I beg to move, That the Bill be now read a Second time.
This Bill has two main purposes. The first is to update the legislation that enables the Government to provide, through the Export Credits Guarantee Department, export credit and investment insurance. The second purpose is to bring about the privatisation of the insurance services business of the ECGD.
Before I describe how the Bill achieves these two purposes, I should like to explain the background to this legislation. For over 70 years the ECGD has been protecting United Kingdom exporters against the financial risks of selling abroad. During that time, it has supported over £250 billion of British exports. It has operated as a separate Government department reporting to the Secretary of State for Trade and Industry. It has insured the whole spectrum of exports, from raw materials sold on cash terms to process plant for which the financial risk in some cases can spread over decades. The ECGD's operations naturally break down into two separate businesses. These have two quite distinct characteristics, which are reflected in ECGD's organisation and management.
The insurance services group, which is based in Cardiff, handles exports sold on short-term credit. The project group, which is in London, handles capital goods exports sold on medium and long credit terms. Those groups are increasingly run as separate businesses, although their financial results are combined in the publication trading accounts of the ECGD.
Can I ask the Minister what may be a difficult question for him to answer on that second group of capital goods? I understand there are reports today that British construction companies were involved in the design and, in some cases, the construction of underground reinforced concrete aircraft hangars in parts of northern Iraq. I do not know whether that information was made available to Her Majesty's Government or whether those contracts had ECGD cover. Were those projects covered by export credit guarantees? In so far as I understand that the Treasury is required to approve such arrangements where they are made, was the Treasury involved, and did the Minister of Defence make any representations to the Department of Trade and Industry in so far as it also has a role?
The hon. Gentleman referred to contracts, but his remarks were vague. He did not specify any particular contract. I suspect that he will be aware that the Government, and indeed all previous Governments, have sound commercial and political reasons for riot revealing details of individual transactions with individual exporters. That would be a breach of commercial confidence. If the hon. Gentleman wants to raise specific matters with me, perhaps he will write to me.
On a point of order, Mr. Speaker. The Minister has asked me to provide information which is already in the public domain. It has been transmitted on British television today to the homes of millions of people. The individual plants have been named and journalists have had discussions with people in the Departments concerned, and that information should be dealt with in Westminster.
In August 1988 my noble Friend Lord Young, then Secretary of State for Trade and Industry, agreed to a review of the ECGD. That review was to identify whether any changes were needed to enable the ECGD to serve better the needs of United Kingdom exporters, particularly after 1992 and the completion of the single market. My noble Friend was particularly concerned to establish whether the existing structure of the ECGD, which has served exporters so well over many years, would remain appropriate in the future, especially after the completion of the single market.
For the insurance services group, the major change is the increasing concentration of its business on exports within the EC and the growing competition between European insurers for that sector of the business. Those trends are certain to continue. There is also the threat to the insurance services group of a possible legal challenge to its EC and OECD business on the basis of its being a state aid incompatible with articles 92 and 93 of the treaty of Rome.
For project business, the pressures are altogether different. There the trading environment has been dramatically changed by the world debt crisis and its aftermath. That has put the ECGD's trading accounts into substantial deficit and it has reduced significantly the level of new business opportunities in comparison with the early 1980s. For those opportunities that arise in the less risky markets, competition between British and foreign exporters is fiercer than ever.
It was against that background that a review was published which has subsequently been known as the Kemp review. It concluded that the interests of British exporters were not best served by leaving the ECGD unchanged. Its principal recommendations were that the insurance services business should be separated from ECGD and converted into a Government-owned company with a view to eventual privatisation. The review also concluded that the remainder of ECGD's activities should continue to be provided by Government through the ECGD, which would remain a separate Government department.
Furthermore, the review recommended that a reinsurance link should exist between the private insurance services company and the ECGD. This would allow the new company to place certain risks with the ECGD which could not be reinsured on the private market.
The House will also recall that, at the same time as Ministers were considering the review, the Select Committee on Trade and Industry conducted a short inquiry into the future of the ECGD. The Select Committee invited evidence from a wide range of outside bodies—exporters, trade associations, bankers and brokers. The vast majority of the memoranda submitted to the Committee supported the recommendations in the review and the need for ECGD to continue as a Government Department to support capital goods exports sold on long and medium-term export credit was particularly stressed. It was also accepted that the ECGD needed to be restructured if it were to compete in the single market. A large majority of the memoranda submitted to the Select Committee supported the privatisation of the insurance services business.
I am sure that the House will welcome this privatisation. Will my right hon. Friend assure the House about the effect of privatisation on the needs of the small and medium businesses, 70 per cent. of which do not export? Many of these companies could export if they had a more flexible form of credit insurance. Will he assure the House that one of the results will be greater flexibility to help those firms to enter the export market in the national interest?
My hon. Friend makes an important point. We would like to see even more smaller businesses engaging in exporting. In practice, it is the smaller exporters who probably find the greatest advantage in having one organisation able to provide insurance on their sales, not only to the export but also to the domestic market. I shall come to this point again later.
I am very grateful for that information from my hon. Friend, who is a member of the Committee.
I return to my theme of setting the scene for the provisions of the Bill. My right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who was then the Secretary of State for Trade and Industry, announced on 18 December 1989 that the Government broadly accepted the Kemp review recommendations. It was decided to introduce legislation that changed the status of insurance services in Government-owned companies. Private capital would then be injected into the company as soon as practicable. In accordance with normal insurance practice, my right hon. Friend noted that the company would need to secure reinsurance in the private market, but accepted the possible need for the Government itself to make available reinsurance for certain risks for a transitional period of up to three years.
The Government believe that this change in the status of the insurance services group is essential, but we stress that the recommendation for change came from the review and it has the strong endorsement of exporters. The insurance services group is based in Cardiff and has nine regional offices throughout the United Kingdom. The group handles a lot of repeat business. The great majority of the exports it covers are handled on cash or short-term credit of up to a maximum of 180 days.
Since the insurance services group moved to Cardiff in 1976, it has played an important role in expanding the financial services market in south Wales and has wisely used the wealth of talent in that area. There has been major investment in new technology, which last year resulted in more than 70 per cent. of the 180,000 applications for insurance cover received being processed within 24 hours of receipt. That compares with only 18 per cent. four years earlier. That improvement greatly helped the competitiveness of exporters of all sizes.
Buyer information is essential to good underwriting, and further improvements have been made in obtaining it, with ECGD taking the lead in initiating exchanges of information with other credit insurers. I am sure that no exporter who has had a policy with ECGD will have failed to notice the successful efforts that have been made to improve customer service. We now need to safeguard that service, so that it can compete in the post-1992 market, and hence the Bill. Without the changes for which it provides, the present service to exporters would be at risk.
Until recently, the insurance services group enjoyed a virtual monopoly.
I am fully aware that my hon. Friend wants to privatise the insurance services group in Cardiff and to bring about competition. However, if the only bidder for the Cardiff-based group is Trade Indemnity, which is ECGD's competitor, does my hon. Friend not agree that it would be better to keep the group in state ownership, because competition between a state and a private insurer would be better than a privately owned monopoly in that sector?
I will refer shortly to the process of sale and to the point that my hon. Friend raises.
The need to put the group into the private sector is not associated just with competition but with the change in the trading environment consequent upon the completion of the single market in 1992 and the threat of legal challenge to the group operating as a Government aid, in breach of the treaty of Rome.
The Government have insisted that the insurance services group should be run as a business and not as a subsidy for exporters. In any event, a subsidised service would be in breach of the treaty of Rome. Competition is welcome, but it is essential, if the business is to flourish, that the group does not find itself competing with one hand tied behind its back. The creation of a single market means that exporters and their insurers more and more regard the Community as an enlarged domestic market, and the distinction between domestic and export credit insurance is becoming blurred.
Many private insurers are offering, and companies are taking, credit insurance policies covering both domestic and export trade, which is both administratively convenient and cost-effective, particularly for smaller businesses. If Cardiff is unable to offer a competitive product, it risks losing its best business.
The insurance services group is prevented by statute from offering a truly competitive product. The Government would naturally not want to legislate to widen the Secretary of State's powers to enable him, via the ECGD, to operate domestic credit insurance in competition with existing private sector insurers. If the group is to compete effectively in the market, it must be as a private sector insurance operation.
Those compelling reasons for moving the Cardiff-based company into the private sector are reinforced by the legal threat to which I referred, which hangs over all European state-owned export credit insurance agencies. The financial backing that a national agency such as the ECG D receives from its Government could be regarded under article 92 of the treaty of Rome as state aid, which is prohibited. Almost every EC member state is working on the assumption that state-financed insurance services may be prohibited. Therefore, like us, many find themselves reorganising their official export credit insurance structure to cut out state control. The United Kingdom must take account of that, and I suggest that the Opposition also take account of it.
The danger is that, if ECGD's insurance services are excluded from EC and OECD business by such a ruling, it would remove about 75 per cent. of better risk business at a stroke, and without such business, the insurance services group's remaining risk portfolio would not be viable. It would also be chaotic for businesses to seek export insurances from one organisation for exports to the EC and OECD and from another for exports to the remaining areas of the world. An outcome along those lines must be avoided—it is against the interests of the ECGD, its customers, staff and the taxpayer.
Clearly, the status of the insurance services group must be changed to meet those legal and business challenges, but also to meet the huge opportunities which await it. Not only is Insurance Services a market leader in the United Kingdom: it is well placed to build up business in other countries. It will only be able to do so after the proposed changes. Then it will be able to provide the cross-border services enshrined in the EC insurance directive, although ultimately that will be a matter for the owners of Insurance Services. The chance exists for the company to develop into a major force in the European Community, bringing substantial benefits to the United Kingdom and to the South Wales economy.
Before turning to the details of the Bill, I should like to mention two matters about which there have been some comments and misunderstanding. It has been said that the Government will not continue to provide insurance for those risks that the private insurance industry is unwilling to take. I am glad to be able to tell the House that that is not the case.
The Government intend to transfer as much of the risk as possible to the private sector. We are confident that the vast bulk of the risk will be insured, or reinsured, in the private insurance market immediately upon privatisation. However, there are a few countries in which ECGD facilities are currently available but where adequate private market capacity does not exist at present. To avoid a sudden and sharp reduction in the facilities available to British exporters in the immediate aftermath of privatisation, some support will be available from ECGD to enable the company to maintain facilities in those markets, and those arrangements will be kept under close review.
It is reassuring to know that facilities will continue to be available, because they will be much needed in some difficult areas. Can the Minister tell the House how long he envisages that they will remain available, as that question is in the forefront of the concerns of many companies?
As I have said, we shall keep those arrangements under close review. As the hon. and learned Gentleman will appreciate, I am sure, the markets to which I refer change. A market may be acceptable to the private sector, but political events may change its marketability, and different arrangements need to be adhered to. That needs to be kept under review. It is a changing situation, and we shall keep it under review.
The second misunderstanding that I wish to clear up relates to project exports, which ECGD will continue to cover. In recent years, ECGD support for project exports has proved an expensive business for the taxpayer, largely due to the effects of the debt crisis, which has plunged ECGD's accounts into substantial deficit, after many years of operating at a healthy surplus. It will take many more years before we can say with certainty what the cost has been.
As an illustration, ECGD's last published accounts showed a cumulative deficit of £693 million and referred to the possible need to add £3 billion to that figure, to make further loss provisions on sovereign debt. Those are enormous amounts by any standards, and the annual cost of interest rate subsidies, incurred to allow exporters to quote the internationally agreed minimum interest rates, must be added to them, which costs about £400 million at present.
Will my hon. Friend be following the European Community rules from now on, and will the project group not provide any form of assistance to industry within the EEC? Does he agree that that would help to release assistance for projects in other parts of the world, where it is clearly more needed, especially third-world countries in, for instance, south and central America?
As my hon. Friend may know, in practice the project group's business is almost entirely in the developing world. The European Community market —and, indeed, the market in OECD countries—is either not one that British exporters of project business have been successful in penetrating, or a cash market rather than one in which ECGD cover is called for.
Despite the cost to which I have referred, the Government remain committed to supporting this important sector of our industry. Nevertheless, it would be a dereliction of our duty to the taxpayer, and to the rest of the economy, not to take any action aimed at preventing a repreat of this experience in a few years' time. What was needed, therefore, was a decision-making framework that would better enable us to balance the national-interest case for supporting project exports with the financial risk to the taxpayer. The ECGD has been working on the so-called portfolio management system to meet that need.
I recognise that, while the ECGD has been doing that work, there has been some uncertainty about the cost and availability of future ECGD support; but the announcement made on 14 January by my right hon. Friend the Secretary of State has ended that uncertainty, and exporters have welcomed that announcement. It guarantees insurance cover for desirable project exports—those that we are reasonably confident will be paid for—but within a pricing and risk-control structure that protects the taxpayer's interest. I confirm the Government's commitment to provide a stable and viable framework of ECGD support for project exports.
Part I of the Bill relates to the powers that are being sought for the continuing ECGD. Its main purpose will continue, as its name implies, to be the provision of guarantees in support of British exports and overseas investment. The Export Guarantees and Overseas Investment Act 1978, which is the statutory basis for those functions, has begun to show its age, and that is especially marked in the way in which the Act prevents the ECGD from taking full advantage of the latest techniques and instruments available in the financial markets. That means that it cannot manage the assets and liabilities that it has acquired in the normal course of business as well as it would like. For example, the ECGD often wishes to adopt innovative financial techniques to help minimise loss or reduce costs, only to find its hands tied by out-of-date law.
Of course, those needs could not have been anticipated in 1978, so it is perhaps not surprising that the existing Act relies too much on the Secretary of State's inherent and implicit, rather than explicit, powers. That has on occasion given rise to uncertainty about the ECGD's authority, and has limited its field of activity.
For those reasons, part I adopts a completely fresh approach to describing the powers of the continuing ECGD. The existing Act is to be repealed, as parts I and III are a complete replacement for the old powers. Let me emphasise again, however, that that implies no fundamental change of any kind in the role of the ECGD. Its primary function will remain the encouragement of exports and overseas investment through the provision of insurance against credit risks. It will remain subject to the objective for its trading facilities to operate over time at no net cost to the Exchequer, and the new powers should enable it to do its job better.
As my hon. Friend knows, the existing arrangements provide so-called section 2 cover. When the ECGD is up against its country limits and therefore will not insure a project, the matter can nevertheless be referred to the Export Guarantees Committee, where what is essentially a political decision will be made to provide cover—although the country is up to its limit, and repayment may be a more dubious prospect than it is in the case of other countries. Will that provision continue, or do the Government propose to deal with such cases in a more hard-nosed and commercial fashion?
Broadly the same procedures will apply, but we believe that what is proposed and is now being introduced under the portfolio management system will provide a more viable and practical framework to balance the mutual objectives of helping the exporter and having proper regard to the interests of the tax payer.
Clause 1 retains the existing but rarely used powers for rendering economic assistance overseas, powers which have lain dormant since the creation of the Overseas Development Administration, except for the restructuring of sovereign debt. There is no current intention to use the powers for any new purpose, and I repeat previous ministerial assurances that this would not be done without a prior statement to the House.
Clause 2 enables ECGD to continue to give guarantees on investments made in overseas enterprises. An additional power is introduced to extend cover in relation to associated companies, and this will broaden the scheme's appeal to potential investors. It is a minor example of the need for this legislation.
Clause 3 allows the ECGD to enter into whatever arrangements may seem appropriate for the proper financial management of its portfolio, and this will permit ECGD to benefit from greater use of financial market techniques such as bond issues, interest rate and currency swaps. This will better control and possibly reduce costs to public expenditure.
It will be noted that the statutory distinction between guarantees issued in the national interest and other "commercial" guarantees is not retained. It has become a less relevant distinction, and it will become even less relevant when ECGD's business is centred, after the insurance services changes, on medium—and long-term export credits. This has implications for the Export Guarantees Advisory Council, whose current role is to advise ECGD on the "commercial" risks—
On a point of order, Mr. Deputy Speaker. I do not wish to interrupt the Minister, but you will recall that, just a few moments ago, the hon. Member for Cannock and Burntwood (Mr. Howarth), on an intervention, asked some questions of the Minister. May I draw your attention to the Register of Members' Interests, published in January 1990, which among other entries records that the hon. Gentleman is parliamentary consultant to Trade Indemnity plc, which is likely to be the purchaser of ECGD if the privatisation goes ahead?
I do not wish to cast any aspersions at all on the hon. Gentleman, because he has in the past made his own position quite clear. I just wonder if it would not be more proper in these matters, even if Members are intervening rather than making speeches, for them to take every opportunity to declare a personal interest.
Will you not give the opportunity to the hon. Gentleman to put on the record the fact that he is a parliamentary consultant to Trade Indemnity?
Further to that point of order, Mr. Deputy Speaker. It is outrageous of the hon. Member for Caerphilly (Mr. Davies). He knows perfectly well that I have the honour to be parliamentary consultant to Trade Indemnity. The hon. Gentleman also knows that I happen to be a practitioner in this matter. If those of us who are in the House are going to be unable to participate in debates in the House on matters which are of great concern to our constituents and throughout the country, it is unfair. I have been accused by the hon. Member. The point that I raised with my hon. Friend had nothing to do with whether I have a consultancy or not but everything to do with the measure that my hon. Friend is bringing before the House.
Order. The hon. Gentleman is now getting dangerously near seeking to debate the whole question whether hon. Members should declare their interests or not when they intervene in debates.
There is an obligation, according to "Erskine May", that hon. Members participating in debate should declare their interest. However, it has not been the practice in recent years to require an hon. Member in the course of asking a question or intervening to make formal declaration of an interest which is recorded in the Register. It will be usual and expected that an hon. Member having a direct pecuniary interest in a matter before the House declares that interest in the event of making a speech in debate.
very much hope that that will enable us to get on.
Further to that point of order, Mr. Deputy Speaker. I should like to make it clear that I did not make an attack on the hon. Member for Cannock and Burntwood. He appears to be sensitive about these matters, and I am sure that he is well rewarded for his sensitivity. I do not want to criticise him, because he has made it abundantly clear in the past that he has a direct financial involvement.
The point that I was trying to make was whether in these circumstances, where we are discussing the transfer of public assets to what is likely to be one private monopoly, and where the hon. Gentleman has such a close relationship, it would not be proper to interpret the ruling that you quite rightly gave in its broadest sense and require the hon. Gentleman and others who might have direct financial involvement to take the opportunity, even though on an intervention, to make that declaration of interest. Could you, Mr. Deputy Speaker, perhaps reconsider your ruling with a view to broadening its scope so as to require hon. Members in these circumstances to make that declaration of interest, even though they are only making an intervention?
It would be most unwise of me to go beyond what I have said. I very much hope that right hon. and hon. Members will bear in mind what has been said in the course of this exchange.
Further to that point, Mr. Deputy Speaker. So that the House will not be misled, I am most grateful to the hon. Member for Caerphilly for his kindness and courtesy—what he is like when he attacks people, I do not know. I am most grateful for his felicitations. Just for the avoidance of doubt, I hope to be able to catch your eye, Mr. Deputy Speaker—which is why I shall sit down very quickly now—later on in the debate. It is at that point that I had intended at some length to develop a full explanation to the House of my interest in these matters, which I hope might be for the benefit of the House rather than to its detriment.
The hon. Member for Caerphilly may be interested to know that my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) had had the courtesy to tell me that he hoped to try to catch your eye during the debate, Mr. Deputy Speaker, and that he intended to declare his interest if he were called— [Interruption.] The hon. Member for Caerphilly said that he did not want to interrupt the Minister. I do not know what he does when he wants to interrupt the Minister, because he has certainly succeeded in making a lengthy interruption.
Returning to the implications for the Export Guarantees Advisory Council, whose current role is to advise ECGD on the commercial risks underwritten under section I of the existing Act, the advisory council consists of eminent bankers and industrialists, and I am pleased to take this opportunity to thank the chairman, Mr. Peter Leslie, and the council members for all the time and valuable advice that they have freely given to ECGD. The major challenges facing ECGD mean that their expertise is needed more than ever; consequently, the Bill extends the advisory council's role so that ECGD can seek its guidance on any matters relating to ECGD's powers, duties and functions.
These changes in ECGD's basic powers do not, however, mean that there is to be any change in ECGD's practice, which stems from the statement by the noble Lord, Lord Wilson of Rievaulx, then President of the Board of Trade, that it will not issue guarantees for "unduly hazardous or quite crazy" risks. In any circumstances where ECGD's accounting officer judges risks to fall into this category and is instructed by Ministers to cover them, then, as has been past practice, an announcement will be made to the House.
I should also stress that the change does not mean that the Government's commitment to project exports is in any way reduced.
Will my hon. Friend the Minister just consider what, at least in my submission, is an important component of the examination of any risk that the Government propose to subsidise at the taxpayer's expense—the profitability of the manufacture for the company concerned? Surely, in an examination of the likely return to the community as a whole, it is important not to put ourselves in the situation where the net effect of our subsidy is to hand over a substantial amount of British taxpayers' cash to some foreign country.
My hon. Friend the Member for Epping Forest (Mr. Norris) raises an interesting point. The objective of ECGD is to try to determine whether the buyer will pay for what he is purchasing, whether it is a sovereign buyer or an individual company. It would be requiring rather a lot of ECGD or any other credit insurance agency to expect it to try to make judgments on the pricing structure of the vendor.
My hon. Friend said earlier that the intention was that these services should be provided at no cost over time. Does that imply that previous losses have to be recouped over a period?
We would hope that what are now shown as losses would substantially be recovered over time, through rescheduling particularly. I am not suggesting that future business should acquire a profit sufficient to repay the losses which have been accummulated and which stand in the books, but we hope that in due course they will be recovered through those who have failed to pay meeting their payments later, usually through the Paris Club rescheduling.
I should like to move on, as I have been generous in giving way, and we have had points of order as well.
Clause 5 will permit ECGD to encourage exports and at the same time improve its financial outturn by marketing some of the information and skills which it acquires in its business activities. Clause 6 places limits on the level of commitments which may be assumed in respect of the operations covered by clauses 1 to 3 of the Bill.
At present, the sterling statutory limit is set at £35 billion and no change is proposed. The foreign currency limit currently stands at 25 billion special drawing rights, but as commitments under this limit do not exceed 6 billion SDR at present, it is proposed to reduce this statutory limit to 15 billion.
Clause 7 provides for a return to be laid before Parliament giving details of the Department's sterling and foreign currency commitments as soon as practicable after 31 March in each year. ECGD also wishes to be in a position to take advantage of ecus as a financing medium and such other units of account as may be created from time to time, and provision for this has been included in clause 6, which I am sure will be welcome to hon. Members in all parts of the House.
