1952. Its beginnings can be traced as early as October, or November, 1951. It is sometimes difficult for a business or representatives of trade associations to find their way into the inner halls of the Government, but surely it cannot be difficult for one branch of a Government Department to make its experiences and opinions heard in another branch of the same Department.
If the Export Credits Guarantee Department knew in October, or November, 1951, that there was a possibility of this situation arising, and the economists and financiers knew it, it ought to have been a purely routine matter for the senior Department, the Department of Overseas Trade, to have been apprised of what had happened. But then we have a history of six or seven months before anything else happens.
Warnings and rumblings were going on all the time in industry and the exchanges of the world, but no stark presentation of a new situation was made until the announcement—to which we have had reference tonight—in May, giving industry a two-month deadline to clear their stocks or carry the lot themselves. By July, 1952, not only the Export Credits Guarantee Department but the Department of Overseas Trade and the Board of Trade and, I hope. the Government knew that here was a situation which might be disastrous.
I wanted to know in July and I have asked on numerous occasions since, what steps we took to deal with it? I did not ask in any sort of criticism or by way of complaining that nothing had been done, although I thought I had cause to do that. I wished to ask in July, 1950, that there should be a dynamic, forceful approach by the Government, or the Department of Overseas Trade, to the Brazilians to try to resolve this difficulty which the hon. Member for Oldham, West (Mr. Hale) so graphically described.
The Brazilians possess things we need and we have things Brazil needs, and to put together those two simple equations and get the right answers is what I asked for. We know that in recent months there have been discussions, at different levels, between the two Governments, but I urge my right hon. Friend to go away with a great sense of dissatisfaction, having got this Vote, and to try to solve this problem of settling the difficulty on an equitable basis to enable us to gain the advantage of trading in a great and expanding market.
As this debate has shown, the Committee take a very great interest in the working of this Department. I do not think we could well exaggerate the importance of the activities of the Export Credits Guarantee Department to the economic welfare of the country at present. I feel with my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) that the actual day-to-day administration of the Department for many years has been a model for other Government Departments. But this is one of the rare opportunities we have of criticising some of the policy decisions of the present Government, because the day-to-day working of the Department is dependent on policy decisions for which the Ministry are responsible.
This Supplementary Estimate falls under two heads. There is the larger part of it required for this default in regard to Brazil of £15 million and the additional sum for salaries. All that could be said has been said in regard to the £15 million in respect of Brazil. but I hope that when the Minister replies he will give some estimate of how much of that sum he thinks is likely to be recovered. I am not sure whether it all represents payments to exporters in respect of goods which were delivered to Brazil or, if not, how much represents payments to exporters for goods which owing to cancellation of the trade with Brazil had not been despatched, or if the goods are available either for the home market or for export to other countries.
I will try to answer that question accurately. Transactions are going on, some goods are already manufactured and in the pipeline, but broadly speaking most of the money which we have to pay out will be for goods actually delivered. I could not give a specific guarantee, as the matter is highly complicated. For instance, there has been a reference to textile machinery. Quite a lot is still in the pipeline—being made.
I appreciate the hon. Gentleman's difficulty, and I do not wish to press him further on that point.
I am more anxious to say a few words about the other item in the Supplementary Estimate, namely the request that this Committee should vote a sum of £18,600 to provide for salaries for 61 additional posts. The whole Committee will welcome that demand as being an indication that the work of the Department is expanding and therefore requires additional staff. I am anxious to know in what direction that additional staff is required. I say that because, as I understand it, one of the most important parts of the work of the Department relates to the export credits guarantees that are given in respect of our trade with Eastern Europe and the countries behind the iron curtain.
The Minister will be familiar with the fact that Members on this side of the Committee have repeatedly pressed that we should do everything possible to expand the trade between this country and the countries of Eastern Europe. It is well known that no one can do any trade with Eastern Europe without the backing of the Export Credits Guarantee Department. I gather that there have been some difficulties recently.
Am I right in thinking that one of the reasons why these additional posts are required is to enable the Department to extend the trading facilities with Eastern Europe? Would I be right in thinking, for example, that one of the countries with which the Minister is anxious to encourage trade is Yugoslavia? All Members of the Committee are taking a great interest at the moment in the development of trade with Yugoslavia. It is also fairly well known that Yugoslavia is by no means satisfied with the credit facilities which she is getting from this country.