Part II of the Bill relates to the proposed privatisation of the insurance services business. It provides the necessary legal framework to implement the Government's intentions. It will allow the Secretary of State to prepare a scheme for the transfer of any property, rights and liabilities currently vested in ECGD's insurance services business. This is dealt with in clause 8.
Clause 9 provides for the arrangements for the transfer of staff to the Government-owned company. These arrangements adopt the practice of earlier privatisations by ensuring that the terms and conditions of service of employees do not suffer as a result of their transfer. In this regard, the Transfer of Undertakings (Protection of Employment) Regulations 1981, commonly known as TUPE, will apply and will protect the position of staff.
While TUPE provides some basic but none the less important legal safeguards, it does not apply to all elements of the employment package which civil servants enjoy at present. First, TUPE does not apply to pension schemes. The Government nevertheless wish to ensure that the staff of insurance services who transfer to the private sector will enjoy pension arrangements in conjunction with terms and conditions of employment which are overall broadly comparable to the civil service terms and conditions which they currently enjoy.
Anything which failed to achieve this could prejudice the prospects for effecting a voluntary staff transfer. This would, in turn, endanger the success of the whole privatisation, given the vital importance to the business of the expertise and commitment of its staff. For that reason, in judging the bids they receive, the Government will ensure that any proposed employment package on offer reflects this need.
Secondly, there is a point about the arrangements for redundancy compensation for civil servants. These redundancy rights are currently enshrined in the civil service pension scheme. As I have said, pension schemes are not transferred under TUPE. It will clearly be important that the transferring staff do not lose the rights which they have built up in the civil service. It is therefore intended that arrangements will be made which will ensure that the existing entitlements of these staff to redundancy compensation remain with them in their private sector employment.
Clause 10 provides the means for the Secretary of State to acquire or be issued with shares in a vehicle company for the purpose of converting it to a Government-owned company. So as to avoid unnecessary uncertainty, it is planned that the sale of the Government-owned company to the private sector will take place as soon as practicable after it has been set up. Clause 11 enables the Secretary of State to take reinsurance from the company into which the other assets and liabilities of the insurance services business have been transferred.
Clause 12 confers the power to delegate to the new company or any other body the functions described in clause 1. This is primarily intended to permit the new company to undertake an agency role on behalf of ECGD in respect of any business where ECGD remains the principal in the transaction, but wishes, for reasons of administrative convenience, to delegate the administration to the new company.
I should at this point like to say a few words about the proposed method of sale of the insurance services business to which reference has been made. The Government have already announced that this will be by means of a trade sale rather than a public flotation. This is because of the particular character of the insurance services business—a highly specialised, risk-taking enterprise which has yet to operate as a fully independent entity. A trade sale offers the best prospect of securing a purchaser who will understand, and be committed to, this complex business and bring to it strong financial resources. This is obviously the right solution for our exporters.
There is also every reason to believe that a competition between interested trade purchasers will achieve good value for money for the taxpayer. Responses to a pre-qualification questionnaire issued by the Government's financial advisers have been received from a wide range of institutions. As soon as convenient after Second Reading, and after taking account of the points made by hon. Members in the debate, a short list of bidders will be selected from the respondents to the questionnaire, and they will be invited to submit definitive bids.
However, while price will be an important factor, it will not be the only one. At the end of the day, the Secretary of State reserves the right to reject any bid which in his view is unsatisfactory, after taking all relevant factors into account. I will ensure that the names of the short-listed bidders are published and that other relevant information will be made available in the Library of the House. As hon. Members will be aware, the Kemp review itself' and ECGD's annual report and accounts are also placed in the Library.
I am sure that the whole House will realise that the changes we are proposing add up to the most radical and comprehensive review of ECGD since its establishment over 70 years ago. In making these changes, the Government's sole aim has been to ensure that the vital services provided by ECGD to exporters are safeguarded for the future. It means that ECGD will now continue as two separate organisations.
However, ECGD has never shirked the need for change. I am confident that both organisations will continue to provide first-class support for our exporters. Insurance Services, as a company, will be able to provide a still better and even more up-to-date service to British industry than it could as part of a Government department. The purpose of the Bill is to ensure that a first-class standard of export insurance continues to be available to British exporters. I commend it to the House.
We have become used to seeing the Government introduce privatisation measures amid confusion and incompetence. The latest measure is a striking example. We are presented with a Bill which seems to be privatisation for privatisation's sake. It is difficult to see any other justification for it. It is clear that what is proposed in the legislation will be harmful to British exports and to the economy as a whole.
The Bill has already given rise to a storm of protest by those affected. Even by the Government's standards, it seems singularly ill thought out. It is likely to be harmful not only to exporters who rely on the short-term cover provided by the insurance services group of ECGD, which the Government propose to privatise, but also to those who rely on the long-term cover provided by the project division. The Bill includes clauses dealing with both parts of ECGD and both, I believe, will be badly affected by it.
The hon. Lady has been making a point about the reasoning behind the Bill. Surely there is a fundamental reason why we should examine the problem. It is likely after 1992 that under article 92 state support will be ruled out by the Commission. Clearly it is state support contrary to the competition rules. If that is so, the British exporter will be at major disadvantage, facing a state-run support system which in effect will be illegal under Community law.
There are two responses to the hon. Gentleman's intervention. The first is that there is no immediate pressure from the European Commission to take action of the kind that the Government are proposing. The second—if the hon. Gentleman will do me the courtesy of listening—is that other state credit insurers within the EC do not seem to be acting in the same way as the Government in this respect. So there are clear differences. Because of that, we need to look at this much more closely rather than simply saying that, because 1992 is coming along, we automatically have to change the status of ECGD.
The hon. Lady seems to think that there is something wrong in the Government's taking action in good time. What would she say if we left it until the last moment and had to do things in a rush? Could I also draw her attention to the action being taken by the Danish Government in respect of its own export credit organisation? She should be aware that this is a real threat to which other European countries are having regard, and we would be falling short of our duty to exporters if we ignored it.
It is not really a question of taking action in good time; it is a question of taking action which will mean that the so-called playing field in Europe is very uneven indeed with regard to export support. We are worried by the fact that the Government are, in effect, cutting back on this kind of export service at at time when other European countries, including our major competitors in France and Germany, are not doing so. I shall return to the point about the level playing field later in my comments.
We have heard the Minister, and we have heard the hon. Member for Lancashire, West (Mr. Hind) from the Conservative Back Bench, but that is not what Kemp found in his report. He said this:
there is nothing in the existing package of 1992 legislation nor in any other proposals for legislation that have been tabled or are known to be under consideration, which in any way affects the ability of the state agencies to carry on business as they have been doing.
I think it is a red herring—or a blue herring—from the Conservative Benches.
I am grateful to my hon. Friend. Although the Kemp report dates from some time ago, the position as outlined by my hon. Friend remains substantially the same.
I stress that this measure comes at a time when support for exports in Britain is particularly important. We had a huge trade deficit in 1990—probably about £16 billion—following the staggering deficit of more than £19 billion in 1989. These are deficits of a magnitude previously unknown in our country. We run a huge deficit with West Germany and also with Japan, and we have the difficulty of competing with those countries in third-country markets. The average annual growth rate in the volume of our exports in the period 1979–89 was only 3·5 per cent. It was lower than that of any EEC country, Japan or the United States.
The need to export has never been greater than it is now. As one newspaper headline put it just a couple of weeks ago,
As never before, it's export or die.
Yet the Government's response to the need to export more has been to cut the services available to our exporters. The Government have introduced charges for export services, there have been cuts in support for exporters exhibiting at trade fairs, for example, and there have also been failures to help exporters in particular cases. One case which recently came to my attention, and about which I have written to the Minister's colleagues, concerned the Government's role in helping to lose a valuable order for six ships from Appledore Shipbuilders, in Devon, because the Government refused to act as guarantor in the way that the customer had come to expect from other Governments.
The point should be made also that the current general economic climate in Britain is not helpful to exporters, so this is a particularly inappropriate time to introduce measures of this kind. Inflation is high, interest rates are very high, and the pound is at a difficult level for exporters within the exchange rate mechanism. Yet the Government's response is to privatise the ISG division of the Export Credits Guarantee Department. How many handicaps is industry expected to survive under in this country?
The hon. Lady asks how many handicaps industry will have to suffer under. It would be a handicap if it had to suffer under the policies of Opposition Members. Has she not seen the figures for car exports? She has talked about exporters not succeeding, but the exporters of cars have succeeded very substantially
I hope to refer to some of the contacts that I have had with exporters who are extremely worried about the Government's policy in cutting back on exports. They seem to me to have a great deal more in common with the industrial regeneration ideas of the Labour party than with the ideas of the present Government.
If the hon. Gentleman will forgive me, I have already given way several times and there are quite a few arguments that I would like to make. Perhaps he will be able to intervene later on.
As the Minister pointed out, ECGD has a distinguished record as the world's most experienced export credit insurer and it has traded profitably for most of its 70 years' existence. Unfortunately—again, as has been pointed out —over the last decade it has been affected by the special circumstances of third-world debt, although in this respect it is no different from the credit insurers in most other countries. ECGD services are valued by large and small firms alike. Small firms in particular do a great deal of business with ECGD and are worried about changes that are being proposed. Even the large firms which are the prime beneficiaries from the project division none the less sub-contract in the course of their work to many smaller firms, which thus benefit indirectly from the support given.
It has been known for some time that the Government would be likely to propose changes in ECGD's status. The prospect of a genuine single market in Europe alters the picture—I certainly concede that—and it was felt that ECGD should have the flexibility to operate within the large single European market. This was one of the considerations behind the Kemp review and the different options suggested in that report for ECGD's future operation.
The Kemp report suggests a choice of three possible directions for ECGD. One was staying within Government, perhaps as a separate accountable unit. The second was to become a Government-controlled agency outside the civil service, and the third was to be a Government-owned company with the introduction of private capital probably after a four to five-year period. The reaction to the Kemp review at the time was generally favourable, although exporters were largely satisfied with ECGD services anyway and were not exactly clamouring for change.
What do the Government decide to do as a result of the Kemp review? Quite simply, they decide to ignore Kemp's recommendations entirely, take no notice of the wealth of advice they received at the time, and come out in favour of the immediate privatisation of the insurance services group. The transition period of four to five years becomes a transition period of 1·5 seconds, or however long it takes technically to create a Government-owned company and then immediately, in the same breath, complete the privatisation process.
The Kemp report also made it clear that there would be a continuing need for a Government-backed reinsurance facility in the case of political-risk exports. In this legislation, however, the Government are proposing to limit their commitment to political-risk reinsurance for three years. The Minister today has sought to soften this particular commitment by saying that there would be some mechanism for reviewing the situation. Perhaps the Minister can tell us where the figure of three years came from and how it was arrived at. It seems a very arbitrary limit indeed. Perhaps he will specify in more detail what measures will be taken if, at the end of the three-year period, it is quite obvious that there is no real willingness on the part of the private sector to offer a reinsurance service, which is certainly needed.
At the same time as privatising ISG, the Government seem determined to weaken the project division of ECGD, which is to remain part of Government. The Minister has already referred to the changes which are part of the new portfolio management system for calculating the premiums that exporters will have to pay, and we know these will mean steep increases and a more expensive export service for medium and long-term exports. I understand that, overall, ECGD premiums are higher than those of most of our main competitors. There is much concern among exporters about what is happening.
All the Government's proposals—the immediate privatisation of ISG, the three-year limit on reinsurance and the introduction of the portfolio management system —are designed to ensure that British exporters get a poorer deal than their competitors. That is the real consequence of the Bill.
Not surprisingly, there has been an almost uniformly hostile reaction to the Bill. The survey that was carried out by Sedgwick James, the credit insurance brokers, found that only 33 per cent. of those questioned felt that the private sector would be able to satisfy the needs of the short-term credit insurance sector. But 91 per cent. thought that the Government were being unrealistic in their stated plans to get other countries to follow their lead in cutting support to medium-term export business.
According to Sedgwick James, 60 per cent. of the people to whom it wrote replied. It tried to make it as reasonable a survey as possible. The Minister may suggest that the number was small, but much concern has been expressed by companies through chambers of commerce —the London and Birmingham chambers of commerce, for example—the British Exporters Association, the Confederation of British Industry and others. The Minister is trying to convince me that only a few firms are concerned about this, but I do not believe him. I know that that is not so.
I am sure that the Minister heard what my hon. Friend said.
The overwhelming majority of respondents thought that the Government's tactics of trying to convince other countries to follow suit were unrealistic. Despite that vote of no confidence, the Government are sticking firmly ro that illusion. In answer to a presumably planted question by the hon. Member for Welwyn Hatfield (Mr. Evans), the Government stated:
The Government intend to press in international fora for other export credit agencies to charge more economic premium rates for export credit support, but, in the meantime, ECGD will be adopting new premium rates which will be matched more closely to risk."—[Official Report, 14 January 1991; Vol. 183, c. 359.]
In other words, we shall proceed no matter how slight the evidence that other countries will follow suit. That is an absurd way of proceeding and of approaching export credit support.
The Secretary of State, from a sedentary position, is saying something about us wanting to subsidise everything. That is patently untrue, as he knows. We want our exporters to have the same facilities as our major competitors. The answer is as plain and simple as that.
At the time of the Kemp review, when the Government were considering the future of ECGD, many comments were received from exporters and from large companies. Most stressed strongly the importance of the existing service. For example, Hawker Siddeley said:
The future of the United Kingdom capital goods industry remains—as will all our competitors—virtually totally dependent on the ability to insure export business over the medium and long term. There is no evidence that this facility exists or will exist in the private sector.
Vickers plc said:
another advantage in retaining the Insurance Services group as a United Kingdom government agency would be its assured access to the vast ECGD data base which may not be available to a government-controlled company supported by private sector capital.
Perhaps the Minister will respond to that point when he replies. The Credit Insurance Association said:
We do not believe that the private sector could assume a significant proportion of ECGD's existing functions.
Many other quotes could be given. Since publication of the Bill, many companies have expressed concern to many of my hon. Friends in whose constituencies they are located and to hon. Members on both sides of the House.
The hon. Member for Leeds, North-West (Dr. Hampson) referred to Rolls-Royce in an intervention. Northern Engineering Industries, which is merged with Rolls-Royce, has written to many hon. Members expressing concern about the future of ECDG and that exporters will receive an inferior service.
Has the hon. Lady read the evidence taken by the Select Committee on Trade and Industry from Rolls-Royce and Northern Engineering Industries, which says:
This should, in our opinion, take place as early as possible in order that ECGD's pre-eminent position in this field is not lost and continuity is preserved. Already the Dutch credit insurer is privatised and we see similar activities taking place in the relevant sectors by the French credit insurer. If the UK is to maintain its position in this field within Europe come 1992 it is important that steps are taken now to introduce private capital so that UK exporters may compete effectively with their foreign competitors.
I am grateful to the hon. Gentleman for reading that. That company wanted the same system to obtain here as on the continent. I have read that quotation and have it in front of me. I assure the hon. Gentleman that the force of its contribution is that we should be competing on equal terms. I contend that the Bill means that we shall not be competing on equal terms.
The timing of the Bill irritated many exporters and industrialists. It appeared just before the Christmas recess, with little publicity, and was orginally timed to be debated in the week of the UN Gulf deadline. That is typical of the rather furtive way in which the Government have treated the ECGD issue. The proposals on its future were first announced by the Government in a written answer to a planted question, rather than, as we had asked, in an oral statement on the Floor of the House, which would have enabled hon. Members properly to question the Minister. The privatisation of ISG was originally scheduled by the Government for April, but because of various difficulties that will not happen until July at the earliest.
The furtive and incompetent way in which the Government have introduced the Bill perhaps has much to do with the fact that they are divided about it. There is no doubt that the Department of Trade and Industry and the Treasury hold different views on it, and perhaps the Minister will give us some details of that. At the time of the Kemp review, it was known that the Treasury, or some in the Treasury, favoured the so-called zero option, ending Government support for export credit even for the medium and long term. The previous Secretary of State was well known as a hardliner on export support, and it was rumoured that he might consider privatising all the Department's work in export support.
There are still disagreements between the Treasury and the Department of Industry, as is clear from a leaked memo that was reported in The Guardian recently from the Private Secretary to the Chief Secretary to the Treasury to the Private Secretary of the Secretary of State for Trade and Industry. I apologise if that sounds like a passage from "Yes Minister", but the relevant extract says:
As for the short-term business, as you know the Chief Secretary is very concerned about your Secretary of State's proposals for large-scale government support for the privatised company.
That shows clear disagreement between the two Departments. The same memo refers rather ominously to
outstanding policy issues on reinsurance and national interest.
Perhaps the Minister could give us details of the exact disagreements. The present Secretary of State for Trade and Industry was previously a Treasury Minister. I wonder whether his promotion has changed his view. I also wonder what are the views of the various Ministers in the Chamber on the issue. It seems that different Ministers have different views.
In a letter to me some time ago, the previous Trade Minister, Lord Trefgarne, said:
I am sure that the changes…are essential to enable ECGD to maintain and improve the quality of its support to UK exporters.
What is the justification for that statement? I see the Minister for Trade nodding, so presumably he agrees with the statement. What studies have been done on the damage that the proposals are likely to do to industry? It is not clear why Ministers make sweeping statements without giving further justification.
Clearly, the Government are rushing to privatise the insurance services group of ECGD. However, it has to be said that there do not appear to be many bidders in the running for it. Perhaps the small number of bidders causes the Government some embarrassment. Furthermore, there are question marks about the suitability of some bidders and the consequences on the wider market if they acquire ISG. If ECGD's main competitor, Trade Indemnity, acquires the insurance services group, will there be a referral to the Monopolies and Mergers Commission because of its dominance of the United Kingdom credit insurance industry? It would be ironic if the Government, claiming as they so often do that privatisation will increase choice, are responsible for eliminating what choice exists in the export credit market.
If the Dutch insurer NCM acquired ISG, would it have the promotion of British exports at heart? As the official Dutch credit insurer, its remit is to help Dutch exports. In any case, it would be absurd and unfair if Dutch companies which used NCM's services were entitled to the back-up provided by the Dutch Government while British companies using the service were not entitled to such Government back-up.
If ECGD were sold to a company without much expertise in export credit services, would not our exporters lose in the long run? Such questions are important. I want the Government to tell us how many bidders are currently bidding and describe the nature of some of them. Parliament is entitled to that information.
It does not seem that the sale will be a great earner for the Government. The sum of £100 million has been mentioned. Perhaps the Minister will confirm or contradict that figure. Certainly it is a small amount of money. It might keep our under-funded health service going for an hour or so, but it would hardly tackle any of the long-term problems of our country, for which public expenditure is badly needed. What is the Government's estimate?
Unfortunately, we are handicapped in our work on the sale because financial details have not been made available to Parliament, even though some financial details have been made available to bidders. I noted that the Secretary of State said that he would make some information available in the Library. Will he make available the details that have been given so far to bidders but to which Members of Parliament have not been given access?
Even possible purchasers have not been able to bid in full knowledge of the facts. For example, in the information memorandum first issued by Samuel Montagu on behalf of the Secretary of State, bidders were given no information on the extent of Government support for reinsurance after the sale. Indeed, the relevant section of the memorandum reads:
Decisions on the scale and detail of government participation in the reinsurance arrangements for the new company will be taken when the outcome of the discussions with private sector reinsurers is known.
That is hardly helpful to bidders who want some idea of the commitment that they will be taking on.
The consequences of the proposed sell-off on the rest of ECGD cause the Opposition considerable anxiety. The losses of ECGD's projects side are considerable for the reasons to which I referred earlier. Therefore, there is a fear among exporters that once ISG is sold off, the rest of ECGD will be vulnerable to continued Treasury sniping —especially given the details of the Treasury's view which I gave earlier. Exporters also fear that ECGD will not be able to fulfil its proper role in promoting British exports in new and sometimes difficult markets.
ECGD is already being forced to take a hard line on cover for certain countries. The portfolio management system will simply make that worse. Indeed, exporters have told me that the uncertainty surrounding ECGD handicaps them when trying to win contracts. They cannot be sure what element of the equation the ECGD contribution will constitute. I hope that the Minister will comment on that. I have contacts with exporters who feel that deals are being held up because of the uncertainty surrounding ECGD.
Furthermore, the ECGD has been forced to take a particularly hard line on trade with eastern Europe, even though for both political and long-term economic considerations, links between Britain and eastern Europe need to be strengthened. It is ironic that the CBI recently launched an initiative to promote trade with three eastern European countries and the Soviet Union when of those four countries, three are off ECGD cover. That certainly does not make the CBI's role easy. I hope that the Minister will tell us whether that position will change because it certainly needs to change.
We all remember the previous Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), declaring that Mr. Gorbachev was a man with whom she could do business. Yet ironically, even before the recent sad events in the Baltic states took place, we were doing far less business with the Soviet Union than we did with the old, repressive but, I suppose, horribly reliable regime. The Government must address that issue quickly. It affects exporters in many parts of the United Kingdom. Indeed, I read recently that even the Scottish Herring Buyers Association was having difficulty in selling to eastern Europe as a result of the withdrawal of ECGD cover. It is important to have Government support for exports in such markets for both economic and political reasons. It is unlikely that the private sector, which must continually be mindful of short-term profits, could support such trade.
Throughout their term of office, the Government have claimed that they want a level playing field in Europe so that our industry can compete on equal terms. I state again that the Bill will do nothing to achieve that aim. Indeed, it will do the opposite. We should aim to give ECGD the same flexibility as COOFACE in France to compete for business in Europe but at the same time it should enjoy a similar degree of Government support for political risk reinsurance for medium and long-term exports. Why did not the Government simply seek to amend the ECGD terms of reference to give it that flexibility and those opportunities? Did they consider such a course? If not, why not?
We have many specific worries and reservations about the clauses and provisions of the Bill which I do not have time to list now but which will certainly be thoroughly aired in Committee. We are worried about the effects on the work force, particularly in Cardiff, employment prospects and, for example, pension rights. There has been a lack of consultation with the work force, much of which has been loyal to ECGD over many years and surely has a real stake and interest in the future of ECGD.
It is clear that the Bill is an ill thought out measure which has been introduced in an incompetent and secretive manner. It is the result of departmental battles in which the privatisation dogmatists and cost cutters have won. Once again, the Government have shown themselves to be the anti-industry party which, for short-term and cost cutting considerations, is prepared to sacrifice our long-term economic well-being. The Opposition will rightly oppose the Bill, subject it to rigorous scrutiny in Committee and use every opportunity to point out not just to industry, but to the general public, just how foolish and ill-judged a measure it is.
I wish to declare an interest as non-executive chairman of GEC-Marconi.
The Bill is important because adequate financing arrangements are fundamentally important to successful export activity, on which the country's economic health depends.
There is a significant shortcoming in the philosophy that has underpinned our export credit activity for many years. That philosophy has been to offer credit only in a reactive manner, when our competitors have made a credit package offer and we have to match it or lose out. I know several cases in which a British product has won the support of a foreign purchaser in terms of performance, product support and delivery dates, only for the deal to be held up on the credit aspect, while other competitors are encouraged to enter the fray and improve their bids. Had our companies been able to make a pre-emptive credit offer at an earlier stage, a deal could have been concluded.
In some cases, the contract is lost following extensive negotiations, but in other cases—this is almost worse—the contract is secured after lengthy reactive responses by ECGD, but has cost us far more in the end than if our companies had been able to make a carefully judged pre-emptive credit offer earlier. I emphasise that I do not speak as, or on behalf of—to quote from today's Financial Times—the
whingeing exporters who want to give British exports away to countries that are unlikely to pay for them.
There are many British companies that have developed their export markets on the back of original contracts which contained export finance and which may have been more generous than the Treasury at the time would have liked. Much export business is long-term business, and the key factor is the ability to break into the market in the first place.
It should not be necessary to state such truisms in this country, which is so dependent on trade. I am not in any way averse to the concept of private capital being introduced into a hitherto Government agency, as one might expect from a Conservative Member—far from it. I also accept that, with the onset of the single Eurpoean market, it is clean and neat to make some new arrangements. But I am concerned about some of the assumptions that seem to underlie the Bill.
First, I see no signs of any of our EC partners, other than Denmark, making similar arrangements. The obsessional phrase these days—the hon. Member for Gateshead, East (Ms. Quin) has already used it—is "level playing fields". In view of my earlier comments about the structural disadvantages for British exporters over the years, I hope that the Government will not be naive and assume that our partners and competitors will automatically seek to bring their arrangements into line with ours.
I hope that, when my hon. Friend the Minister winds up, he will give us details about exactly what our EC partners are doing, because there is an element of hearsay about present examples, which are not exact. The House needs an assurance that the Government will continue to provide support, including support in the national interest, for exporters on terms at least comparable with those offered to our competitors.
Secondly, the privatisation of the insurance services group will make the projects group position all the more exposed. I know that some in industry fear that the Bill could be a precursor to the abolition of the projects group, and I should like a reassurance on that.
Thirdly, for the smaller exporter, the presence of ECGD insurance—the fact that the small exporter has got it—enhances the quality of the exporter's receivables, thus creating an improved borrowing base when negotiating vital capital borrowings from his banker. That last point was made in virtually those words by Lloyds bank in its evidence to the Select Committee on Trade and Industry.
Fourthly, there are anxieties in some quarters about the capability and appetite of the private market to provide reinsurance. The three-year guarantee proposed by the Government may not be long enough. After all, the Kemp report spoke of a four to five-year transitional period. I should like an assurance that the Government will review the working of the system within three years of the legislation coming into effect. Industry would be entitled to expect that such a review should examine the successes and failures of the privatisation up to that stage and consider the issue of the Government continuing with some measure of support.
I know that many hon. Members want to contribute to the debate so I shall conclude by saying that, in introducing the Bill, the Government need to reassure industry. Times are hard, and markets are tough. The 1978 Act talked of "encouraging" exporters; the Bill uses the phrase "facilitating". That does not sound like a Bill with the degree and element of full-hearted, warm, supportive commitment that the industry would like and the economy needs.
I am proud to say that I am the president of the Manufacturing, Science and Finance union. I hope that others who have to declare an interest can say, like me, that they are not paid for holding the office and do not receive any reward for it. However, the Bill affects many of my 650,000 members. Certainly it will withdraw an important ability to export from the two thirds of those members involved in manufacturing industry.
The Minister referred to the esteemed Lord Young, who used to provide the previous Prime Minister with solutions—thank goodness he has gone. The Minister also referred to the previous Secretary of State, the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley)—thank goodness he has gone; he would have got rid of all the support given to British exporters. The present Secretary of State is not a great deal different from the right hon. Member for Cirencester and Tewkesbury, but at least the total service is not being mutilated, if we are to believe what the Minister said.
It is noticeable that, although the Bill affects 25 per cent. of our exports, two very junior Ministers have been left to put the case for it to the House. One very new Minister, the Parliamentary Under-Secretary of State for Industry and Consumer Affairs, will reply to the debate.
My hon. Friend the Member for Dundee, East (Mr. McAllion) says that it is sinister; I shall leave it to him to expand that point in his speech.
I should congratulate the Parliamentary Under-Secretary on his elevation to the Front Bench. As an opponent of his, I have not yet had an opportunity to do so, but I hope that he can provide some of the answers that were not provided by the Minister of Trade.
It was shown to me yesterday just how essential the Export Credits Guarantee Department is. I was in Liverpool talking to a company executive, who said that 86 per cent. of his product was exported. The company is in the Mexican market. The executive to whom I spoke was aghast that there could be any change in relation to export credit guarantees. He pointed out to me that the company is already 16 per cent. adrift of the terms of the Spanish offer in that market. It is able to remain only because of the quality of its product. When a firm starts from scratch in a new market, it will not have the advantage that customers already know their product.
The unwillingness of the private sector to provide this type of cover has been demonstrated in the past. Without such cover, many successful export initiatives would have been lost to this country. This is a blow to our export performance, and it comes at a time when our trade deficit is £15 billion. What a time for the Government to take another swipe at exporters and make life more difficult for them. I should have thought that the Government would be anxious to do the opposite, that they would want to strengthen the position of those entering the export market —a difficult field—and do all they possibly can for them, rather than injure them.
As has been stressed, privatisation applies to small and medium-sized firms—the ones that need most help. They are the companies that provide the dynamic element in our industry. It is they that initiate. They are also the ones, I regret to say, that suffer most from the Government's economic policy. Many of them have gone or are going out of business as a result of high interest rates and a very difficult home market. In their attempts to survive, they have had to turn to the export market.
A group in Nottinghamshire has three factories in my constituency. Not long ago, it was praised by the right hon. Member for Finchley (Mrs. Thatcher), who used to be Prime Minister, for its marvellous export record. Despite that, one of the five factories in the group closed as a result of the Government's policies. Yet it was making a marvellous export contribution. I support what my hon. Friend has said about small and medium-sized factories, which have made such a contribution, being clobbered by the policies of a wicked Government.
I could not agree more. Indeed, praise from the right hon. Member for Finchley (Mrs. Thatcher) when she was Prime Minister, or—even worse—a visit by her to a factory, was usually followed by the firm's going into receivership.
Small and medium-sized firms ought to be encouraged to get into the export market, yet the Government are removing the prop that they need. These are the firms that are most at risk, the ones least able to bear the burden, the ones that will suffer most when a customer defaults. It is wrong that such firms should be left to the vagaries of the free market, yet that is what the Government are intent on doing.
Even Conservative Members have asked who will take over this function. Will a private monopoly be created? I should be interested to hear what the hon. Member for Cannock and Burntwood (Mr. Howarth), who said he was a creditor consultant, might say about maintaining competition in the market. What is going to be done to help the small and medium-sized firms that will find it so difficult to survive? I hope that they can be reassured. It would be interesting to hear the defence of this monopoly.
As I am sure the hon. Gentleman knows, the Export Credits Guarantee Department is not the only organisation in this field. There is a private insurance market that is used quite widely by small firms exporting from the United Kingdom. Consequently, there will not be a monopoly. In addition, other firms will have an opportunity to develop. The ECGD has tended to take on the larger projects, but there are facilities, through the projects group, to make such provision. There is not a monopoly, although it is true that one organisation will be in a dominant position.
We are talking about the insurance services market. What is being taken away is the public-sector element, which operates in an area into which the private sector is not prepared to go. That is the danger. In the letter that the hon. Member for Leeds, North-West (Dr. Hampson) and I wrote to The Times, we said that we hoped that, if this arrangement should go through, the Government would look at companies placed in this position and decide not to withdraw completely. I understood from the Minister's introductory speech—perhaps we will hear more in the reply to the debate—that it was accepted that there would still be a need for public-sector involvement in part of the market. I think that that is the point that was being made by the hon. Member for Lancashire, West (Mr. Hind).
Another difficulty will arise with the advent of the single market in 1992. Nothing in the legislation relating to the single market makes it necessary for the Government to take this step. We have heard that the only other Government contemplating such a course of action is the Danish Government. Certainly there is no sign of it in the case of our competitors in the European Community. I say again that, in this regard, there is no need for the Government to be a pathfinder.
At one time, I thought that the whole operation of the ECGD would be destroyed. I am very pleased that the judgment of the Kemp report—that there is no alternative to a Government scheme if our exports are to remain competitive—has been accepted. Privatisation of the insurance group will secure the short-term credit proposals. However, this change is unnecessary and unwanted, and it will not reassure industry. The danger is that it could do great harm to British exports.
As my hon. Friend the Member for Gateshead, East (Ms. Quin) said, we are facing not only the single European market in 1992, which will bring with it more competition, but the collapse of the Soviet bloc and the eastern economy. There are more opportunities, but they will bring with them new uncertainties and risks. We should be encouraging companies to break into these new markets. They will deal with new ventures and new trading records and may be facing an uncertain future. They will have little market expertise, no credit history and therefore no credit rating. I am sorry to say that they will have to do all this against a background of continuing political uncertainty. If we are asking small and medium firms to enter that difficult market, it is incumbent on us to give them every possible support. Because the Bill will not do that, it is wrong to introduce it at this time.
The Gulf crisis proves that the risks for exporters have never been greater. Along with that risk, there are opportunities for exporters, and we are asking only for some help for them. Why should we tell them that they can go into the markets, but must do so with one hand lied behind their backs? We must ask why the Government have, against the advice in the Kemp report and against the lack of demand from exporters who said that they were satisfied with the ECGD, introduced the Bill at this difficult time. We heard no good reason from the Minister for Trade, so we do not know why the Government intend to place a further burden on the back of British industry, which is already reeling because of the difficult recession.
It has been suggested that the Bill has been introduced so as to bring us into line with EC policy, but that is not necessary. We see the difficulties for people entering the private sector underwriting business. There is no need for the Bill, and the exporters have not demanded it. The real reason for it is the Government's ideological and political prejudice. Once more, dogma is taking over from common sense. The Government have a hatred of everything that is in the public sector. They have to go for privatisation, whether or not it is better.
The Government should think again before inflicting this blow on British industry. The Minister for Trade is no longer here, so I ask the Under-Secretary not to stay within the Department and just have dinner with his colleagues. He should go out into the real world and see the difficulties that these companies are facing. He should seek their advice instead of doing what he thinks is best, because the Government think that everything must be privatised. If the Under-Secretary did that, he would come back with different opinions, and opinions different from those expressed by the Minister for Trade. The Prime Minister may have changed, but Government policy has not.
The Minister said the staff at Cardiff would be transferred to the private sector. What happens to the staff who do not want to be transferred? Will they be allowed to remain in Government service? Will they have a career? Will they be able to use their expertise? It is essential that we get some replies to those questions, because these people have done a first-class job, as British industry and exporters have recognised. Anyone who cares about British companies and British exports should reject the Bill. I hope that the House decides to do just that.
I start by declaring my interest in the Hill and Smith group.
I thought that there would be agreement on a wide range of points across the House. I believe that there is that agreement, although the speeches from the two Front Bench spokesmen did not make it apparent. I say this for the simple reason that, as has been said before, we are a trading nation. We are a nation that succeeds or fails economically on its ability to export. Economically, we live or die by the success of our exporting industry. On that at least, we can agree.
An exporting nation must ensure the security of those in the business of exporting goods. It must consider what is necessary in the insurance structures that underpin that. In this day and age, a trading nation cannot thrive without having some structure or infrastructure to take care of the insurance aspect of exports. I am sure that that fact must be common ground across the Floor of the House. In a sense, all that we are talking about is how that is to be achieved.
The single criterion on which one can judge whether the Bill deserves the support of the House is this. Will it make better or will it make worse the position of exporters? Will it improve the security of exporters, in so far as one can have security in such a risky trade? The Bill succeeds or fails on its ability to fulfil that one central point.
When one considers the needs and demands of those who export, it is clear that there are only two options. There can be disagreement about which option to go for, but one has to be chosen. In so far as one can detect a policy from what we heard from the hon. Member for Gateshead, East (Ms. Quin) she appeared to be supporting the first option—maintaining the status quo. I do not say this in an adversarial way, but I am sometimes slightly surprised by the conservatism of Labour Members. They appear to think that, because something has been done —in some ways very successfully—in one way, looking at it in terms of future demands and needs, and because there is a good idea in there trying to break out, that is bad. One of the curious things about our debates is, at times, the radicalism shown by those on the Government Benches and the conservatism shown by those on the Opposition Benches.
I did not defend the status quo. I said that there needed to be changes so that the ECGD could take advantage of the European market, but that I did not like the changes proposed by the Government because I felt that they would weaken, rather than strengthen, us in the face of our European competitors.
It is one thing to say that one is not in favour of the status quo, but that position becomes somewhat less convincing if one takes a very dogmatic attitude to any of the reasonable, feasible proposals which are put forward against it. I shall develop my argument and if the hon. Lady is still not totally convinced, I shall give way again, if necessary.
The only two options that hon. Members need to think about in considering what is the appropriate insurance structure is either to maintain the status quo or something pretty close to it. In other words, we should leave it up to the state or, alternatively, turn it over to the market. The moment one talks about turning this over to the market, one can almost hear Labour Members writhing and taking the view that that lets in laissez-faire politics. To use a much more neutral word in the more neutral times in which we live, it is not so much a question of leaving it to the market; it is a question of leaving it to those who actually know how to handle these things. I am referring to the people with particular expertise and particular interests.
In other words, one is saying that, rather than this being done by the state, it would be better if the whole insurance infrastructure so far as possible were left to the private insurance industry. As a politician and an ex-Minister and as somebody who has worked with civil servants and who has high regard for them, for the most part I prefer to confine politicians and civil servants to those things which politicians and civil servants, by their talent or lack of it, are qualified to do. I do not see it as the role of politicians and civil servants to get involved overly much in matters which could be more properly accommodated by those who actually know how to do them.
If one accepts, as I do, that the right way forward for insurance in terms of exports will for the most part lie in the private sector, then certain considerations and consequences flow from that. One of them must be examined and thought about, although at the end of the day it is not the fundamental criterion to which I referred a moment or two ago. One consequence will be the employment effects for those who are employed within the present structure. I accept that to the hilt. I have a particular interest and I shall refer to that aspect in a moment or two. As I have said, it does not seem to me that the status quo is a viable option. The only sensible option that remains is that which underpins the Bill, which is to privatise this sector of the ECGD and to proceed in that way.
In this debate, the Kemp report has assumed almost the importance of the Bible on the basis that we have all decided to quote it for our own purposes. Inevitably, when dealing with such a report one has more or less to dine a la carte. I do not think that it would be appropriate even in a debate such as this to quote the Kemp report at any great length; it may be that others will wish to do so rather more in extenso. But it is a fair point to make that that report recommended, albeit over a slightly different time scale, what the Government are now doing in this Bill.
Of course, times move on, and the point has already been rightly made that the report was commissioned two years ago. That has implications in terms of the European dimension and I shall touch upon that topic in a moment. It must be said that there is increasing competition in the credit insurance market both in the United Kingdom and in the European community. Obviously that is led and generated by the private sector and we cannot turn our face against it.
We also have to face the fact that in the EC credit insurers are increasingly offering policies which cover both domestic and export credit possibilities. Once again that is a relatively new and increasing factor which must be taken into account. That is a trend which, in my judgment, can only be intensified by the EC directives we have seen of late in the non-life insurance sector of the industry who allow private sector insurers registered in one state to do business in another state in the community, provided that those are private firms and do not operate with state backing.
For the purposes of this debate I do not have to say whether it is a good idea or not, but the fact is that that is the world in which we live and that is what is coming out of Europe. For better or worse, I say, gritting my teeth, that that is something we simply have to live with. That is the fact of life in Europe at the moment. If the insurance firms concerned are state backed as opposed to being backed by private firms, they will be unable to operate. Therefore, I believe that it is unrealistic to look at what the position was in 1988 when the report was first commissioned. We should look at the position in which we find ourselves today. We must face up to that consideration.
Where do we go from here? What other possibilities remain? One point that occurred to me when l was preparing my thoughts for this debate, and it is a point touched upon by the hon. Member for Gateshead, East (Ms. Quin), relates to the possibility of altering the enabling legislation. I understand that that would be possible. It would be feasible, in the short term at least, to alter the legislation so that that section of the ECGD could compete for business other than that to which it is presently confined. In a sense that would be worth while. There would be the possibility of other forms of trade, other business or cross-subsidy. Once that is done we have to face the European dimension and how we cope with it. If we proceed in that way, we may be able to loosen things up in the foreseeable future, but after that we shall have all sorts of problems.
Again reference has been made, and it is a theme that will run through this debate, to article 92 of the treaty of Rome which makes it quite clear, as I understand it, that any insurance agencies which adopt policies which in a sense provide aid and in so doing distort competition are likely to be outlawed. I can understand people making the point that this has not happened yet, but that carries the same sort of conviction as the character who falls out of a 20-storey building and who, as he hurtles past the 18th floor, says, "So far so good."
I ask a question in a genuine thirst for knowledge. The hon. Gentleman said a little earlier in his speech that the fact that Mr. Kemp reported two years ago has some implications for Europe. In fact, Mr. Kemp reported 18 months ago, but that is not a point that I wish to press. Article 92, as I understand it, has not changed in that 18 or 19-month period. So what are these implications which arise from the fact that Mr. Kemp reported some little time ago? I should be interested to know the hon. Gentleman's view.
That is a very fair point, it touches particularly on the European dimension, and I shall move to that almost immediately. The significance of the Kemp report is that it was commissioned in 1988 and published in 1989. There is not much point in working out precisely the month in which a particular event took place. I am saying that when one is dealing with Europe one has to try to keep ahead of the game. One must try to foresee the way in which fashions in Europe are going, rather than finding at the last moment that one has a problem to cope with.
The hon. Gentleman agreed that the question on intervention was reasonable. Will he please answer it? This Government do not have a reputation for trying to stay ahead of developments in Europe on the environment, agriculture, trade and industry or anything else. On this issue, time and again we have been asking Ministers to tell us what are the legislation and regulations concerned and the reasons for jumping in this fashion. Will the hon. Gentleman tell us?
As I said when replying to the more helpful and more thought-out intervention of the hon. and learned Member for Montgomery (Mr. Carlile), the fashions in Europe will change. Fashions do change. Anyone who has ever been involved in considering the social charter will know that once an idea gathers force in Europe, Europe and the European institutions may seem rather slow moving and monolithic. When the process of change starts, it is essential to keep ahead of the game. That was the point that I was making. I said that I would deal with that topic in my own time, and I shall.
I commend my hon. Friend for what he says. He has hit the mark. There is no need to be sidetracked down a legalistic alley by the hon. and learned Member for Montgomery (Mr. Carlile). It is clear from article 92 of the treaty of Rome that the whole drift of competition policy is against Government intervention to distort competition. Therefore, my hon. Friend was right in his analogy of the so-far-so-good victim of a defenestration. As my hon. Friend suggests, were we not now to take account of the fact that European rules will inevitably lead to the point where Government subsidy of this sort of service is outlawed, the Government would be failing in their duty to the very exporters whom the Bill aims to support.
My hon. Friend has it exactly. The point in essence is simply that, if any hon. Member thinks that an article in the treaty of Rome, which could be used to Britain's detriment, would be allowed to lie fallow in Europe, he would not be living in the real world. The point simply illustrates the utter confusion in the minds of Opposition Members. From being violently and rabidly anti-Europe, they have become so communautaire that recently, when I attended an assize held in Rome which was the first conference of EC Parliaments, the Labour delegation voted to accept, virtually without amendment, a communiqué calling for economic and political union. It was not a question of them suddenly deciding to dip their toes in the water. They went from violent opposition to ecstatic surrender.
I thought that the hon. Gentleman would be fairer than to accuse Labour Members in that way on Europe. When the decision was made in the House to go into Europe, Members on both sides were opposed to it, so the hon. Gentleman should be fair about it.
The hon. Gentleman knows the high regard in which I hold him. I would be upset if I thought that, whatever else he thought about my views, he thought that I was being unfair to him. The only point that I was trying to make, in my usual helpful and non-adversarial way, was simply that, if one were looking for a consistent policy on Europe one might be expected to find it in a party which, for all its internal divisions on the subject and for all its changes in emphasis, has at least maintained a consistent position before the electorate. If the hon. Gentleman feels that I was less than fair in making that point, I can understand it.
What alternatives to the ideas put forward in the Bill have come from Opposition Members? We have heard that they think that the status quo could be altered to advantage. We have not heard precisely how, but we know that it must not be altered in this way. But it is difficult to find a consistent policy from Opposition Members. The moment the word privatisation is mentioned it is like red rag to a bull. The Bill was described by the hon. Member for Warrington, North (Mr. Hoyle) as an exercise in dogma, or something like that. It would be difficult to find a more dogmatic and doctrinaire attitude than that of the Opposition who say that they do not like what there is at the moment, that they have no idea how to change it, but that they do know that anything that the Government come up with will be unacceptable.
I said that not only did I think that the Government were making a change for the sake of it, but that the exporters did not want such change. It is not a matter of dogma on our side or on your side. It is you who insist on instituting such a change against the advice of those who use the service.
There are no dogmatic or doctrinaire attitudes on the Conservative Benches, either.
Once again, the Opposition raised the terrible bogey man of what would happen if some foreign country were to take over. It is remarkable that, despite the Opposition's communautaire policy which leads them to go to Rome and, in a spirit of enthusiastic surrender, yield themselves up to European union, the moment that there is a possibility of a foreign company having an interest in Britain, the Opposition are prepared to go to the barricades about it.
Export is a two-way street. The idea that we can have some mad, potty world in which all we have to do is to export our goods, industries and services without making provision for the import of services and goods is unreal. Whether a Dutch or any other company were to have such an interest in a reinsurance firm within the private sector, at the end of the day it would be acting for the reason that business men always will act—to make a profit. It is that word again. The idea that some private company would try to so construct its insurance arrangements as to make it virtually impossible for Britain to export in such a situation to do themselves some good is a marvellous idea, an exercise in a certain type of xenophobia, but at the end of the day it is completely unreal.
The hon. Member for Gateshead, East (Ms. Quin) had a pile of papers a great deal larger than mine and I was waiting for her to read them, but I am happy to say that that did not happen. One of those papers was pink and it occurred to me that it might be today's Financial Times. Picking up a theme that I have heard so many times from the hon. Member for Ashfield (Mr. Haynes) I thought that the hon. Lady, knowing of commentaries which are quite against the position that she has adopted, would bring them to the House, almost as one would do in a court of law, and say that although she has come up with ideas, as one would expect, some of the evidence was against her.