I hope that in the interests of good relations with Yugoslavia, to which I, as I am sure all other hon. Members, attach great importance the Minister will say something about the matter. We are all very glad to know that Marshal Tito is shortly to pay a visit to this country. Would I be right in saying that one of the primary reasons for that visit is to discuss with the Minister the extension of the export credit facilities being given to Yugoslavia? Could the Minister explain, for example, why Yugoslavia feels that his Department does not give her, the same generous facilities that are given to other Eastern European countries, for example, Greece and Turkey? Is there any reason why there should be this differentiation? Would the Minister not feel that in view of the changed conditions it is time that the terms of credit facilities available to Yugoslavia should be at least as reasonable and generous as those in the case of Greece and Turkey?
After all, the whole of our trade with any of these Eastern European countries, to which we attach so much importance, is entirely dependent upon the facilities which are given by the Secretary for Overseas Trade by virtue of his responsibility for the Export Credits Guarantee Department. It is a matter of vital interest to this country. I can well understand that there was a time when the risks which were being run by the Government in that direction were considerable. I hope that one of the reasons for this request for additional staff—we have not been told exactly what it is for—is to enable the Government to adapt their policy to the changing world conditions.
We have heard from the Prime Minister that in his view the danger of war has receded. Therefore, the risks involved in trading with any part of Eastern Europe are not so considerable as they were a couple of years ago. If there is that harmony between one Government Department and another which this Committee is entitled to expect, I hope we shall find a reflection of that general outlook in the international situation on the terms of credit and trading which exporters and traders in this country are to get from the hon. Gentleman's Department; because that is the crux of the matter.
This is one occasion when this Committee should probe very seriously into this matter. I can well understand that the Export Credits Guarantee Department has to judge the risks of giving their guarantees from month to month. They are in the position of insurers, and hitherto they have done their work remarkably well. I think I would be right in saying that the losses which have fallen on this Department, as a result of the underwriting they have done in respect of trade with Eastern Europe, has been practically negligible. The blame is that additional facilities are not always opened up as and when desired, and I hope we shall hear from the Minister much more about why this additional staff is required; with what countries the Government are hoping during the current fiscal year, and the next fiscal year, to expand the facilities which his Department was established to provide for the trading community of this country.
I am grateful to the Committee for the way in which they have received this Supplementary Estimate, and I should like to answer hon. Members as fully as I can.
The right hon. Member for Rochester and Chatham (Mr. Bottomley) commented on the fact that the Government did not foresee the situation before May, 1952. when the E.C.G.D. cover was withdrawn. The explanation is that trade between Brazil and Great Britain was running approximately at the rate of £60 million to £65 million either way in 1951, and that cotton imports from Brazil were £30 million in 1951, whereas the cotton imports in 1952 were under £1 million, for reasons I have already given. I think it may be considered that we might have made a wrong decision if we had anticipated that there would have been this terrific cut. It was a difficult thing to spot.
I was interested in what the right hon. Gentleman said about railway equipment. I do not know of any Board of Trade decision in this matter and I must confess that this is the first I have heard of that allegation. If the right hon Gentleman will put a Question on the Order Paper, I shall be very happy to provide him with an answer.
If the Secretary for Overseas Trade looks in HANSARD, he will see that the question was put by one of the Government supporters. and if he would be kind enough to send me the further answer he sent to that hon. Gentleman, it would satisfy me.
Thank you. The right hon. Gentleman and other hon. Members have referred to the visit of businessmen One prominent gentleman said how grateful he was for the way he had been treated by the Board of Trade. We did go out of our way to try to explain to the Inter-Parliamentary Union Delegation from Brazil—it was a large one—our anxiety about the way our trade was going. This is more a question not of the amount of money that we are likely to get back but of when we are likely to get it back. That is the problem. Brazil has been in difficulties before, as have many other countries and she has got out of them.
I was asked about my noble Friend the Joint Under-Secretary of State for Foreign Affairs. He is back and he has reported to the Government. As some polite remarks were made about the officials in the Department, I would say how sorry we are that Mr. Somerville-Smith has retired. We wish him success in his retirement and congratulate him on the decoration he received. The hon. Member for Darwen (Mr. Fletcher-Cooke) need have no inhibitions about legal action or fear that any step has not been taken to see that the contracts are tied up.