Perhaps the hon. Lady will refer to the Financial Times when she replies instead, but I suspect not, and one can see why.
In today's Financial Times there was a lengthy critique entitled "Breaking Cover at ECGD". Because the paper's name sounds vaguely capitalistic, some might have the idea that it is a rabid tabloid which panders to the worst fantasies of the right of the Conservative party. But that optimistic view, which I should like to think was true, is not borne out. Anyone who has had any acquaintance with the Financial Times, especially on employment matters, and has seen the way in which they are handled, will know that it writes with great knowledge and with some considerable skill, not automatically from a pro-Government point of view.
Today's Financial Times has a number of things to say about the Bill and what our attitude to it should be. It picks up exactly the point made by the hon. and learned Member for Montgomery a few moments ago. It starts by reviewing at some length the sort of difficulties in and objections to the Bill. It makes the point that the Kemp report, if not all things to all men, certainly has something for everybody. But it then goes on to say:
None of these is ground for abandoning a sale whose original motive remains valid.
Without new freedoms ECGD will lose ground to UK and continental competitors.
That is exactly right. The Financial Times has no axe to grind. That is its reading of the situation. It goes on:
Admittedly, privatisation has not yet been forced on the government by the European Commission. Simply changing ECGD's charter might allow it scope to compete in the single market.
Then it comes to a point which is obvious to anybody who has had any contact with Europe, whether within or without government, in terms of the real world. It says:
But Brussels is looking much more closely at subsidies implicit in export credit insurance. Privatisation is much the cleanest approach.
That is what is being said. That is not the situation that existed 10 years ago, or even five years ago. That is what the Financial Times says today about this measure—that privatisation is by far the cleanest approach; that we should not take comfort from the fact that the European Community has not done it yet; and, most important of all, we should recognise there are difficulties but we should not make the mistake of thinking that those difficulties are insurmountable.
On employment prospects, I was extremely pleased to see that the duty regulations are there so that provisions relating to redundancy will be continued and that there will be continuity of employment. Some people may claim that that is the minimum requirement, but there is not just the standard protection of the regulations; there is also protection for the enhanced redundancy payment as well. The point has been made very forcefully that transfer will have to be voluntary; that there will be no compulsion. The terms and conditions will be at least as good. Clause 9 provides quite specifically for the Transfer of Undertakings (Protection of Employment) Regulations in the way that I have described.
It could be asked whether that gives total protection. Could the Minister or anyone else absolutely guarantee that the position of the civil servants who transfer will be precisely the same so that their jobs are secure? Of course not. Surely we have moved away, have we not, from the idea that there is any such thing as total security in employment?
If you, Mr. Deputy Speaker, were working in the ECGD and were concerned about your job prospects, would you feel safer in a structure which takes account of the changing times and of the fact that one cannot continue in the old ways for ever, but at the same time says that as far as possible the previous conditions enjoyed in the civil service regime will be replicated under the new regime? That is not a guarantee because there is no such thing, but it is really the very best deal that can be obtained in the circumstances.
Yes, there can be problems in setting up a structure in this way. As in any legislation, one is trying to look into the future on the basis of the best information that one can get. If we look at what is happening in Europe today and at what exporters need and if we look at the Kemp report in the light of where we are now, not back in 1988, we realise that this Bill and the policies in it are the right ones for our exports. That is why the House should support this Bill.
In the part of Wales where I live, it is normal at funerals to spend a little time praising the deceased. Therefore, I think it is right to start my speech by saying that the Export Credits Guarantee Department has done an excellent job for many years and that many industrialists, and other people who are beginning their business lives as entrepreneurs building up manufacturing industries, view with some alarm the change that they see taking place, the consequences of which they are unsure of. Change for change's sake cannot be justified; but if the change is to produce a more beneficial export environment for potential exporters, the Government will have succeeded in their aims, whether these are brought about by dogma or on empirical grounds.
It is a bit of a mixed bag, because part of the ECGD will continue to survive. This is a form of medicine that we have yet to apply to human beings. Part of it is possibly going to some other place, and the hon. Member has a particular interest in that place, which he has frankly declared; that is probably why he thinks it is better.
This Bill emanates from a Government Department which has become renowned for the political and economic dryness of its Ministers. They are dry and proud of it—drier than those in any other Government Department. Indeed, it is a Department in which those copies of the former Prime Minister's Bruges speech which are not framed are heavily dog-eared through repeated reading, in an effort to check that what is being done fulfils the requirements of "Brugesism".
It follows that this anticipatory obedience which the Department of Trade and Industry wants to show to a possible future interpretation of article 92 of the treaty of Rome is a little uncharacteristic. I have been trying to think of an analogy, and the best I can come up with is that of the footballer who rushes up to the referee during the first half and says, "Excuse me, ref, but I anticipate committing a professional foul in the second half, so would you please show me the yellow card now to try to stop me doing it then?"
That is certainly not a characteristic approach by this Government and one is tempted to the view that, although dogma may sometimes be logical—it may be the best basis for a decision if it is right—there is nonetheless more than a suspicion of dogma in this early progress by the Government to privatising the insurance services group of ECGD.
The hon. and learned Gentleman referred to the attitude to Europe of Ministers in the Department of Trade and Industry. As the only wet ever to have survived in the Department—and that was not for long —I cannot comment on that. If there is a cynicism among some people in this country about Europe and the difference between what is said and what is done in Europe, it is precisely because in Britain it is clear that progress towards the single market, which is the single greatest manifestation of something practical that can happen in Europe, is much further advanced than elsewhere, where there are many more interventions by state organisations than in the United Kingdom.
While I do not want to interrupt the flow of the hon. and learned Gentleman's argument or his interest in Gazza analogies, may I suggest that it is entirely proper that this Government should now be addressing the question of anticipatory legislation in the right spirit—that is, believing in the single market and wanting to see it completed as soon as possible.
As ever, the hon. Member for Epping Forest (Mr. Norris) makes a very interesting point. However, I am slightly puzzled by the logical analysis he makes, because it seems to me that, in the decision they have taken in this Bill, the Government are running the risk of putting British potential exporters at a disadvantage compared with some of their European competitors, whereas in some other respects, such as going enthusiastically for 1992, they are trying to put British industry at an advantage compared with some other countries which may in certain respects have been a little slow.
I believe that it is contradictory to the future practical prospects of the export credit guarantee systems, and of exporters, to privatise the insurance services in this way and at this stage. It would have been far better for detailed discussions to take place within the European Community, so that we would have a clear picture of the way in which other member states were likely to react to the possible breach—it is only a possible breach—of article 92.
The phrase "level playing field" has already been mentioned often in this debate. It is important that our exporters should not find that, as a result of a Government decision the motive for which is privatisation, they are at a disadvantage because other countries have not only failed to move as quickly towards obedience to the interpretation of article 92 in relation to 1992, but have no intention whatsoever of doing so. Our anticipatory obedience to article 92 is a clear potential disadvantage for British exporters.
Insurance—particularly export credit insurance, which is a form of factoring—is a high-risk business, as I am sure the hon. Member for Cannock and Burntwood (Mr. Howarth) who declared an interest in Trade Indemnity, would readily acknowledge. It is therefore a business in which the initial profit discount, or premium, must be fairly high. There is a danger that a company in the private sector will be forced in certain transactions to set its premiums so high that smaller companies will be unable to manufacture goods or to provide services and sell them at the net price that they will receive.
That is not a criticism of companies such as Trade Indemnity. In the ordinary commercial sphere, they provide an important service—for example, in respect of straightforward commercial factoring—but it is one generally taken up by companies that are in the growth phase of their existence and not in their early stages, nor in their later stages either.
The hon. and learned Gentleman makes a fair point about a matter of some concern to small and medium-sized businesses. However, he may agree that an important point of principle is at issue in respect of reinsurance. The strength of reinsurance is the test of availability of cover. Those who oppose the Bill argue that the strength of reinsurance provided by the Government's bottomless pit—that is, the taxpayer—represents strong reinsurance cover and that it has to be demonstrated that similar cover will be available in future.
The hon. Gentleman makes an important and valid point, and it is well taken. However, at this stage in my argument I am more concerned about the initial situation, when a potential exporter tries to obtain a guarantee. If I were a small manufacturer of goods for which I saw export potential in, for example, a South American country, I would be concerned not so much about the reinsurance aspect as about the amount of money that either ECGD or Trade Indemnity, or whoever, will take off my price, and how much profit I will be left with at the end of the day. I believe that there is a genuine fear—which I hope will prove unjustified—that small companies will find it difficult to trade in exports to risk countries if they are confronted with the high premiums which I anticipate.
The Kemp report did not recommend that the Government should aspire to withdrawing their support completely. It stated:
This would be a very high risk policy and would be strongly opposed by industry. It is unlikely that the private sector would adequately supply cover against political risk, for small businesses, or provide supporting advice in the way in which ECGD does at present.
That shortfall, foreseen by Mr. Kemp, will remain; and will continue to exist as a consequence of the Government's decision to privatise in a hurry.
When the Minister replies, perhaps he will explain why the Government decided to reject the option in Mr. Kemp's third recommendation, that four to five years should be allowed before introducing private capital. Ministerial statements have developed in response to that recommendation. When the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was Secretary of State for Trade and Industry, he spoke of
converting insurance services into a company and the injection of private capital quickly thereafter.
That was something closer to Mr. Kemp's third option than the measure now before us.
By 26 July last year, the then Minister and present Secretary of State said in a written answer:
I have decided that the short-term business of ECGD should be sold by means of a competition
and that the sale should be completed
as soon as possible thereafter."—[Official Report, 26 July 1990; Vol. 177, c. 410.]
That is, after April 1991. It would be genuinely helpful to know why the Government decided to accelerate that process in a way that is inconsistent with both the objective and the carefully researched views expressed by Kemp.
That action is not consistent either with the wishes of British commerce and industry. Earlier, there was a contentious reference to a report by the credit insurance brokers Sedgwick James, the results of which were summarised in the Financial Times on 10 October 1990. So that the Minister will not leap to his feet and savage me, I concede immediately that only 55 replies were received to the 92 copies of the questionnaire that were distributed —which, on the face of it, is a very small sample.
However, as the hon. Member for Gateshead, East (Ms. Quin) fairly pointed out, although some of those invited to reply were large-scale exporters, others were organisations representing large numbers of exporters in general. Bodies such as the London chamber of commerce carefully collate and cautiously analyse their members' views before expressing anything that could be remotely described as a collective opinion. Although I concede the sparsity of the sample in that survey, I hope that the Minister will recognise that at least the opinions given were informed opinions, based on careful consideration of the issues.
I should add that it is the best evidence we have. I am not aware of any other survey, or of the Government having sought to collate the type of information carefully obtained by Sedgwick James. Of the respondents to that survey, 71 per cent. said that they would review their business strategy if British export credit facilities ceased to be competitive with those of other countries, and nearly half—and this is a shocking feature—replied that they would switch productive investment and procurement to other countries having better export credit arrangements. Some companies even said that they would cease to export to certain markets, which is understandable.
This hasty legislation has been cobbled together to produce a piece of privatisation of a less contentious nature than others, one that would not attract so much public notice, to fill part of a thinnish parliamentary timetable. I suggest that at best the Bill is premature, and that at worst it is, on its merits, wrong.
An hour ago, I thought for a moment that, for the first time in 17 years, I would be called to speak before 6 o'clock. However, right hon. and hon. Members have been so gentlemanly and polite today in allowing many interventions that the time has moved on. Nevertheless, I am glad to be of assistance to the Treasury Bench in making an early and extended speech, rather than a late and short or squeezed contribution. I hope that my hon. Friends on the Treasury Bench will not take the hint and pursue it in Committee.
First, I must declare an interest as I am a consultant for a company which is an adviser to GEC.
Some of my remarks will reinforce those made by my right hon. Friend the Member for Chertsey and Walton (Sir G. Pattie). The hon. Member for Warrington, North (Mr. Hoyle) and I wrote a letter to The Times, as we are both members of the Select Committee on Trade and Industry. However, I think that our views diverge from there on, because he made certain remarks about the economic cycle, whereas it is my view that, if there is a complaint to be made, it is that the Bill should have been put before the House a year ago during the 1989–90 session —as indeed it would have been, but for a somewhat unseemly dispute between officials at the Treasury and at the Department of Trade and Industry.
I would certainly argue in favour of the merits of that part of the Bill, on the basis of the evidence heard by the Select Committee and contained in the Kemp report. I was impressed that the Kemp report did not commit itself absolutely to a long period as a Government holding company before bringing in private money. Other options are considered and some of the evidence, for example that from Rolls-Royce, suggested that the ECGD had become more commercially oriented in recent years. As a result, there had been positive benefits and it was putting together more imaginative packages. Confiscation insurance was cited as an example. The evidence also suggested that privatisation would maintain progress, at a time when there is growing demand in Europe. That is what it is all about. We were unnecessarily restricting one of our major financial industries, at a time when the European financial services market was growing.
I fully support privatisation. Nevertheless, as was pointed out in the Financial Times, British industry is "whingeing" about it. Let me put it another way, it is not at all happy about some of the other aspects; that is where I agree with my right hon. Friend the Member for Chertsey and Walton. GEC is the largest client of the ECGD, spending more than £1 billion per year in insurance. There are about 12,000 accounts. However, ECGD is not really about insurance. It has the single statutory duty of encouraging British exports, and it is in that context that British industry is expressing its unhappiness, because we have never needed exports more than we need them now. Competition has never been more fierce and there have never been such opportunities, especially those in eastern Europe at present.
That being said, if one is not careful one can come to conclusions which do not stand up, by assuming that other countries always do things better, and more generously than we do. For example, if one studies some of the evidence to the Committee about the situation in eastern Europe, it does not show that the German or Italian credit agencies were offering anything other than short-term cover, on much the same terms as the ECGD, in the Polish market.
As stated in the letter which I signed with the hon. Member for Warrington, North, my first criticism is the lack of detail during the sale, both for potential buyers and for those hon. Members who take an interest. One could argue that more information would have been available from a private company than has been available from a state operation.
A more central criticism—I am seeking further reassurance about this—is how the high political risk markets will be handled. I understood my hon. Friend the Minister, in his opening remarks, to be giving a key reassurance that there would be a period during which the new privatised company would gain reinsurance from the retained ECGD Government operation. British industry will want to know our intentions as regards the length of that period. Will it be three years, or will it be abandoned in less time? Could it run beyond three years? I think that British industry will take the view that there should not be an artificially imposed time limit.
Many people think that the private sector would not be able to pick up suitable premiums in many difficult political markets to enable smaller and medium-sized companies to get the right price for their products. Therefore, we should not abandon that principle of reinsurance, and I recommend to my hon. Friend the Under-Secretary that we keep the situation under review and wait to see at what stage, if any, in the near future the EC produces a directive. If, as the years go by, industry can show that there remains a real need for it, we should continue to supply back-up.
There is special concern about that aspect and the Guardian newspaper released some Departmental papers about it. The Treasury wrote to the Secretary of State's private secretary as follows:
As for the short-term business, the Chief Secretary is very concerned about your Secretary of State's proposals for continuing large-scale Government support for the privatised company
Anyone reading that will realise that those remarks take us directly back to the zero option. Has the Treasury given up the zero option proposals? We all assumed that it had given them up for long-term projects, but that Treasury mentality seems to remain. That sort of evidence of the Government's intentions is what has been disturbing British business. We should wait and see how the situation develops.
Some of the gentlemen who gave evidence to the Committee on 4 July 1990, when asked what the ECGD's premium rates were like compared with those of our competitor countries, replied that the ECGD rates are sometimes higher by a factor of two, and occasionally more. If that situation is maintained, there will be be a level playing field.
As the letter which the hon. Member for Warrington, North and I wrote to The Times yesterday states, it is vital that we give an assurance to British industry that, so long as the playing fields are not even, we will use some mechanism—the reinsurance aspects of the privatised company—to enable our companies, especially small and medium-sized businesses, to have access to those markets. That is what the ECGD has always been about. It was created so that we could lower premiums and establish level playing fields.
GEC sent some comments to members of the Select Committee last week, in which it stated:
There is no evidence that our overseas competitors are being subjected to the same changes through a withdrawal of Government support for exports.
So, will Ministers give a commitment today that, until such time as there is evidence of similar changes for our overseas competitors, there will be a commitment to maintain support in political high-risk markets? As the GEC document points out, if one does not
Whereas Government has a role in trying to boost export activity, a commercial agency
primarily has as its goal
the maximisation of its returns",
and therefore is either not likely to take the risk of insurance or would substantially raise its premiums. That is a major concern.
As regards the Treasury's attitude to long-term projects, page 98 of the Kemp report states:
As there is absolutely no prospect of a world free market, without interventions or support by governments, being established, the use of export credit agencies by competitors, within the scope of the rules of the OECD Consensus, is a fact we must take into account when deciding our own policy".
Will my hon. Friend the Minister give a complete commitment that that view is Government policy, and that no change is planned?
If we are not careful, the Treasury's thinking on industrial policy will prove to be the worst form of "short-termism" that British industry faces. The Treasury memorandum on the ECGD caused great alarm in the Select Committee, as we said in our report. According to the memorandum, the reason for the lack of private sector interest in export credit insurance was
the existence of Government schemes. The withdrawal of such schemes should stimulate the introduction of private sector alternatives".
I do not accept that that has been proved. The memorandum also stated:
The withdrawal of subsidies will have 'a beneficial effect upon the rest of the economy which is relieved of the burden of paying for them."'
We encounter that sort of attitude all too often. Understandably, every Treasury has an intrinsic dislike of subsidies, and of any assistance that involves taxpayers' money. Notwithstanding that, all Exchequers in all industrialised nations provide subsidies to some extent, as they always have done in this country.
My hon. Friend is right, of course, but surely our objective should be to get rid of such subsidies across the board, so that taxpayers throughout Europe can stop financing the export of goods for which no one can pay.
That is precisely my point. I have urged repeatedly that we should not proceed too far in the present direction. Although I accept that a privatised company will need some assistance in certain markets until the grand design has been achieved, no one who has examined the position sees any evidence that we are anywhere near that stage. I represent a textile-producing area, and I have come across the same attitude in that context—the belief that, if textile subsidies are withdrawn, consumers will instinctively buy imports because they are cheaper, and will therefore have more money in their pockets to boost other aspects of the British economy. That view is contained in the Silberston report.
The answer is that, although consumers might spend in other sectors and increase growth rates in the new service industries in the south-east, they would not necessarily spend in a way that would create or maintain jobs in the north. What that short-sighted, short-termist attitude overlooks is the "cascade effect": if the major players in the game are not assisted, all the small sub-contractors and suppliers will suffer as well. It was absurd bottom-line thinking on the part of the Treasury to predict a short-term loss of £1·5 billion per year as a result of the ending of long-term project help. The Treasury did not take into account the way in which major companies enter new markets, open them up and establish longer-term business contacts for both themselves and their suppliers.
Although I welcome unreservedly the privatisation of the short-term insurance services group, British industry undoubtedly needs reassurance that the remaining ECGD will continue to assist the new privatised company in especially politically difficult markets. We need reassurance, too, about Treasury thinking on the long-term project group. Above all, we need to create a climate in which British industry feels that it is wanted and encouraged by Government, rather than an alarmist state of mind. I believe that the British Treasury has gained far too strong a position in industrial policy making, and that that is the reason for the reaction of British industry.
Let me join other hon. Members in declaring an interest. I act as parliamentary consultant to the National Union of Civil and Public Servants, many of whose members will be directly affected by the privatisation. I am proud of my association with the union, but, naturally, I receive a consultancy fee. I assure the House that I donate the whole of that fee to my local Labour party in Dundee. If any Conservative Members feel particularly guilty about any consultancy fees that they may receive, I recommend the same course to them. I will give them the name and address of the treasurer of my local party; we need the money more than they do.
At least one faction of the ruling Conservative party has long nourished an obsession with privatisation. The faction to which I refer is, of course, the No Turning Back group—or, as I heard a Conservative Member describe it, the No Coming Back group; no coming back after the next general election. The tragedy is that the supporters of that faction have risen to the highest levels in the present Government: I understand that the Secretary of State for Trade and Industry is an erstwhile supporter. Indeed, he seems to support it still, for he has brought to the Department not only his own obsession with privatisation but his No Turning Back fellow-traveller, the hon. Member for Gainsborough and Horncastle (Mr. Leigh), who is now Parliamentary Under-Secretary of State for Industry and Consumer Affairs.
What I know of the background of both men convinces me that the only rationale behind the Bill is that privatisation obsession. Why else should it not only unite Opposition Members—not always an easy task—but attract to the same anti-Bill coalition representatives of the trade unions, the Confederation of British Industry, the British Exporters Association and many chambers of commerce? No doubt some Conservative Members find that an even more unlikely coalition than the one that has formed in the Gulf over the past few weeks, but I can tell them that its members had been united by the Government's failure to provide any justification for the measures contained in the Bill.
I know that the hon. Gentleman did not intend to mislead the House when he included the CBI in his list of the Bill's opponents. However, according to a CBI brief which I have here, that organisation supports the Bill in principle. Perhaps the hon. Gentleman has information that he has not shared with the rest of the House—or was he himself misled?
Not only is this information that I have not shared with the House; it is information culled from the newspapers, which were reporting the CBI's opposition to the Bill long before it came to the House.
Conservative Members will always try to point to a consistency of purpose in the Government, which they will claim has led logically to this Bill. They will cite the launching of the "next steps" agencies initiative and to the Kemp report, which arose from that initiative and which recommended the privatisation. One hon. Member even described it as a bible for hon. Members. It has been asked —rightly—why Kemp's advice has been ignored. Kemp recommended that a state-owned company be created for a period of three to five years before privatisation.
Perhaps I may be of some assistance to my hon. Friend the Member for Dundee, East (Mr. McAllion) who has referred to the CBI. The hon. Member for Cannock and Burntwood (Mr. Howarth) appears to feel that the CBI was supportive of the principles of the Bill, but the CBI also called for
a statement that the Government will continue to provide support for exporters on terms at least comparable to those afforded to their international competitors, including that support provided in 'the national interest'".
That goes to the heart of our criticisms of the Bill.
My hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael) is right: it is that kind of support which is completely missing. This explains the united coalition in this country against the Bill arid the Government's proposals.
Kemp recommended that in the first stage there should be a state-owned company for at least three to five years before moving on to privatisation, and so far no convincing answer has come from the Government Benches to the questions raised by Opposition Members. We can, however, be certain that it has something to do with the Government's determination to rush the Bill through the House before the next election and before the people put them out of office and this Bill out of existence.
One of the key arguments has been the assertion that the requirements of the single market in 1992 will exclude state credit agencies from the insurance market. We are also told that increased competition within the single market requires a level playing field on which private sector insurance will not be placed at a disadvantage to public sector insurance. Both these arguments are no more than free market dogma, and an uninformed dogma at that.
First, there is no evidence whatsoever that the European Community is about to introduce, or even intends in the short to medium-term to introduce, legislation that would directly affect the operation of the ECGD. The Kemp report itself reached that conclusion. Hon. Members on the Government Benches have said that this development is inevitable, and one of them referred to a report in the Financial Times; but they are very selective when they refer to reports in the Financial Times. If they referred to a report on 10 January they would find that the Government line that private reinsurers would quickly step in to fill the gap was hotly disputed in the market place, where withdrawal of support was seen as unilateral export disarmament. That is what the Financial Times said recently, yet none of the hon. Members on the Government Benches have referred to that kind of argument.
In the absence of any substantial evidence to the contrary, the Government have a clear responsibility to explain why they are rushing this Bill through even before they know that there will be any such legislation or what form it may take. Those of us who are more cynical might suggest that not only is it expedient to rush the Bill through before a general election but that there is no better time than now to try and rush it through when the country's time and the attention is elsewhere and when the eyes of the media are diverted; there is no better time to slip through this unloved and shoddy measure in the hope that it will receive scant attention from anyone outside the House.
Let us take the question of the level playing field. Level for whom? Certainly not for British exporters who will be almost alone in having no kind of Government promotion for trade and exports compared with their European competitors and in having no public support for high-risk and politically difficult markets. Our exporters will thereby be weakened in comparison with exporters elsewhere in Europe. The Government justify this weakening of our exporters' position by reference to a level playing field and some imaginary state of capitalist perfection where we have a wholly free and unregulated market. It exists only in the minds of the No Turning Back group, but it is on the point of doing serious damage to our exports, to our balance of trade and to our national interest.
Another real cause for concern is the impact on ECGD itself and on its work force, who for more than 70 years have provided an invaluable service to exporters in this country. They have rightly been described as the world's most experienced credit insurers. They have given something like £250 billion in support to United Kingdom exporters, and they assist some 6,000 exporters every year. They have an insight into the problems facing exporters which is unrivalled and an expertise that underpins the export drives on which this country's future depends, and yet they are now to be subjected to break-up, privatisation and massive changes—changes unsolicited by them, about which they have not been consulted by Government and which I have no doubt they wholly oppose.
Earlier in the debate, an hon. Member said that this was a case of radicalism versus the status quo. There is radicalism and radicalism. There is the kind which is change for the worse and the kind which is change for the better. The radicalism advocated by hon. Members on the Government Benches is change for the worse, and that is why Opposition Members oppose the measure tonight. Perhaps in replying to the debate the Minister will tell us what support for the Bill exists among the experts in the ECGD themselves and how, if they had the vote, they would cast it at the end of the debate, for or against this particular measure.
What is certain is that the Government's proposals have met with almost universal hostility from those who represent the ECGD work force—the trade unions, who carried out a very successful lobby of the House today. They have raised a whole series of legitimate questions and worries with the Government to which they have so far had no satisfactory answers.
The Minister will know that the privatisation of the insurance services group will affect some 600 civil servants based not only in Cardiff but in the regional network. When it comes to redundancies, they want to know if at any stage there will be compulsory redundancies after the concern has been privatised. I understand that some in the regional network have already been threatened with redundancy, even before the Bill came before the House tonight. Will the Minister give a commitment to investigate these allegations of redundancy threats in the regional network and report at least to the Committee, if not to the whole House, the outcome of those investigations?
I also want to know what guarantees the Minister will give that privatisation now will not mean compulsory redundancies for the work force at some future date.
There is also the question of the terms and conditions of workers in a privatised concern. In opening the debate the Minister referred to the TUPE regulations of 1981 which require the offer by the purchaser of an overall employment package which is no worse than the civil service's employment package. I think he used the term "broadly comparable". What do "broadly comparable" and "no worse" mean? They are open to interpretation. I suggest to the Minister that the employers and the Government are in a better position to interpret what these words mean than are the employees.
Moreover, what is not open to interpretation and what has been confirmed by the Minister earlier is that pensions will be excluded from the TUPE regulations: workers who have contributed throughout their lives to an index-linked pension scheme, who have paid for them, are to have that agreed scheme stolen from them by Government diktat. The Minister says that this is fair. What guarantees has he given? The statement made by the Minister at the opening of the debate was less than clear. Does he guarantee that exactly the same pension rights will be available to the workers after privatisation as before privatisation; exactly the same kind of index-linked pension scheme?
Will the Minister confirm for the benefit of the House that the TUPE regulations cover only the position on day one of the transfer, and that on day two the new employer will be free to make whatever changes he wants to the terms and conditions of employment of the workers he has taken over?
Will the Minister further confirm that the transfer from the civil service to the new company will continue to be on a voluntary basis or say whether there will be a shift to compulsion? I understand that it is voluntary at present, but if insufficient people are convinced about the new company will the Government conscript civil servants at ECGD into the new private sector company that replaces it? If they do so, will he confirm that those who transfer will have exactly the same rights relative to their civil service status as they have at the moment? The Minister said that he would secure existing rights to redundancy and so on, but what about future rights? Will they be guaranteed? Will rights in the privatised concern be the same as they were in the public sector? I hope that the Minister addresses those points in his reply to the debate.
Will the Minister consider why the CBI and the British Exporters Association have lobbied against the measure? A privatised insurance group will not provide credit and insurance in high risk markets, particularly where there is political instability. The ECGD works under a break-even requirement on a yearly basis, but after privatisation the position will change and it will be required to make a profit. There will be a new balance between profit and risk taking, and risk taking will be the loser. There will be less risk taking after privatisation. Fewer exports will be assisted and fewer markets will be won. The national position of the United Kingdom will be weakened substantially.
Future options for export credits will be bleak. Either we will have a United Kingdom monopoly, most likely under trade indemnity, with higher premiums and reduced support, particularly in difficult markets, or there will be a foreign takeover, with British companies at a disadvantage, particularly in relation to companies from the home country of the foreign predator. That is a bleak prospect. We have already seen a reduction in support for trade fairs, the introduction of export charges and the withdrawal of cover from certain countries. In the case of a firm in my constituency recently, credit cover for Kenya was withdrawn. Now we have the creation of a so-called level playing field which will leave British exporters at a clear disadvantage.
In presenting the Bill, the Minister summed up by saying that its sole aim was to ensure the safeguarding of vital export services. It is precisely those services which would be put at risk by the Bill. For that incompetence and lack of understanding, the Government deserve to be put at risk. Their stupidity will play a significant part in ensuring that, when eventually they face the people, they will meet certain defeat.
I am grateful to you, Madam Deputy Speaker, for calling me so early in this fascinating debate. I must follow the hon. Member for Dundee, East (Mr. McAllion) by declaring an interest. My interest is twofold—first, as director of a small to medium-sized manufacturing company which exports, and secondly, as a parliamentary adviser to a major firm of international contractors who have a distinct interest in the measure.
In principle, I have no great hang-ups about the part of the Bill relating to the privatisation of the insurance services group. From my personal experience, with my small company hat on, I have not had the greatest satisfaction in dealings with ECGD in the past. I have found it bureaucratic and slow. The hon. and learned Member for Montgomery (Mr. Carlile) put his finger on it when he referred to decisions where we found that the cost of market development in overseas countries, especially where there was a high finance risk, coupled with the cost of the premium and the price that we could get for the product, made the business unattractive. Therefore, we found ourselves inclined to leave aside those parts of the world where finance was difficult or where we would have to undertake excessive market development, with nobody else to do it for us. As a consequence, our exporting activities were inhibited. We did not achieve anything like as much of the export activity that we would all have liked. We felt it safer to do it the other way.
I entreat my right hon. and hon. Friends, when addressing the question of how to divest Government of the operation after the passage of the Bill, to make certain that there is strong and free competition. That is very important. The attitude change which will come about as a consequence of the Bill could be of enormous help to small and medium-sized manufacturing companies such as I am involved with. We have found after previous privatisations that once the change in structure has been made, there are new dimensions of thought. The establishment of clear competitiveness between two or more suppliers could bring out new dimensions of thinking on export credits guarantee. I should like to see that sphere opened up.
I should like to address the remainder of my remarks to the serious business of project exporting industry. My hon. Friend, in opening the debate, remarked upon the welcome that had been received from those involved in exporting. That is not the uninhibited joy which has been expressed to me. In an article in the Financial Times on 15 January 1991, the world trade editor, Peter Montagnon said:
it has sparked deep worries among exporters that stiff terms for export credit insurance would make them uncompetitive on world markets.
The article underlines all the way through the representations that I have had. People have come back to me asking why, within the portfolio management system which is being put forward, we have got for project group business the most expensive premium rate structure of all the major exporting countries. I understand that this is ECGD's estimation of the position. I should like the Minister to confirm that to me in his reply, because it is fundamental that it should be appreciated.
My hon. Friend the Minister will surely realise that if that is the case, as I believe it is, it is putting United Kingdom exporters at a significant disadvantage and, indeed, diverting manufacturing activity away from this country. If it is felt that we do not provide the sort of assistance being provided by others, the major exporting companies in project business will look to overseas arrangements which will bypass this country. It worries me that that may happen.
France and Germany were mentioned by the hon. Member for Gateshead, East (Ms. Quin). The United Kingdom is pitching in the same marketplace, an incredibly competitive marketplace, in third-world countries. Both France and Germany charge lower premium rates. Significantly, in EC terms, neither France nor Germany publishes figures or accounts in the same way as we do. So, in effect, there is a hidden subsidy to the disadvantage of the United Kingdom. Looking at the drive towards Europeanisation, harmonisation and the political unity which is being urged upon us by France in particular, I cannot help but feel that such activity has to be ironed out of the system. We have to be careful that we do not go along with a situation in which France, Germany and others give more favourable rates, particularly as I gather that we are the most expensive.
If my hon. Friend's answer is a recognition of the premium position so far as the portfolio management system is concerned, perhaps he will tell the House why the Government are apparently deliberately withdrawing support for British exporters, in contrast with the very positive attitude of the French, and indeed the rest of the world, who are in there pitching for these third-world contracts that are so difficult to get? I read with great interest about the stone-walling that went on in another place a week ago by the Minister for Industry when he was challenged on this very point. I have no doubt that his brief said that he should not answer the question but I should be grateful if my hon. Friend would answer it tonight. One cannot help feeling that possibly the Government want to prevent United Kingdom project exporters from exporting to third-world countries. I cannot believe that that is the case, but it is the impression that one is left with all the time.
I want to refer to the written answer given to my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) on 14 January. I must confess that I am glad that there has been a week's delay on this debate, which has given us time to digest things a bit. I note with interest that the Government are taking measures to press in international forums for other export credit agencies to charge more economic premium rates. The exporting industry, obviously, is not adverse to this. All it wants—we have heard this expression before—is a level playing field, and I can understand that. It does not want the Government to move at a pace which places the United Kingdom project exporting industry at a competitive disadvantage.
So, may we have some positive information from my hon. Friend in winding up tonight relating to the steps that he is taking? Which forums are we pressing? What is the timetable, the expected completion? The hon. Member for Dundee, East (Mr. McAllion) said that no one on the Government side had mentioned unilateral disarmament. He had the fortune to be slightly ahead of me rather than after me.
I have to remark that, while in another context the Government have not been strong advocates of unilateral disarmament, in the written answer of 14 January there is a clear statement that this is what we are about in this context. It is unilateral disarmament in that we are saying that we will seek a level playing field; we are unhappy with the premium rates that the other countries are charging so we will jack ours up to minimise the risk; we are sorry about the effect that it will have on all of them, but they will have to live with it. So can we have a little consistency by my party and my hon. Friends in terms of disarmament? I am a keen advocate of multilateral disarmament as far as arms are concerned, and I should like to be consistent.
Can we be told what timetable my hon. Friend envisages for achieving this level playing field, which will be welcomed by industry? Furthermore, what review mechanism does he have for assessing the consequences of this unilateralism in terms of business opportunity lost? If I am wrong and there is no business loss as a consequence, that is fine; that clears the ground; but we need some assurance that there is a mechanism for assessing it.
In his written answer my hon. Friend makes the point:
It is not the ECGD's policy to disclose details of the amount of cover available for individual markets; exporters should contact the ECGD to ascertain the cover position in respect of contracts they are currently processing."—[Official Report, 14 January 1991; Vol. 183, c. 359.]
That rang alarm bells with me. What speed of response does my hon. Friend expect when a project exporter with a possible bid in mind approaches ECGD to ascertain the possibility of cover? I am talking about the major project exporting business and it is an important point, since companies have to be able to work out their longer-term forward strategy and tendering is a long and expensive business. My hon. Friend will know that project exporting is difficult and tendering costs are high, while success rates are low. So each success has to bear the cost of all the failed bids.
Once a breakthrough has been achieved in a particular market, it is vital to be able to build on that success with follow-up orders. An over-restrictive application of portfolio management system principles could mean no cover for those follow-up orders precisely because of that initial success—an unsustainably wasteful way of doing business.
We are talking in terms of a tender time of, first, three to 12 months to identify an opportunity, pursue it and pre-qualify to tender. It is an expensive process; it means a lot of money and a lot of work up front. it probably has to be pursued against the strategy that I have mentioned in respect of a particular country as well. We have a tender period of three months, followed by the adjudication and subsequent negotiation process before contract award, which takes six to 12 months, or even more. So we are talking about a time span of at least 12 months, and probably 24 months or even more, before a contract comes to fruition.
So could a company which established when it started the process that ECGD cover was okay for the country and available, therefore, in principle, and even that the amount involved was in the ball park, be told when it moved into the adjudication phase or the final negotiation phase that there was nothing left in the kitty, that a major contract had been given the previous week to another company in another business relating to that country and therefore its effort, time and money had been wasted? That is very important because it affects the confidence with which people attack the process of achieving export business in the project field in third-world countries.
I should like to ask my hon. Friend how the Government see the portfolio being constructed and developed. It is said in the release that this is really a matter for the ECGD to look after, but I think it is helpful to know how it will be structured. As I understand it—I shall be grateful to be corrected if I am wrong—the portfolio is spread on the basis of 25 per cent. being defence-related, 25 per cent. being aid-associated, roughly 25 per cent. being Airbus-related—very heavy—and 25 per cent. being routine commercial projects. Airbus and defence look like being locked in, which leaves the aid and commercial sectors open to squeeze, and there was a mention of the Treasury possibly seeking to exercise influence towards a zero option in terms of funding.
Both those points have important connotations, in the short term for employment and in the longer term for United Kingdom national interests abroad in terms of influence, future business and the whole long-term approach to things.
So I would like from my hon. Friend an assurance that there is a continued commitment to exporting industry working in third-world arenas and not making the combination of premium increases and market capacity restrictions so severe that United Kingdom exporters will be unable to compete and, as a consequence, will achieve little or no business.
Lastly, a practical potential result of getting the parameters of the portfolio management system wrong will be to encourage United Kingdom based project importers to look even more towards co-operation with overseas partners. I have mentioned this before. These joint operations result in a dilution of the use of British manufacturers. As a British manufacturer potentially engaged in supplying overseas contracts, I feel very strongly about this. It would be possible to paint a scenario of penny wisdom and pound foolishness as we further risk our manufacturing base, engender unemployment and spend more on unemployment costs than we save on ECGD accounts. This is where the two budgets have to be brought together. Furthermore, we help our competitors, who may well be assisted to secure a foothold in markets which traditionally have been ours. The other point is the consequent effect on the balance of payments, which is important, and on employment.
I want an undertaking that the Government will closely scrutinise the operation of the portfolio management system and examine its trends and progress, that they will keep the door open to the United Kingdom project exporting industry so that it can be kept informed, and that they will respond to alarm signals with alacrity and flexibility when they are pointed out to them.
I should like to give a fair wind to the basic principles of the Bill. I have no hang-ups about its privatisation provisions, but there is tremendous responsibility on the Government in exercising their powers on the ECDG and the project exporting industry, which is not being offered to private ownership. It is a big responsibility.
I shall be brief; if that gives a flicker of anxiety to some, it will bring relief and rejoicing to many more.
I wish to follow the point that was made by the hon. Member for Leeds, North-West (Dr. Hampson), who is no longer present, in his plea for a long-term industrial strategy. Although his hopes are high, his prospects are rather limited. This matter has gone on for far too long. The Kemp report, which has been referred to almost ad nauseam, was issued at the end of a period of uncertainty about the Government's intentions for the Export Credits Guarantee Department.
The Kemp committee sat for a long time and thought carefully. Anyone who has had a quiet word with those who prepared the Kemp report will realise that their purpose was to come up with as low an order of madness as they could get away with to prevent the Government from coming up with as high an order of political madness as they could get away with if left to their own devices. That is not a satisfactory basis for the report.
After the report's proposals became known, there was a further period of uncertainty as we waited for the Government to clarify where they stood. As my hon. Friend the Member for Gateshead, East (Ms. Quin) properly and accurately said, there was a clear conflict of interest between the Department of Trade and Industry and the Treasury.
That period of uncertainty gave rise to additional difficulties. For example, in an attempt to structure or influence the Government's proposals, the ECGD began to modify its behaviour. It would be interesting to know from how many countries the offer of export credit guarantee help was withdrawn during that period of internal debate on how to respond to the Kemp report. I fear that, during that period, a massive effort was made to contain current expenditure—the source of the Government's concern—to satisfy the Treasury. That process has already damaged the prospects of British exporters, in some cases irreversibly.
It is interesting to note that the proposals of the Kemp report—to privatise the short-term services division of the ECGD as a state-owned holding company—were taken up by the Government of France, who operate their export credit guarantee assistance through a state-owned holding company. It is instructive that, for the purposes of joint marketing, that state-owned holding company has linked with French domestic credit insurance companies. Inspired and encouraged by the French Government, it is setting up export promotion agencies throughout eastern Europe to ensure a substantial place in those markets for French exporters.
That shows how those structures can be used to promote exports and an industrial strategy. It is terribly disappointing that in all the hints, guesses and statements of the Government, there has been no sign not only of any proposals but of any suggestion that such matters were a matter of concern or interest. That must be profoundly depressing for many exporters who, in increasingly difficult economic circumstances, are attempting to serve this country by broadening the base of our exports.
That uncertainty affects not only the past but the future, because, although we are aware of the structure and form of the Government's proposals, we are still uncertain about their content. For example, we have no clear idea of how they will attempt to ensure that the spread of risks covered by the ECGD will be reflected in the new arrangements made for the state agency.
The hon. Gentleman mentioned what the French are doing for short-term credit. They do not have a good record on using state aid, supposedly to help industry. In that context, one thinks of the motor industry, and Renault in particular. To what extent is he aware of whether the state-owned companies that have been set up are profitable and are not subsidised by the Government? If they are being subsidised, surely that would be in breach of article 92 of the treaty of Rome?
I suspect that the French Government have chosen to operate in that way to cast a fog of decent obscurity on that matter. Hon. Members may regard that as a sign of duplicity, but they may also regard it as a sign of ingenuity. If ingenuity promotes exports and increases their base, it may be no bad thing. The changes that the French Government have made in their export credit guarantee system in the past five years have been much influenced by the rules of the European Community and, in substantial measure, are an attempt formally to comply with them while retaining the ability to launch active industrial strategies of their own. There is no doubt about that, but I do not know why that accusation is made against the French. If one were a member of the French Government, one might take considerable pride from it.
The Government have thrown no light on how and by what means they will attempt to ensure that we shall have the same ability to take advantage of the spread of risk that we have now. They have not said how they will try to control the risk premiums that will be offered. They have thrown no light on whether the prospects of the network of the nine regional offices, which were referred to by my hon. Friend the Member for Dundee, East (Mr. McAllion), will be secure under the new system.
The availability of a deeply embedded regional network of export credit guarantee offices for that small-scale but intense level of export activity is absolutely vital if smaller firms in the regions are to be drawn into the practice of active exporting. We expect the Minister, if not tonight, later in the Bill's progress, to give us his thoughts on how the network of agencies can remain.
My hon. Friend the Member for Dundee, East was also right to cast doubt on whether the provisions for the transfer of undertakings in the Bill are meaningful. Those of us who are witnessing the true impact of changes in the national health service and the protection offered by the transfer of undertakings provisions are profoundly sceptical about the assurances provided in this Bill and whether they will prove meaningful.
Several hon. Members on both sides of the House have remarked that the Minister gave us no idea how he proposes to fill the black hole in his proposals. We are agreed, and the Government have been forced to concede, that even in their own proposals there remains a problem with the reinsurance of high political risks. The Government have said that, for three years, some means will be found to keep the reinsurance going. We have been given no details of that.
What will happen at the end of three years? Will there be a further period of transition and if so, on what basis? If not, how do the Government expect people to go over that cliff—because cliff it will be? The problem of political risk reinsurance will be an increasingly dominant feature of exporting to—one regrets—an increasing number of countries throughout the world. The Minister gave only a general assurance, which was not backed up by precise details. That is a matter of considerable regret.
There is a problem for the Government themselves. It would be a curious thing for the Government to privatise —if that is their word—the Export Credits Guarantee Department, lose control over the pattern and level of activities and be manoeuvred into passively picking up the tab for problems of political risk reinsurance. Again, the Government have provided no information to us and possibly no protection for themselves and their supposed aim of containing public expenditure.
The present position is disturbing. The economy is undoubtedly entering a period of recession. That point does not need to be laboured, because it is obvious to all. The insurance industry is less capable now than in the past of bearing some of the burdens which the Government propose that it should undertake. I draw the attention of the Minister to clause 3(3) of the Bill which contains the words:
The Secretary of State may not, in pursuance of such arrangements, enter into any transaction for the purpose of borrowing money but, subject to that, he is not precluded from entering into any transaction by reason of its involving borrowing.
The only conceivable meaning of that rather tortured language is that some of the Government's proposed arrangements in the new system will be extremely complex in insurance terms. Is this the right moment for the Government to hurl into the market many difficult and problematic transactions when it is clear that the British insurance industry is already shouldering a wide variety of difficulties and is much less robust than it has been for some time?
The Government's intention to bring export credit guarantees to the market is of little advantage to anyone if there is no market to be made. The Government must be somewhat cast down by the fact that many of those whom they hoped to interest in buying into the future of ECGD express much less interest now than previously. If the Government wish to offer ECGD for sale in the market, they owe it to themselves and the people who work in ECGD to ensure that there is a market to be made. At present, no such assurance can be given.