The hon. Member for Oldham, West (Mr. Hale), as I expected. made a strong and powerful case for his own constituency. I would point out to him that the Department has covered £5 million worth of textile machinery for export, most of it, to Brazil in the last year. If that had not been done, the effects on Oldham would have been very much worse. The trouble is not one of the E.C.G.D. providing guarantees for this industry, because the Brazilian authorities have refused import licences. It really goes back to the basic problem of Anglo-Brazilian trade. As far as the hon. Gentleman's remarks about raw cotton are concerned, it is true that we want the cotton, but the fact of the matter is that world demand has gone down now owing to the slump in the textile industry, and we are under severe pressure from Pakistan—which, after all, is a fellow member of the Commonwealth with us—Egypt, Turkey, the Sudan and many other places, to take their cotton.
When the hon. Gentleman talks about world demand in this way. he sends a cold shiver down my spine. He means the number of people who can pay for the stuff in spot cash, but when I talk about world demand I talk about the number of people who want the stuff. If he would talk in that way, we should get somewhere.
On the immediate policy for capital equipment, we have considered and met some requests. Hon. Gentlemen referred to priming the pump, but we cannot prime the Commonwealth countries adequately. That is one of the difficulties with our slender resources. In reply to the hon. and gallant Member for Down, North (Sir W. Smiles), I would say that there is no intention of preventing imports from Brazil.
The hon. Member for Stoke-on-Trent. South (Mr. Ellis Smith) mentioned the question of an explanatory document. I should like to look at that suggestion, but Civil Estimates are dealt with in a different way from Service Estimates where a document is always laid. It is not usual with Civil Estimates. Both he and the hon. Member for Islington, East (Mr. E. Fletcher) asked about the increase in staff. A sum of £4,000 is required this year for additional staff to deal with all these difficult questions in connection with Brazilian underwriting alone. Then there is another requirement caused by a small increase in wages to messengers and some increased overtime.
The officials of this Department have had to work very long hours to deal with these complicated matters. I cannot specifically say that any of them are required for Yugoslavia, but I can confirm that it is the desire of my right hon. Friend to see a mutual trade between Yugoslavia and us on as high a level as possible, and our endeavours will be used with that in view. Part of the increase in salaries is because the Government have now put the dollar Latin-American countries such as Mexico on to the same basis as America and Canada for credits guarantee, so that will require additional staff.
The hon. and gallant Gentleman has made a very reasoned explanation up to now of the need for this Supplementary Estimate to cover increases in salary, but it is stated that there are to be 61 additional posts, and it is that which is causing us concern. There is a sum of £18,600 required for 61 additional posts, and the point I was making was that, before we vote this sum of £14 million, we ought to be given some explanation why these additional posts are necessary.
I have already explained that £4,000 is required in dealing with Brazil and a small sum in respect of messengers and an additional number of officials needed to deal with specialised credits being given to exporters who wish to export to the Latin-American dollar countries. There is a small increase in North America and the Department generally is expanding its work so that it has been necessary to find more officials in order to make certain that it works at its full efficiency.
So far as the hon. Gentleman's point about Australia and New Zealand is concerned there is a small amount contained in this Supplementary Estimate for Australia, but exporters to Australia and New Zealand did not make so much use of the Department's facilities as those exporters to countries where the risks were considered greater.
The hon. Member for Liverpool, Walton (Mr. K. Thompson) said that we were not getting anywhere, and this is a problem which I know causes him great anxiety. I would point out that this is a Brazilian problem as well as a British one, and I am glad to see in the "Financial Times" today—although it is in such small print that it is exceptionally difficult to read the advertisement—an offer from the Bank of Brazil to sell some of this 1951–52 crop under certain conditions, which any hon. Member may be able to read in the Library. I hope that is an encouraging fact, but we must still remember that there are other countries from which we can get cotton, and we must buy as competitively as we can.
I think I have answered most of the points put to me. We will note the point made by the hon. Member for Oldham, West, but I think he must remember that we have gone a long way with the taxpayers' money to assist his constituency.
That a Supplementary sum, not exceeding £14,818,000, be granted to Her Majesty, to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1953, for the salaries and expenses of the Export Credits Guarantee Department, and for payments under guarantees given after consultation with the Export Guarantees Advisory Council.