I do not wish to echo the point made by the hon. Member for Hereford (Mr. Shepherd) about the problems in the projects assistance provided by ECGD. The points that he made were sound. We do not know the exact balance—to some degree we must rely on guesswork—but Airbus and defence account for over 50 per cent. of the work of the projects section of ECGD. One could question whether that is an appropriate emphasis for a Government agency. It will continue to be a Government agency which is seriously interested in broadening the basis of British exports.
It would be unfortunate if, at the end of this tortured and difficult business—it has already lasted far too long and created far too much uncertainty and the results seem far from clear to the Government—we ended up in the disgraceful position that the Government not only had no industrial strategy to underpin their work in export credit guarantees but relied excessively on their own involvement in reinsurance of political risks in an entirely passive way. That may not represent good value for money. Neither should the main occupation of the remaining Government export credit guarantee activity be the promotion and securing of the British arms export trade.
It is always a pleasure to speak at the time when, as they say, the going gets tough and the tough go and have their dinner and leave those of us who are in thrall to the Whips to address the nation. [Laughter.] I do not know why that is a matter of amusement to my hon. Friends. It is a deeply serious point. We had hoped to have our dinner closer to 7 o'clock than 8 o'clock.
As it is fashionable to make declarations of interest, I should perhaps declare an interest as one of the few small business men in this place, and a one-time exporter. I have been had by almost every insurance company that exists. To that extent, I am distinctly susceptible to the quality of their service.
I have generally had a good experience in my dealings with ECGD. I have heard views to the contrary. One of my hon. Friends said that he found the service bureaucratic, but that was not my experience. It has always been straightforward, and its employees were knowledgeable and helpful. The acid test of the Bill and the proposal to denationalise ISG is that which my hon. Friend the Member for Teignbridge (Mr. Nicholls) set out.
In an excellent speech—I am sorry that the hon. Member for Cardiff, West (Mr. Morgan), who is looking slightly quizzical, did not hear it, because it was first class —my hon. Friend the Member for Teignbridge (Mr. Nicholls) suggested that the acid test was extremely simple. One had to ask oneself—[Interruption.] Are we sure who my hon. Friend the Member for Teignbridge is? We should look him up. May I continue, Madam Deputy Speaker?
We must ask whether the Bill helps or hinders exporters because, in all honesty, that is the acid test.
I do not know if I speak for all my hon. Friends but I suspect that I speak for the true intelligentsia, those of my hon. Friends who are present, when I say that I would not be in the slightest bit interested in a measure that was dogma purely for dogma's sake. The proposition in the Bill is an intensely practical response to a potential problem facing British industry. It saddens me that Opposition Members give a most extraordinary knee-jerk reaction whenever the word "denationalisation" or "privatisation" is mentioned, and in whatever context.
It may be a slight breach of confidentiality for me to tell the House about a conversation that I have every reason to believe took place between an Opposition home affairs spokesman on the privatisation of some prison services, a development to which I look forward. When I asked the Opposition's spokesman's attitude to that, I was given to understand—I think the hon. Member for Cardiff, South and Penarth (Mr. Michael) will be able to put two and two together and make five—that the Opposition spokesman's response was, "I gather that we are against it, although in all honesty I am not terribly sure why." If Opposition Members ask themselves whether they are sure that they understand why the knee has jerked so comprehensively against the idea that we should transfer the operation of the ISG to professionals who understand the business, they will find that there is no good reason whatever.
As I am sure you would point out fairly soon, Madam Deputy Speaker, the hon. Gentleman strayed into home affairs matters. I think that he reversed the quotation, because, as I understand it, the response was given by the Minister. That reflects the confusion among Government Members about many policies. I invite the hon. Gentleman to consider the minutes of the Committee currently discussing the Criminal Justice Bill, because he will then see that the knee-jerk reactions occur among Back-Bench Conservative members of the Committee.
I did not want to say this, because it is terribly unfair to do so, but I was referring to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) who is not on the Committee. If I were an Opposition Member, I would question the right hon. Gentleman about the soundness of his opposition to privatisation. I have always given the right hon. Gentleman credit for considerable intelligence and I suspect that he, like many Opposition Members, privately knows that the idea that a service should be provided at arm's length by professionals, with proper supervision by the legislature, is inherently immensely sound. Conservative Members can be immensely proud of having promoted the idea so strongly during the past 10 years.
The Bill's purpose is to address the acid test of whether or not we can improve the service to exporters. I believe that we can, for concrete reasons. We should not still be debating the first one, which is whether the whole direction of the single market and single market legislation in Europe is towards the declaratory principle of article 92, which is, essentially, to outlaw state aid that distorts competition. It is absolutely clear that that is the nub of the single market. The whole point of the single market is to create conditions in which there are no artificial boundaries to trade and competition among companies in all the European member countries. A cardinal principle of the single market is that Governments should not distort competition by artificial intervention.
I have heard the Opposition advance some most extraordinary arguments on that issue during today's debate. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins), for whom I have great respect, uncharacteristically—there is no need for him to look round because I am referring to him and if he looks forward he will see that I can only be referring to him— advanced an extraordinary proposition. He suggested that what he describes as the complicity—his description, not mine—that underlines the French Government's approach to its subsidy of exports is a virtue, of which, on the quiet, we should approve. That is not only a dangerous proposition, but deeply questionable. The hon. Gentleman seems to be suggesting that the great spoils of this life should go to those who, in the single market, are most capable of undermining the whole purpose of the legislation. That strikes at the central purpose of the European Community.
I must say—it is directly relevant to the denationalisation of ISG—that, if there is occasional cynicism among Conservative Members about the direction in which the European Community is progressing, it is absolutely because over the past decade, the Government have shown a complete commitment to the implementation of the single market. We are further advanced towards the single market than any of our colleagues in Europe, and intend to see it completed. We wish to see it completed honestly and openly, because we believe that honesty and openness form the correct basis on which to conduct international trade.
It is utterly objectionable to suggest that we should adopt the attitude that, if we can evade the regulations, twist and turn them to our purpose and permit an underhand support of industry against the clear and wonderfully declaratory principles of our Community Ministers, whether French, Italian or whatever, it is desirable to do so.
It was clear that the hon. Gentleman was enjoying his own rhetoric, but he had left the subject of the Bill. Which pieces of legislation and regulation was he referring to?
I am sorry—I had given the hon. Gentleman credit for a more subtle intervention. I was simply referring to the principles of article 92. We have had a great discussion about the Kemp report as if it were some sort of bible-1 think that my hon. Friend the Member for Teignbridge described it as such—from which it was impossible to deviate. There is no difficulty in reading the Kemp report and assimulating it into the position that the Government have adopted. It is quite clear that it is not necessary as of today to denationalise ISG—
I think that precisely my next point will satisfy the hon. Gentleman, so I hope that he will wait to hear it; if he is still not happy, he can then by all means intervene. As the Financial Times said in an article today, privatisation is much the cleanest approach to addressing the obvious question that will arise in future for French and other Governments in Europe—ensuring that there is a cast-iron mechanism to guarantee that state support to exports does not distort competition in contravention of what will then be established European legislation. That legislation will be so established because that is the whole drift of the European market, as underpinned by article 92.
The hon. Gentleman provides fresh confirmation that there is no such regulation. Perhaps he could now tell us how long ago article 92 was signed, as he seems to rely absolutely on it.
The whole drift of European single market legislation is clearly towards a competition environment and the absence of state subsidy. If we and other European Governments—with some honourable exceptions—were to continue with the present arrangements, there is no question that, in due course, we should fall foul of the very clear competition regulations that are the very essence of the single market.
I am given to understand that the hon. Member for Cardiff, South and Penarth is a Front-Bench spokesman on these matters. That being the case, it really disturbs me that his party should be so confused as to the whole thrust of the European Community. That thrust is the creation of the single market. Indeed, I can think of few other virtues that the Community brings with it.
My hon. Friend the Member for Thurrock (Mr. Janman)—a fellow member of the "Essex mafia"—has been extremely patient. I give way to him.
I am very grateful to my hon. Friend for giving way eventually. After all, he invited me to make interventions. I am grateful also that he is a colleague from the very fine county of Essex.
My hon. Friend is right when he says that it is surprising that the hon. Member for Cardiff, South and Penarth (Mr. Michael) seems not only to be gleefully unaware of the existence of article 92, but also not to understand that we are talking about a measure that is very important to the insurance industry. He seems to be unaware of the fact that there have already been three European directives laying down the criteria relating to competition in the provision of insurance services across national boundaries. Some of those criteria gel with this Bill, in the sense that an organisation funded by the state would not be able to compete across national boundaries.
My hon. Friend makes an entirely fair point. Indeed, such is his grasp of these events, that he confirms his position as political commissar of the Essex Members. It is a pleasure to have him alongside me. However, bearing in mind the way in which he thanked me in the introduction to his intervention, in future I shall be more wary about giving way to him.
I want now to move on to what seems to me to be a very important practical consideration, to which, it may be, too little attention has so far have been paid. More than half of the business of ISG is conducted with fellow members of the European Community. My understanding of the whole principle of credit insurance is that it provides cover against default on payments. Understandably, in the case of ISG, we are talking about business with fairly low margins. As the risk is fairly assessable and sensible, there is clear virtue in establishing two principles.
The first is that, in this context, there is absolutely no need for artificial subsidy. It is very questionable that a taxpayer would get fair value for money were the Government, by way of a state agency, to subsidise credit insurance within the European Community. The second principle is fairly straightforward. Business with low margins ought to be conducted in very large volume throughout the community. So far as Trade Indemnity and potential bidders for this company are concerned, I have no axe to grind.
Indeed, it is a great shame. My hon. Friend gets a lot more by way of retainer than the hon. Member for Cardiff, West (Mr. Morgan) gets from his union.
As I have said, I have no axe whatever to grind. Subject to proper application of the rules on monopoly, my understanding is that we are not creating a monopoly.
What we shall have is a substantial professional organisation acting within the United Kingdom. It is clear that, by definition, we are entering a European market. The competition will be within Europe. Indeed, I can even see virtue in having in the United Kingdom a pretty substantial organisation capable of taking on the spread of risk and the volume of business that makes the underwriting of European community commercial risk justifiable. The idea that there is some sort of great monopoly scare in the prospect of tying the ISG to one of the existing credit insurers in the United Kingdom need not detain hon. Members, especially those on the Government side.
What is important is one of the other conditions attaching to the sale of ISG. This follows from a point that was discussed earlier. It would be utterly self-defeating if the bidder were to be a state-subsidised foreign company. Indeed, it would be intolerable if we were to have, for example, a part French-owned company actually determining the ability of British companies to export to France or, indeed, to any other country in the community. Clearly, under competition rules, the Secretary of State has already established that he will look very carefully at cases of acquisition by companies that are themselves part state-owned. I believe that that policy is entirely right and has widespread support on this side of the House. It is gratifying that the principle is embodied in this Bill.
One question remains, and it is one to which Opposition Members have quite rightly alluded. Other European countries will not necessarily change their regulations on the day on which this Bill becomes an Act. It is quite obvious that, so far as British industry is concerned, if the profitability that is demanded by the sale involves a sudden and short reduction in the facilities that are available to exporters, the British exporters will be at a disadvantage. That is the point at which we would allow dogma to overtake common sense and the interests of our business community. That being the case, I am delighted at the willingness of the Government to provide a three-year reinsurance facility through the Export Credits Guarantee Department to allow a new company, in effect, to balance its portfolio.
To the Government, I make a plea that echoes one that has already been voiced today. We should not be too rigid about the size or, more important, about the duration of the insurance provision underpinning the new company. It is vital that we move to an entirely commercial market as soon as possible and that we do not, in the interim, put British exporters at a significant disadvantage. The way to match those two things is to make sure that the reinsurance facility is not simply closed-ended for three years but is capable of extension should the need arise.
The Financial Times article that has been mentioned is very supportive of the move to denationalise the ECGD. It says that top-up may be necessary. I echo that sentiment, and I hope that my hon. Friend the Minister will take it on board. The acid test is not dogma; it is the practical interests of British industry.
In the closing part of his speech the hon. Gentleman has been saying some extremely interesting things. That comment is not meant as a reflection on the earlier part of his speech. His remark that he does not think that the reinsurance facility should be closed-ended represents some criticism of the Government. Does he think that it should be closed-ended as to resources?
I am glad that the hon. Gentleman has referred to that point. I made it for this simple reason. To the extent that it is necessary to move immediately to the commercial environment—that is to say, one in which the insured risk will show a profit—the new company will quite rightly wish to limit the facilities available, particularly as it will want to expand its book in certain markets as it develops experience. During that time, the provision of a reinsurance facility, effectively continually funded by ECGD, is entirely proper.
At the moment, the proposition is that that should be limited in operation and in time. My plea to the Under-Secretary—to which, were he not in avid discussions with practically every other hon. Member in the House, he would no doubt be sympathetic—is that that facility should be open-ended in terms of both scope and time. I do not think that the Under-Secretary heard me, but I shall leave it on the record for him to read in his bath tomorrow morning.
I shall now say something about projects group business. So far today, there has been no mention of the fact that the ECGD has a cash deficit with the consolidated fund of £2·5 billion, and I am given to understand that there are further claims of another £2·5 billion for the next few years. That puts me in mind of two cardinal principles. One was mentioned by my right hon. Friend—I am sorry, my hon. Friend—the Minister for Trade. I am sure that I merely anticipate the inevitable. From his commercial experience, he will know of that old golfing metaphor—one drives for show and putts for dough. In other words, turnover is jolly useful, but nobody made a profit of turnover. One must show a profit on turnover.
In the present environment, I doubt whether the taxpayer can be happy that, so far, we have spent £5,000 million making goods in Britain and then giving them to other people at, essentially, £5,000 million less than we ought to have given them. I am a simple person, as no doubt my speech will confirm, but the introduction of the portfolio management system is a welcome development, as it will introduce some management control in a part of business that is otherwise in danger of getting out of hand.
It is right to have a system for pricing and controlling ECGD expenditure in relation to its support for project exports on medium and long-term credit, because that will allow the national interest reasons for supporting project exports. There is a good national interest reason, on occasion, properly to be weighed against the risk to the ECGD and the taxpayer that income from premiums and the ECGD reserves will not cover the underwriting losses that the ECGD may make on this type of insurance. Incidentally, it will ensure that the ECGD will continue to support United Kingdom capital and project goods exports, but at a greatly reduced cost to the taxpayer. That is an important criterion.
I am advised that it will also ensure that premium rates charged by the project group match the degree of risk more closely, which means that rates for high risk markets may rise. I face that prospect with equanimity, because rates in the lower risk markets will fall, and that must be good news.
If we do not press for other export credit agencies to charge more economic premium rates—something to which I hope the Government will pay attention—it will be pointless to be in a virtuous or a vicious circle by which everybody is subsidising business to pass goods around the world at prices that are inherently unrealistic.
The best way of all in which the Government could assist exporters is by a simple mechanism that would have the virtue not only of making exports more attractive, but of making them easier to fund—that is, to reduce the domestic interest rate. That might even drive down the value of the pound and make imports dearer. That is how I see it, as a simple soul, but I am told that this is a highly unsophisticated analysis, so I leave it on the table. I hope that my right hon. and hon. Friends in the Department of Trade and Industry will see the wisdom of that policy, so that those of us in the small business section will have a tiny modicum of relief.
This is a forward-looking Bill, which shows that Britain is determined to be the leader in the single market. It is in stark contrast to the policies of some of our European counterparts but, more particularly, it is in stark contrast to the views of the Opposition. We intend to make the single market work for the benefit of all European citizens. I have no hesitation in commending the Bill to the House.
I have no specific interest to declare about any company with which I am involved, but I declare a general interest in the well-being of the whole British manufacturing industry, for which the services that we are discussing should be continued. I agree with the hon. Member for Epping Forest (Mr. Norris). There is a huge divide between Opposition Members, who believe that the ECGD, in all its activities, has an important and at times vital role to play in the support of British manufacturing, and Conservative Members who, in their blind pursuit of the quixotic folly of the single market, do not mind what damage they inflict on British manufacturing, so long as they can say that they are unilaterally conducting this policy of industrial disarmament.
It is no good saying, as the hon. Member for Epping Forest said, that the French, the Germans and the Japanese have their own ways of promoting their exports—in the latter case, for many years and perhaps even now, they prevented imports as well—but we shall have none of that, so translucent is our purity, so overriding is our determination, whatever the cost to British consumers and producers, to implement the single market with all that that involves.
Governments of both parties do silly things from time to time, but I should have thought that this silly, tatty, messy Bill would have been dropped following the change in regime a little while ago. Unfortunately, we have had a continuation of policy under three Secretaries of State for Trade and Industry. The privatisation measures in the Bill result not just from silly dogma but from the determination of the Treasury, which now emerges triumphant from the long guerrilla campaign that it has waged against an outstanding Department of Government. As many hon. Members on both sides of the House have done, I pay tribute to the competence and professionalism of those in the ECGD with whom I have had occasion to work.
It is no argument—indeed, it is a slight—for Conservative Members to say that, by privatising this service, we shall put it in the hands of the professionals. It is in the hands of the professionals. It is in the hands of a group of people who have done the job for many years and who have always had as an overriding objective, the promotion of British exports and the interests of British manufacturing industry.
Will the Under-Secretary look into a case for me? It concerns GEC-Plessey Telecommunications in my constituency, which has secured a most important contract with the Government of Kenya for £23 million-worth of exports of telecommunications equipment. I understand from the group's director that cover for Kenya has been removed. This affects the project group, which is based here in London. Will the Minister reconsider that decision and recognise that, after we lost many jobs in Coventry last year in this sector, we do not want unnecessarily to face the same problem this year?
That not the issue today. Manufacturing companies are able to avail themselves of services which have been in place for many years; they have done a good job by British industry. In this debate we are discussing the dismantling of one of those services and the prospective rundown of other services. We are dealing today not just with the insurance services group, which is the first step. Who believes that the Treasury does not have its sights relentlessly set on project support? Clearly it must do so, and that is what the long-term argument is about. It is about efforts by the Treasury to get out of this whole area of support for British manufacturing. This issue is not whether the company should take on this role. The issue today is why the Government are not doing so.
In other words, the hon. Gentleman is saying that the whole commercial insurance experience in ECGD, which he rightly says has experts working for it and which has been in business for a long time, has come to the conclusion that this is a risk which can no longer be underwritten. In effect, the hon. Gentleman is saying that, despite the fact that they will not be able to pay the money, GEC should be able to export this, with all the consequences for jobs in his constituency and elsewhere in the country, and that the taxpayer should pay for it. Why should not the taxpayer just give the money straight to GEC?
I am not saying that at all. There is always a question of judgment in these matters. That must be clear even to the hon. Gentleman In this life, things are not black or white. If the hon. Gentleman really believes that, he cannot have been in the House long. There is a difference in the Government. I am sure that the pressure here, as always, is coming from the Treasury, which takes an extremely hard line. The Treasury's sole concern is always to limit Government expenditure, while the Department of Trade and Industry is pushing the manufacturers' case and the case of British industry, and I believe that it would be supported in that attitude by the project group. I ask the Department and the Minister of State to take a particularly close look at this aspect.
It would be strange indeed to see such a Bill as this being pushed through in any other country. At a time when we were withdrawing subsidies right across British manufacturing industry, France, Italy, Germany and Japan were continuing in various ways to back their industries. I do not condone what they have done, and I do not particularly say that it is wrong.
When the Government say that they will have none of that and that all we are interested in is the 1992 position, one must ask whether they have ever been in manufacturing industry. Do they not know what the score is when one gets into contract negotiation? Do they not realise how important it is in many big projects, and indeed within and outside Europe, to have the Government with and behind one's industry?
All we are asking for on behalf of British manufacturing industry is a level playing field, but we cannot level the playing field at our end and fall off the edge at the other end. That makes no sense to anyone in British manufactory industry. We want a level playing field and on that basis we can compete with anybody, but there have to be reciprocal measures and actions for achieving that. We cannot have the British Government seeking to prejudice the interests of British industry.
This Bill is ill thought out. We do not know who will buy this proposal. It would be absurd to sell it to the Dutch national company, and equally absurd to create a monopoly by selling it to Trade Indemnity in the United Kingdom. I do not believe that Sun Alliance could possibly undertake to do anything like the job on the scale and on the terms that we need.
We need from the Government a total rethink of this mess to avoid getting themselves into a position in which they have no buyer or the cover suddenly dries up. Even Conservative Members have said that there must be an open-ended guarantee for the supply of that reinsurance finance—an unconditional guarantee in terms both of the volume and of the conditions on which it is available. What sort of incoherent, self-contradictory nonsense is that?
There is only one thing to do today. The most appropriate course is for the Government to withdraw the legislation, to go back to proper funding and support for ECGD as a separate independent corporation, funded by but separate from Government, in the way the French and others operate. But we cannot have this continued penalisation of British interests in the interests of a greater, quixotic monument which the Government are so anxious to build on the ruins of British industry which they are creating.
On a point of order, Mr. Deputy Speaker. On behalf of a number of my colleagues, I make a formal request that the Government consider making a statement at 10 o'clock, or as soon as is convenient thereafter, about the attack on Tel Aviv tonight, about the tragic loss of another Tornado, and about the oilwells ablaze—a matter that was raised at 3.30 pm. Could that request be conveyed to the House authorities?
Having heard the opening remarks by the hon. Member for Gateshead, East (Ms. Quin) who led for Labour this afternoon, and the comments of her hon. Friends, particularly the hon. Members for Warrington, North (Mr. Hoyle) and for Dundee, East (Mr. McAllion), I make the point that ideologically they are just as committed to nationalisation and state control as I am committed to and believe in precisely the opposite approach.
I make no apology for the fact that I am a totally unrepentant denationaliser. My hon. Friend the Member for Epping Forest (Mr. Norris), who has gone to his well-earned supper, made a most delightful speech of serious content which was delivered in a way that only he could do. But throughout his speech he also used the word "denationalisation", and rightly so. I am not quite sure why we stopped using that word in favour of the word "privatisation", which seems to have all sorts of connotations in the public mind which confuse and diminish public support for the concept that industrial and commercial undertakings are better run and managed in the private sector than in the public sector. As my hon. Friend the Member for Teignbridge (Mr. Nicholls) said earlier—and it was not a criticism of this place or of hon. Members but a statement of simple fact—this House, which contains very able hon. Members but largely the wrong people, is the wrong venue to dabble in the day-to-day affairs of commerce and industry.
We who are honoured to be here are primarily the guardians of the public interests. I believe that we can best do that if we are at arm's length from the various enterprises and if we ensure that they work within a framework of minimum regulation to ensure and protect the public interest. That is our true role rather than the running of trade and industry.
I welcome the Export and Investment Guarantees Bill as yet another step in denationalisation, even if the Government in their wisdom have felt able to float the Insurance Services Group as part of the present Export Credits Guarantee Department. If the Government feel at this stage that the wider public interest is best served by retaining public control of what is currently called the project group based in London, then for the moment I am content.
Who would buy the massive losses and predicted losses that were referred to by my hon. Friend the Member for Epping Forest? Judging by the fact that ECGD may not support exports to the Community and that those exports are currently about half the total activities, it seems to me that a review of its format is called for, and certainly it is right that it should become two separate enterprises. If ISG covers short-term credit, surely it fits the normality of private insurance cover rather than the involvement of the state and the Exchequer. Its activities at present are not loss-making, so I presume that it has nothing to fear from the normal commercial pressures of competition.
I do not like to hear of the deficit on the business that will stay in the public sector, but clearly it is the kind of business that could not be won by exporters without it. If its continued funding is in the public interest, at least for the time being, until we see how Europe and the rest of the world moves, I am content that that part stays in the public sector.
All of us, as was said earlier, have heard of projects lost to other countries because the financial arrangements were not as good as those on offer by our competitors. I hope that, when my hon. Friend the Minister replies, he will say something about that. My instinct is that insurance services, like so many other areas of commercial endeavour, are likely to respond much more readily and effectively in the private sector under the increasing European rules. Unless denationalised, my understanding is that insurance services would be functioning, as my hon. Friend said when he opened the debate, with one arm tied behind their backs. We must anticipate 1992 and make the necessary changes.
This is not the only example of where in the European context we must get out of the public and into the private sector soon. Hon. Members will recall that last week the British Technology Group had an excellent display in the Upper Lobby. That organisation too is finding itself constrained and is worried about the new format in Europe after 1992. I hope that it will not be long before we debate on the Floor of the House the setting free of that enterprise.
I have been a member of the Committee considering one other denationalisation Bill, when the one legitimate concern expressed by hon. Members on both sides, not just the trade union sponsored Members, was for the protection of the staff involved. I understand that clear undertakings have been given that transfer to the privatised company will be voluntary and that the staff who transfer will be given terms and conditions at least as good as those that they currently enjoy. I also understand that, where that is not possible, those terms and conditions that cannot be transferred will be replicated. I do not believe that the Government could be clearer than that, and I hope that my hon. Friend the Minister will confirm that that is the Government's intention.
The reading that I undertook before the debate suggests that that is the case, but if that is not so, I hope that my hon. Friend the Minister will clear that up when he replies.
The hon. and learned Member for Montgomery (Mr. Carlile) said that, if rates were not competitive, British industry would go elsewhere to other companies in the United Kingdom or to finance and insurance companies in Europe. So they should. The hon. Member for Coventry, North-West (Mr. Robinson) has experience of industry and I am sure that he would agree that industry jolly well should go where it can get the best deal. What I hope will come out of the Bill is that there will be one other means whereby British manufacturing companies can find a British company that will give them the best deal in Europe. But it is no part of the Government's role to set a scene that virtually makes that impossible, driving companies abroad for their insurance cover, which is what would happen if we did not set up a framework in the United Kingdom to ensure a competitive scene.
If the short-term business underwritten by insurance services is no different from much of business currently being dealt with by private sector insurers, and if the project group is to be allowed to continue with Government funding, to handle under the state umbrella those risks that cannot be covered by or are unacceptable in the private sector, we are approaching the matter in the right way, denationalising that which can be denationalised and retaining in the public sector that which cannot.
This is an enabling measure. No date is set for any flotation. I echo the comments by my hon. Friend the Member for Leeds, North-West (Dr. Hampson). I support the Bill but I express some caution. We should not move at a pace which puts any United Kingdom company at a disadvantage compared with any European competitors.
I speak tonight as the Member for Cardiff, West, not in my capacity as a n Opposition spokesman on energy. The ECGD insurance services group is located in the adjoining constituency of Cardiff, Central with the computer centre in the other adjoining constituency of Cardiff, North. Many of my constituents are among the 800 or so people who work for ECGD in the Cardiff area. Therefore, I feel particularly strong empathy with the battle against this rash, hurried and premature measure.
All hon. Members seem to be agreed tonight that, if the measure is prompted by free market dogma, it is wrong, and if our opposition to it is based on Stalinist dogma, that is also wrong. Hon. Members on both sides of the House have managed to skate for at least five minutes on the thin ice in the belief that dogma is wrong and common sense is right. I shall try to examine whether the measure is activated by dogma or whether it has a backbone of rationality and common sense.
The Bill has two main purposes. One is to continue with the existing work of the ECGD, providing the Secretary of State with the powers to do that, and the second is to facilitate the privatisation of the insurance business of the ECGD. I am not a great fan of Anglo-Saxon proverbs, but that could be called trying to have one's cake and burn it.
The Bill seems to have been prompted not so much by the needs of industry, the EC or 1992, but simply by the weirdo views of the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley), the previous Secretary of State for Trade and Industry who, to use a football field analogy, believed that one should equalise before the other team scored. It is true that some day the EC, in particular, via Sir Leon Brittan, a former Member of the House and the vice-president of the EC in charge of competition matters, might bring in a proposal which will then have to be negotiated with the 12 Governments to produce a level playing field in the area of export credit insurance free of subsidy, or at least the possibility of subsidy implied by the taxpayer backing for it, to cover internal trade after 1992.
There is no sign of this on the horizon yet. No one is hurrying except this Government. That causes us to ask why it was necessary for the right hon. Member for Cirencester and Tewkesbury to leap in with the measure when he did, in advance of all the other countries which had not made any moves in the same direction. Is that the best way to play the Euro game? That is the question we must ask ourselves when we apply the test of dogma or common sense to this measure.
I remind the hon. Member that his own party often criticises us, albeit quite wrongly, for dragging our feet in the European Community, particularly in relation to implementing directives from the Community about the single market. The hon. Member will be aware that Brussels is taking a very keen look at the subsidies that are implicit in the way in which countries in the Community handle their export credit policies. Surely it is absolutely right and proper that this Government should take a lead in what, inevitably, everyone else will have to follow.
The hon. Member has touched on the correct point, but he is interpreting it quite wrongly. How is the Euro game best played in the interests of United Kingdom plc? That is what we are asking. That is something this measure plainly does not do. All the justifications that have been given by the hon. Member for Oxford, East (Mr. Smith) who has now gone to his much delayed and very much deserved dinner, the hon. Member for Nottingham, South (Mr. Brandon-Bravo) and the hon. Member for Thurrock (Mr. Janman), by way of intervention, simply display the fact that they do not understand how legislation is shaped at the European level in an attempt to produce, post-1992, the much desired level playing field.
Let me tell the House what actually happens when the European Community shapes legislation to bring in the level playing field. The European Community is attempting to blend 12 entirely different systems—perhaps it is not as many as that; the Benelux countries, Spain and Portugal may have similar systems. Nevertheless, it is trying to blend at least half a dozen entirely different systems. This does not mean that, on day one of 1992, everything that existed before that could possibly constitute an intervention in the free passage of goods, services and labour across community frontiers must be abolished.
That is not the way the European Community operates; it never does things like that. It will recognise that, in Britain, we have a system which has existed for 70-odd years, and 90 years in domestic credit through trade indemnity. France has a different system; Germany has a different system again, and so on. How can all these systems be blended into a sensible compromise that does not favour any one country? If the Government are really interested in the well-being of this country, the last thing they will do is lay all their best cards on the table before any of the other countries in the Community have started to show any of their bargaining chips. Before the other countries in the Community even start to mould the legislation into the shape that suits them best, we have already shown our best hand.
In effect, the Government are saying that United Kingdom plc can swim in shark-infested waters without any water wings or assistance or any swimming lessons at all. If it cannot swim, then it probably does not deserve to be in business anyway. That is a reasonable summary of the attitude of the right hon. Member for Cirencester and Tewkesbury. He is effectively saying, "If I am not good enough to be Secretary of State for Trade and Industry, then British industry is not good enough to be looked after by me. It can either sink or swim, and if it cannot swim, it is probably a good thing it is out of the water instead of cluttering it up for everyone else."
It is the same sort of attitude that we saw in the steel industry in 1980 when the Davignon crisis plan came in. Britain dived in straight away before any of the other countries. When Davignon said that we must lose 25 per cent. of our steel industry we closed plants even before we started bargaining. Then the other European Community countries caught up very slowly—the French Government did so in 1985; the Germans started in 1987 and the Italians waited until 1989. But we did it in 1980—no problem. This Government thought it was a good idea to apply the cold shower treatment and get rid of the so called weaker brethren, remove the fat and the surplus.
That is what we mean by dogma. That is what we mean by not adopting a common sense and rational attitude. It is the Government's job to look after United Kingdom plc. It is the French Government's job to look after France plc and the German Government's job to look after Germany plc. If this Government does not look after United Kingdom plc then the French Government certainly will not do so. I am afraid that that is the nature of the failure of the British political establishment in this House and in particular in the Government party to understand how to play the Euro game in order to give United Kingdom plc a reasonable chance of competing on fair and equal terms in 1992. That is one of the reasons why we have a trade deficit of extraordinary proportions with our fellow trading partners in the European Community which bodes ill indeed for the onset in 11 months' time of the European single market.
Tonight we are looking at two aspects of the Export Credit Guarantees Department. The first is projects, which is admittedly a subsidy racket. There are no two ways about that and we all agree that this is so. It is a very difficult position to get out of and the Government have accepted that by not attempting to privatise the projects group—the long-term credit insurance for defence equipment, power stations, chemical plants and all the usual stuff that we have sold abroad to third-world countries and eastern Europe over the years. It is a bit of a racket. There is very heavy and competitive subsidisation of the export terms. The Government do not have a solution to that question and I do not have one either. I accept that it is a racket. Multilateral disarmament must take place over the years which may affect the work of the projects group, but the Government accept that they do not know how to get around the problem.
Basically, this Bill applies to the unsubsidised part. It is a mutual reinsurance facility in many ways which has been in existence in respect of the OECD and the EC level export credit insurances, and it is unsubsidised. It involves a facility that is available from the taxpayer, but it is obliged to abide by the principle that it must not be subsidised. It must wash its own face, taking good years with bad. It is very similar to trade indemnity in this country through the backing of the big insurance companies.
On the projects side, we are not talking about the removal of subsidy. I do not know whether the EC wants to go in for the kind of penny-in-the-slot, laissez-faire philosophising that we have heard from many of the Back Benchers who have supported this matter tonight. It is not a matter of saying that we should eliminate subsidies because that is the basic principle of the Community; it is merely a question of whether something should be done in the public sector or the private sector.
The hon. Member for Nottingham, South said that he preferred the word "denationalisation" to the word "privatisation". Tonight we are looking at all the options whereby we can denationalise something without privatising it. In other words, are there any methods by which one can bring in private capital so that ownership is not transferred to the private sector but the public sector borrowing requirement problem is removed? In other words, one has a state-owned plc, either with or without private capital. These are all matters of detail which could act as forms of export credit which are guaranteed to work without finding a bidder who will actually purchase the company and place it in the private sector.
It is not just the effect on the public sector borrowing requirement or arguments about 51 per cent. or 49 per cent. It is the fact that, when politicians, whether in this place or at local level, have control of something, they feel that they have to meddle. They are the wrong people to meddle. It should be left to those who are running the business.
The hon. Gentleman offers one of the best examples of penny-in-the-slot, laissez-faire theorising that I have ever heard. If that is not dogma, I do not know what is. The hon. Gentleman suggests that the ECGD cannot make sensible commercial decisions while in the public sector. Only among the free traders on the Back Benches and Front Benches of the modern Conservative party is there to be found dogmatic assertions of that kind without any facts to back them up. That allegation has never been made during ECGD's 70 years of existence, and the ISG has never needed a subsidy.
It is hoped that the group will be kept together when it is sold to a private purchaser. However, one must remember the management pyramid, chain of command and age spread that currently exists in the ISG. Many of those currently responsible for taking the key decisions that can equally well be effected in both the public and private sector are people in their forties, who may have worked in the civil service for 25 years, first in London and then in Cardiff, and who will have a large pension entitlement.
If one asks someone who has spent all their working life in the ECGD, man and boy, woman and girl, whether they want to transfer to Trade Indemnity, Sun Alliance, Barclays, Nederlandsche Credietverzeuring Maatschappij, or whoever purchases it, or would prefer to spend the next 10 years still employed in the civil service or take early retirement, a large proportion will prefer to move to another Department rather than take their chances with a private employer. At 47 years of age, or whatever, their pension entitlement is important to them.
That stark choice will confront many people in senior management positions in the ECGD. The pension entitlement which has accumulated for many of them is bound to be a major factor in deciding whether to join the private purchasers' own pension scheme and sacrifice a civil service pension, or to take a job elsewhere in the service.
I take a close interest in anything affecting the ISG's headquarters in Cathays park in Cardiff, not least because I worked as a civil servant in the same building for five years and was involved in the negotiations that brought the group to Cardiff in 1975–76, when I was the industrial development officer for south Glamorgan. In the mid-1970s, we made a major attempt to attract to Cardiff Government Departments that were moving out of London. Companies house moved in 1974, and the business statistics office moved to Newport in 1975. The ECGD itself moved to Cardiff in 1976. In the private sector, the Automobile Association's insurance division moved from Basingstoke, and the Chemical bank of New York relocated to Cardiff in 1981. Over a five-year period, a critical mass was achieved in financial services in the Cardiff area, so that it now offers a choice of jobs in both the public and private sector that would be attractive to existing ISG employees.
When the group is privatised, its main building will be in breach of its covenant with the Marquis of Bute, which specifies that all buildings in Cathays park must remain in public sector use as universities, local offices, Government Departments, and so on. On privatisation, the group will be without a home. One can understand the concern felt by the ISG's 750 employees, because the Government are placing their jobs on the block by transferring the group to a new owner and leaving it without a headquarters. I understand that the Marquis of Bute's legatees have promised to be reasonable and will not insist from day one of privatisation that the group will have to move out of Cathays park, but then it will be down to rather one-sided negotiation with Cardiff property developers if the company is to find a new home. If the negotiations turn sticky, there may be cause to worry about the future employment of those concerned, who may be forced to move from the area that has been their home since 1976.
I appeal to the Government to be as non-dogmatic as it is within their philosophical capabilities to be. They may find good reason for abandoning the Bill. They do not have to stick to it for the sake of the memory of the right hon. Member for Cirencester and Tewkesbury, never mind scoring brownie points with the Adam Smith Institute. Instead, they should look after their 750 civil servants in Cardiff, and look after UK plc.
I shall be as brief as possible, so that my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) may have an opportunity to contribute to the debate. I confess that I am standing here tonight partly because of the arm-twisting of my Whip a few hours ago, when he approached me about speaking in this debate.
The hon. Member for Cardiff, West (Mr. Morgan) is on firmer ground when he asks my hon. Friend the Minister to address the practical questions and the difficulties that must be overcome in physically moving the group out of its existing offices in Cardiff and transferring the business to a new owner, than when he spoke of Labour's interventionist, nationalising philosophy of the 1960s and 1970s.
The Bill is a small but precise step forward in the programme of rolling back state control—and a very welcome step it is. I hope that it gives a clear message to both Labour and the British people—that, even though there has been a change of leadership in our party, there has been no diminution or watering down of our clear intention to continue implementing the Conservative principle of denationalisation for the future health of our people and economy.
Tonight, we have heard a lot about the ECGD's deficit, although I believe that most of it is within the projects group and not the ISG. However, I wish to dwell upon ISG and its denationalisation. Within the European Community, it is illegal to subsidise exports from one member state to another. Given that 50 per cent. of the ISG's work is within the Community, and that it is part of an organisation which is clearly used to subsidise exports, it is quite evident that action has to be taken. The keenest and most appropriate method is to transfer the ISG into the private sector, which is what the Bill seeks to do. It also seeks to improve the cost-effectiveness of the projects group, as some of my hon. Friends have mentioned.
Within the next few years, the European insurance marketplace will be in a considerable state of flux, and the Bill gives the ISG the commercial flexibility required to operate within that marketplace. Bureaucratic sloth, which is inevitable in any nationalised operation, will be replaced by competitiveness and commercial awareness. Denationalisation of ISG will inevitably give that edge to its entire operation. The Bill carries out the fundamental recommendations of the Kemp report, which is an objective and non-doctrinaire assessment of the requirements.
As my hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo) said, denationalisation is a better way to describe what we are doing than privatisation, and I shall summarise the main reasons why I think that it is important for us to proceed with it.
There will be increased competition in the credit insurance marketplace within the European Community. The marketplace will be framed by national law and by directives from the European Commission, which will preclude state-subsidised or state-owned companies from having access to markets in other member states. Therefore, the first reason is that the commercial environment is changing, due to our membership of the European Community and to the single market, and the Bill reflects that changing environment and will allow ISG to compete within it.
I must tell the hon. Member for Cardiff, West that, although there may be practical problems because of the changes, it is far better to have those problems than to lose large numbers of jobs in Cardiff because the ISG in its present state would not be able to gain access to the European marketplace as a result of those changes.
A private company, rather than a publicly owned body, will be able to refine its product range, and will have more commercial freedom. For example, it may want to combine domestic and export credit insurance, without subsidy from the taxpayer. In other words, the products that it offers the marketplace within which it will have to operate will be far more commercially competitive.
ISG will need to be non-subsidised if it is to be effective within the European Community, and the services that it offers must be competitive. The continuation of state subsidy would hamper ISG in the modern European marketplace. Increasingly, multinationals will want one-stop shopping when buying insurance in the European Community, and the Bill will enable the ISG to diversify the services that it offers multinational operators within the Community. The ISG will not be able to do that if this change is not made.
Continual state backing is probably illegal, as I said earlier in an intervention during the speech of my hon. Friend the Member for Epping Forest (Mr. Norris), whether it is overt state control, as in Britain today, or the more covert arrangements developed in France, which the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) mentioned. Whether they are overt now, or covert during the next few years, such arrangements are illegal under article 92 of the treaty of Rome. Given the Opposition's uproar when there was that little controversy last year about the sale of Rover—the Opposition were very annoyed then about the use of injudicious state subsidy in Britain in the motor industry—it is interesting that Opposition Members now defend French actions in this part of the insurance industry.
Another good reason for denationalising ISG is that it is absolutely right to free it from the interference of politicians and civil servants. Given his experience in the civil service and the world at large, I am surprised that the hon. Member for Cardiff, West has not observed that there is an overwhelming temptation for bureaucrats, civil servants and politicians to meddle when they have the opportunity. The best way to prevent that is to ensure that the service is offered by the commercial world, under private ownership.
I believe that the Bill will enable the ISG to provide a better service for exporters, especially small firms. I welcome the mechanism whereby the ISG will be transferred to the private sector—competitive tender—and also the criteria to be applied to that mechanism. Let me say in conclusion—for I know that my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth) wishes to speak—that the Bill is good for the ISG; good for the employees, as it will be far more likely to guarantee employment than the present system; good for exporters; and good for the taxpayer. It is, however, bad for the Labour party, which is still wedded to the philosophies of the interventionist 1960s and 1970s, which tonight's debate has exposed for what they are.
The repetition by the hon. Member for Thurrock (Mr. Janman) of the word "good" does not make good a had piece of legislation.
This has been an interesting debate, in which a number of constructive speeches from both sides of the House have exposed the weakness of the Government's case. The Opposition have maintained from the outset that the Bill is dogmatic and pointless. It will weaken the Government's support for private enterprise and do yet more damage to the export trade that is so important to Britain's economic future. Today's debate has shown that we are right. The Minister should listen to the voices of his hon. Friends as well as those of Opposition Members, and withdraw the Bill.
Our plea is simple—protect exports. The Cardiff and ISG operations are not merely a concentration of staff—which my hon. Friend the Member for Cardiff, West (Mr. Morgan) and I value, because we see it operating in our city and our constituencies, and especially in the constituency of the Trappist hon. Member for Cardiff, Central (Mr. Grist). This is a concentration of staff with expertise, whose work has won respect and who have given tremendous support to manufacturers throughout the United Kingdom.
I accuse the Government of a lack of pride in the achievements of an important public enterprise—a lack of pride in the contribution made by an arm of Government in helping the private sector, and small businesses in particular. The Government, indeed, show a certain lack of patriotism, allied to the lack of understanding of Europe that is patent in their approach.
Perhaps we should not be too surprised when we consider where the Bill started its life. Its birthplace was the Department of Trade and Industry, where the inner policy-making sanctums were presided over by the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley). South Wales Members—including my hon. Friend the Member for Cardiff, West and myself—were appalled when the decision leaked out in a written answer. Some of us went to see the right hon. Member for Cirencester and Tewkesbury, and asked him why he was taking such action. He replied, "Well, we may be forced to do it anyway." We asked, "What action by the European Commission forces the panic?" The response was a toss of the head; we received no answer.
We pointed out that, in his previous post at the Department of the Environment, the right hon. Gentleman had had a reputation for refusing to listen to Europe—not only in regard to law and regulations: he had had to be dragged to the door of the European Court before showing the slightest twitch of interest or intention in relation to environmental and water industry issues, let alone action. We received no answer that day to our question, and have received no answer since. No evidence has been produced to support the Government's decision. It is an example of appalling misjudgment to promote a measure to undermine Britain's export drive, and an example of even worse judgment to press on when the case has been blown apart and everyone is against it.
The debate has produced a number of red herrings—not least from the hon. Member for Thurrock, who suggested that the ISG would be unable to compete in the European marketplace. It would be able to do so if the Government showed the necessary flexibility, and considered the options recommended in the Kemp report instead of being mesmerised by their own single solution. One of the problems that confront us now is the dead hand of the Treasury, which is clearly heavier than ever under the present Prime Minister.
The hon. Member for Teignbridge (Mr. Nicholls) offered us a curious argument which ignored the alternatives set out in the Kemp report. He argued that the existence of European regulations which have nothing to do with this Bill and nothing to do with any part of the ECGD somehow leads to an imperative for the Government to take action in this piece of legislation. This is complete nonsense. The Government's most enthusiastic supporters have been reduced to gobbledygook in this debate in trying to defend Government.
We have had the whole question of the EC. This was dealt with by Mr. Kemp in his report. I would point the Minister to the paragraph on page 52 when, having considered the European legislation and regulations, he points out that the Government have not accepted the argument that the arrangements gave unfair advantage to the exporters using their national schemes compared with exporters in other member states. There would thus, he said,
appear to be strong grounds for arguing that the Commission has de facto given its approval to state support for export credit agencies as at present practised by member states, with the exception of those activities that have been specifically declared unacceptable under the Treaty.
The hon. Member for Epping Forest (Mr. Norris) and his straight man, the hon. Member for Thurrock (Mr. Janman), both of whom have fled the Chamber, exposed the weakness of the Government's case, because, when they were asked to point to regulations, they could point to none, not even draft regulations, on the issues covered by the Bill. The best that they could do was to refer to article 92, signed in 1957, and it is clear that there is no pressure from Europe for us to move towards exposing our export industry. The EC is being used by the Government as a scapegoat for this piece of indefensible legislation.
Is there not the non-life directive which means that the European marketplace is now open for competition in credit insurance, among other forms of insurance, throughout the European Community? Is there not therefore a necessity at least to provide some new structure for ECGD because Europe will be the home market? Does not this measure give us an excellent opportunity to bring about that restructuring?
The hon. Member for Cannock and Burntwood (Mr. Howarth) follows his colleagues by using a piece of EC legislation which has no relevence to this Bill to try to give it some sort of relevance in defence of the Government. I admire his persistence in doing that, but I can neither admire nor respect his logic. There is no logic in his argument.
Not only is there no regulation to which the Government can point, but, even if new regulations or legislation were introduced in the EC, ample time—at least two or three years—would be allowed for credit insurers to change to the extent necessary. There is therefore no hurry.
Even more helpfully than other colleagues, the hon. Member for Epping asked the House the simple question: does the Bill help or hinder exporters? It is a simple question and it has two simple answers: it will not help and it will hinder. He had to call in aid a curious logic that led him into home affairs and an anonymous quotation in order to make the accusation that the Opposition are ineffective on this issue. I remind the House that it is the Government who refuse to look at any option but one at the present time.
I would also remind the House that we have reason to be concerned about the future. The Treasury will make an input to the review of ECGD in 1992–93, and it is bound then to press its preference for the zero option. The Minister must state categorically how long the Government will continue the support which was promised at the beginning of this debate. When introducing the Bill, the Minister failed to answer that question put to him very simply indeed: how long? It must be answered when he winds up, or we shall know that the answer to "how long" is "too short".
The hon. Member for Teignbridge went on to quote today's Financial Times. Selectively he quoted the most extreme paragraph of the only article, while these matters have been under debate anywhere in the press, to show any real favour to the Government's line—and even that article had to admit, rather weakly, that
privatisation has not yet been forced on the government by the European Commission. Simply changing the ECGD's charter might allow it scope to compete in the single market.
So even that article—the one supporter of the Government's curious approach—condemns the very case that a few hon. Members, a minority of hon. Members, on the Government Benches have sought to sustain today.
I wonder whether the hon. Member for Teignbridge has read other articles in the Financial Times. Did he see, for instance, the article on 10 January with the headline:
Exporters fear fresh drain on their credit.
A sub-heading read:
Resentment at the way British companies are denied the support enjoyed by continental rivals has prompted an unlikely alliance between City, industry and Labour.
That is not an unlikely composition, because the City and industry are becoming increasingly aware of the solid and responsible way in which Labour's team is dealing with these matters, which is leading them to an increasing consensus with Labour on the importance of having a Labour Government to deal properly with these issues.
I will cite two aspects of that article in the Financial Times. It quotes the London Chamber of Trade as saying:
It is imperative that the existing level of service to exporters from Cardiff, both in terms of the markets covered and the credit period available, should not be diminished.
Could we be clearer than that? The article also said:
Other European governments show no sign of winding down this kind of government support, but Whitehall has decreed that after a three-year transition period it will be withdrawn in the UK.
The government line that private reinsurers will quickly step in to fill the gap is hotly disputed in the marketplace, where withdrawal of support is seen as unilateral export disarmament. Adding to the exporters' alarm is the declining appetite for political risk reinsurance which the Gulf crisis has inspired in the Lloyd's market.
It is clear that the arguments of my hon. Friends, reinforced by gentle queries from Government Back Benchers, are correct, and that the case against the Bill is overwhelming.
The Financial Times article pointed out that the service of ISG in Cardiff is particularly valued by exporters in high risk countries. No hon. Member would deny that there are too many high risk areas in the world in which we have to compete if Britain's export record is to be restored from the dismal levels to which it has sunk under the Governnment. The Financial Times accurately reflects the views of the Labour party, of those who work in the ECGD and of exporters in the United Kingdom.
My hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins), in a characteristically thoughtful contribution, referred to the need for regional networks. Of course, the ISG has that network and a strong contact with all parts of the United Kingdom. Those of us who have battled locally against the Government's neglect of the regions will endorse his remarks wholeheartedly.
The hon. Member for Hereford (Mr. Shepherd) gave a series of warnings to the Minister and approached the question of competition within Europe in a sober and considered manner, much in contrast with the confidence shown outwardly by Ministers. He rightly identified the insistence of Ministers on not answering questions as highly suspicious. I suspect that their refusal to answer questions is more in their nature than in the brief. I do not think that it is fair to blame the civil servants. It is Ministers who have been refusing to answer straight questions put to them, not only today but in written questions, in discussions and in private meetings ever since the privatisation measure was first considered.
The hon. and learned Member for Montgomery (Mr. Carlile), who represents a part of Wales with relatively small industry and where Government help and support are much needed, did an excellent demolition job on the Government's case. Like many of us, he wants to know why the Government are responding to EC signals which are as covert as a smuggler's lamp, but from Back Benchers and Government alike, answer comes there none.
I state it simply: Europe has not pressed the Government to change in the way set out in the Bill. State-supported operations, such as those in France, have not fallen foul of European law or regulations. Time and again in parliamentary questions, Ministers have been offered opportunities to provide evidence for their claim that Europe is pushing us in that direction, but they have been no more successful than the hon. and motley Member for Teignbridge in producing the faintest iota of fact to back that claim. I shall be most surprised if the Minister, in his reply, does more than skirt around that attitude. It is a simple question. Let him, if he can, give us a simple answer.
The Minister, intervening on my hon. Friend the Member for Gateshead, East (Ms. Quin), asked what we would say if the Government failed to take action in good time. If they did that we would say that they were wrong, neglectful and stupid, but it is not what is happening with this Bill. I must again insist that Ministers, encouraged by Back Benchers of an extreme disposition, are jumping like lemmings when no one with any interest in encouraging exports is pushing them to take the actions outlined in this Bill.
It is a matter of fact that almost 80 per cent. of the insurance cover with existing customers is with customers having a turnover below £1 million a year. That is an extremely important part of our export industry. I draw the House's attention to the large number of jobs created in recent years—often not acknowledged by the Secretary of State for Wales, the Secretary of State for the Environment or the Secretary of State for Trade and Industry—through joint enterprises, work by local authorities, joint enterprises with private industry, such as the Cardiff and Vale enterprise in my own constituency, to build up the economy and help people start up in business, stay in business and expand. In the last two years, ECGD has been constrained by the Government to make swingeing increases in the premium rates it charges to businesses with £1 million turnover or less. That situation will be much worse after privatisation and the Government are wrong to place those businesses and the business that they bring to this country at risk.
The hon. Member for Surrey, North-West (Mr. Grylls) expressed concern that over 70 per cent. of businesses do not currently export. He was right to express that concern. The Minister's response that it would be useful for those firms to insure with one body is mischievous nonsense. These are just the types of businesses which need the security and confidence that come from a Government-backed institution and need an efficient public service to support them in their intitiatives and provide them with fresh encouragement to that end.
In his very categorical statement the hon. Gentleman has said there would be, definitely, swingeing increases in premiums for small businesses. He says that small businesses have to have Government-backed insurance. Does that apply to all their other insurances? Can he produce facts to justify those allegations?
I can certainly state categorically, as I did, that there have been swingeing increases for small businesses which insure through ECGD. We know from the views of private industry, which have been expressed on the business of reinsurance, that this is an unpopular area which they would not take on board without increases in the insurance. That is far less of a surmise than the load of waffle that we have had from the Government Benches, both ministerially and from Back Benchers, since the beginning of this debate. If the Minister is so keen to be challenging on this issue, let him answer the simple question that I have asked him again and again: where is the evidence of EC regulations that bring about the requirement for any change? I see that he does not wish to.
In a written answer last week, the Secretary of State stated two principles. He said:
The Government continue to attach great importance to United Kingdom project and capital goods exports and to maintaining a viable and stable framework of ECGD support.
Secondly, he said:
the international debt crisis, and more recently the events in the Gulf, have shown the risks which are assumed by ECGD to be potentially very significant." [Official Report, 14 January 1991; Vol. 183, c. 359.]
That is important. The problem is that the second one is so important that it is overriding the first one in the Government's mind, not because they want to help industry but because they are worried about the financial commitment involved in giving support to private
industry. I regret that the Ministers seem to have lost their battle with the Treasury in seeking to balance, those priorities.
I point again to the confirmation in the Kemp report that there is no pressure from the United Kingdom exporting community or from the commercial sector generally for this changing status in any part of ECGD. The Kemp report also showed that the private sector does not and cannot provide services equivalent to those currently provided by that department.
Kemp also said—this is directly relevant to the question that the Minister asked me a moment ago:
It was also stated frankly by some brokers that small policy holders, were not commercially interesting to them and that there was no prospect of the private sector providing the counselling and service that such policy holders received at present through the ECGD regional organisations.
Not only will there be increases in premiums over and above those forced by the Government's dogma, but the service will deteriorate.
The hon. Member for Leeds, North-West rightly challenged the Government's view that the private sector is waiting in the wings to take the risk. He was equally right to discuss the partial view that the hon. Member for Cannock and Burntwood put forward. No sound business case exists for this privatisation. The decision to privatise is purely political. We accept that there would be increased competition for ISG services but consider that it would best be met by extending the scope of ECGD's activities so that it could insure exports from other EC countries and possibly United Kingdom domestic trade.
If implemented, as my hon. Friend the Member for Cardiff, West said, the privatisation of the ISG would directly affect more than 600 civil servants based in Cardiff and the regional network. At this stage, the proposal is for transfer to the Government company to be voluntary, but the most likely outcome, as he rightly said, is that insufficient staff will volunteer and coercion will prove necessary. Their transfer would be covered by the Transfer of Undertakings (Protection of Employment) Regulations 1981, which merely impose the offer by a purchaser of an overall employment package which is no worse than that available in the civil service. All that that means is that those conditions apply on day one. There is no guarantee for employees on day two.
Why break up an efficient and successful operation? Why remove the conditions and security that employees have? Why attack morale in a department and an operation important to our national interest? Those questions must be answered, but have not been answered in this debate.
My hon. Friend the Member for Cardiff, West made a modest plea for staff in Cardiff. The hon. Member for Nottingham, South (Mr. Brandon-Bravo) offered a promise, which he asked the Minister to reinforce, that staff conditions will not be adversely affected by the change. I share his hope that the Minister will clear that up but, even better, we shall hold the hon. Member for Nottingham, South to his promise when we consider these issues in Committee and seek to improve the protection of staff. There is no change on day one, but change on day two and thereafter offers no guarantee of hope for the future of those staff.
The right hon. Member for Chertsey and Walton (Sir G. Pattie) emphasised that he was not a whingeing exporter and underlined the importance of backing our exporters. In effect, he agreed that there is no evidence of competitor countries rushing in the same lemming-like way to undermine their industrial capacity to export.
We know that there has been a renewed wrangle in Government in recent weeks, with the Chancellor wanting a clear break with no future commitment for finance from the Government on activities with which competitor countries are helped by their Governments. We know that small exporters are angry that the Government propose to hand political risk insurance to the private sector, making it less likely that United Kingdom manufacturers will be able to get protection for contracts where there is political instability. It is difficult to imagine circumstances which more graphically illustrate the importance of political risk insurance than the situation today, when our country is at war and when the political situation in eastern Europe and many other parts of the world offer a major challenge to our economy.
I highlight the comments of the Select Committee on the Treasury and Civil Service on the autumn statement. It underlined again and again the importance of exports to our economy. Paragraph 22 of its report stated:
Exporting may become increasingly difficult. An economic recovery based on increasing the growth of exports in the second half of 1991 is therefore far from assured. If the United Kingdom's export performance should falter, in the absence of some offsetting support from other components of domestic demand, the forecast for resumption of non-oil economic growth will not be achieved.
That is put at risk by the venture on which the Government are foolishly embarking. They were warned by the Select Committee that the outlook for the next year is, if anything, even more uncertain, with the consequence that potential errors could be greater than those implied by the average of past errors. We appeal to the Minister not to compound those errors by pressing ahead with this legislation.
We ask the Minister to defend British interests. He must surely accept the progression of events which will be inevitable once the Bill becomes an Act. He must accept that important issues need to be addressed. He must tell us how the Government will continue to meet their obligation to encourage United Kingdom trade once ECGD is privatised this year. Currently that is part of the work of ECGD. Has the Minister taken full cognisance of the recommendation of Ernst and Whinney in which it said that it
would not advocate the sale of ISG into the private sector in the absence of historical financial information. The absence of that information makes the raising of capital in the private market at best difficult at present, and could, in any case, significantly reduce the sale proceeds obtainable by Government for the business"?
That was a warning given by Ernst and Whinney. The Government have not responded by providing the House or those who are anxious about the future of ISG and our export industry with the financial facts. I suspect that that failure will be compounded by the Minister failing to give an answer today.
I urge the Minister to accept that, if he fails to defend British interests as we seek—especially in view of the Treasury's intransigence—it will be only a matter of time before decisions are taken on purely financial grounds and no attention is paid to public policy or national interest. Then it will be only a matter of time before overseas ownership dilutes still further the increasingly tenuous link between our national interest and our export trade. It will then be only a matter of time before the pressures of commercial logic squeeze out trade which involves risk but is important to our national economy. It will be only a matter of time before jobs become less secure, high-quality senior staff in the ISG move elsewhere, conditions of work deteriorate and an important national asset is wasted.
Like the leech in the middle ages, the Government's cure is more painful than the condition that they seek to cure. The reasons put forward sound remarkably similar. The hon. Member for Cannock and Burntwood suggested that ECGD was not dying but going to another place. That sounds mealy-mouthed. Misplaced faith is the main characteristic of the No Turning Back group, a breed which seems to be a curious cross between a lemming and a rottweiler.
I urge the Government to accept that privatisation is a high-risk strategy. It is a sobering thought, but it is a fact, that if the insurance services group had been privatised two or three years ago, it could have been made insolvent purely as a result of the stock market crash of October 1987.
The hon. Member for Leeds, North-West said that industry wants a Government who care about its difficulties and about exports. He is right. We need a Government who want a fresh strength in British industry and who care about our manufacturing base and our need for future success in export trade. For that, and for a determination to return to common sense on the issues debated today, British exporters will have to wait for a Labour Government. The Opposition will vote against this ill-considered and short-sighted legislation.
We have had an interesting debate on this important legislation. Several points were raised and I shall try in the time available to answer the main questions. I shall reply in writing to any points that I cannot answer because of time constraints.
I apologise if I cannot reply to everything that the hon. Member for Cardiff, South and Penarth (Mr. Michael) said in his machine-gun delivery. I am sorry that he thinks that I am a cross between a lemming and a rottweiler. I like to think that I am rather a gentle sort. But I shall disappoint him in one respect. Contrary to his suggestion, I have not decided at this stage to withdraw the Bill. I have made that decision for good reasons.
As my hon. Friend the Member for Teignbridge (Mr. Nicholls) said—he has apologised for the fact that urgent business elsewhere has unfortunately taken him away from the closing speeches—we all have a common aim. If we disagree on everything else in the debate, I hope that we can agree that our aim is to improve the services to our exporters. That is the key point in the debate. I assure my hon. Friends the Members for Hereford (Mr. Shepherd) and for Epping Forest (Mr. Norris) that our aim is simply to speed up the response rate and efficiency of ECGD.
In closing the debate, I should first make absolutely clear what the Government propose to privatise and why we believe it to be necessary. As my hon. Friend the Minister for Trade explained, ECGD's operations fall into two distinct categories. My hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo) emphasised that distinction. First, there is the insurance of project exports, such as aircraft, process plant and construction projects, involving credit terms of a least five years and often as long as 10 years. Secondly, there is the insurance of mainstream exports—anything from confectionery to cars—where credit risks of not more than six months need to be insured.
The first category of business, averaging more than £2 billion of exports each year, is handled by ECGD's project group based in London. Let me assure my right hon. Friend the Member for Chertsey and Walton (Sir G. Pattie) that the Bill will not affect in any way ECGD's support for project exports. I also assure my hon. Friend the Member for Leeds, North-West (Dr. Hampson) that there is no wish among Treasury Ministers to weaken ECGD's contribution to the support of project exports.
Support for such business requires ECGD to underwrite large value payment risks, usually in developing countries, which can persist for as long as 20 years. Clearly, that requires some extremely difficult judgments to be made about the future. There is obviously a risk that, despite using the best information and best efforts to arrive at a right decision, events sometimes do not turn out as well as anticipated and ECGD has to face a claim.
Of course we want to support our exporters, contrary to what the hon. Member for Gateshead, East (Ms. Quin) suggested in her opening speech. No one involved in the financing of international trade predicted that we would have a debt crisis as severe as that which arose in the early 1980s. ECGD shared that experience, and the results have shown up in the large deficits that have emerged in its financial results during the past few years.
I can tell the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) that privatisation has nothing to do with ECGD's deficit, which is due entirely to the project business.
Yes, it is fair to say that. Clearly, we are in a difficult position, a point that I know my hon. Friend the Member for Leeds, North-West made most powerfully in his speech. The aim of the system that we are introducing is to address a problem that undoubtedly needs solving.
The experience of the debt crisis in the world prompted the initiative that resulted in the announcement by my right hon. Friend the Secretary of State for Trade and Industry last week of the introduction of the portfolio management system. My hon. Friend the Minister for Trade dealt with that in some detail in his opening speech.
I accept that the portfolio management system contains some elements that our exporters would prefer not to see, which is unremarkable. As my hon. Friend the Minister for Trade said, ECGD's support for project exports has, in recent years, proved to be an expensive business for the taxpayer, largely as a result of the debt crisis. However, by no stretch of the imagination can our policy response in the face of the mounting cost of that support be characterised, as some have tried to do in the debate—particularly the hon. Member for Gateshead, East—as its effective withdrawal. My hon. Friend the Member for Thurrock (Mr. Janman) made that clear today.
We have not withdrawn support, because we recognise that, without it, our exporters' prospects of winning business in the face of fierce international competition would be seriously damaged. But we also recognise that, even if others should want to do that, there is no point in supporting exports that stand little chance of being paid for—a point made in the Financial Times article today. It is all a question of trying to draw a sensible balance that recognises not only the competitive needs of exporters but also the risks of the taxpayer. PMS is simply the risk-analysis framework that helps us in that task. There is nothing sinister about it. It does not take decisions for us; that difficult task will quite properly rest with my hon. Friend the Minister for Trade.
Rates vary from market to market, but I can confirm that, on average, United Kingdom rates are high. I hope that my hon. Friend accepts that one advantage of PMS is that it will result in higher risks requiring higher premiums, and in lower risks requiring lower premiums. That seems to be entirely sensible. My hon. Friend, in his contribution, raised some very interesting questions. I hope that he will accept that, given the debt crisis, we had to introduce PMS for the sake of the taxpayer as well as of the exporter.
The first fruits of PMS have been to demonstrate, first, the risk posed for the ECGD scheme of its being unduly exposed on high-risk markets and, secondly, the extent to which its current premium rates are not sufficiently matched to the risk. In response to the latter point, the ECGD will be increasing its rates on the higher-risk markets. Overall, its premium income is expected to rise by about 10 per cent. This must be seen as a minimum response to the problem, and to represent it as an unnecessary or serious blow to our exporters' competitiveness is both to mislead and to exaggerate.
I have been listening carefully to the Minister's reply. Can he assure the House and the large textile companies, particularly those in Yorkshire, that what the Government are proposing will not adversely affect the ability of those companies to export throughout the world?
Textile exports will be covered by Insurance Services, but I have noted my hon. Friend's question.
I reassure my hon. Friend the Member for Leeds, North-West that there is no question of short-termism, that premium rate subsidies will be eliminated only on the basis of multilateral international agreement. My hon. Friend the Member for Hereford said that we must not go down the road of unilateralism. We have no intention of so doing.
I should like to deal now with individual markets. Decisions on the volume of ECGD cover on individual markets are both more difficult and more important. Clearly, given recent experience, it would be quite irresponsible of the Government not to adopt a prudent and disciplined approach to arriving at these judgments. However, this does not mean that, on the more difficult markets, cover will be withdrawn. I can give that assurance to my hon. Friend the Member for Leeds, North-West, who also raised the point. What it does mean is that we shall need to look more carefully at the balance between national interest and risk.
The starting point will obviously be a wish on the part of the Government to help our exporters to win worthwhile export contracts. The constraint will be the assessment of the financial risk in doing so. There will be extremely difficult judgments to make, but we are confident that the result will be ECGD's continuing to give our exporters the support they need to compete successfully for overseas projects that represent a not unreasonable credit risk.
The suggestion that the Government are not committed to support for project exports is simply not borne out by the facts. The suggestion that more could be done and that PMS should be abandoned is beguiling and may win friends in some quarters, but it is an irresponsible denial of the hard lessons of the recent past and the debt burden that we face. I believe that the difficult decisions we have taken represent the only way forward and a good deal for our exporters.
My hon. Friend knows that successive Governments have come under enormous pressure from contractors and others engaged in projects overseas for support from the taxpayer—from ECGD—on account of the fact that certain countries do not represent a good long-term risk for the contractors. Is it not the case that the Government, throughout their lifetime, have solidly demonstrated their maximum support for industry—particularly through the aid and trade contingency provision when exporters claim that they are up against unfair competition, especially from the French? This provision was designed by the Government to ensure that exporters would be able to go out and win contracts.
I am glad that my hon. Friend for Cannock and Burntwood (Mr. Howarth), who is a banker and knows about these things, has had an opportunity to make the point that he has been waiting to make all day.
By contrast, the second category of the ECGD's business—exports on short-term credit totalling some £14 billion each year handled by the insurance services group in Cardiff—presents underwriting risks that can be managed much more effectively, and where the meeting of a given financial objective is much more achievable. Hundreds of thousands of export transactions are involved each year and about 75 per cent. of this business concerns commercial risks in the EC and OECD countries. It is already run by ECGD as a commercial activity and without Government subsidy. Even if there were not overriding reasons to want to change its current status, it would be a strong candidate for privatisation.
I emphasise that the prime motivation for privatisation arose from an assessment in an expert and independent review commissioned in 1988 by the then Secretary of State, and known as the Kemp report, which has been referred to several times. It concluded that, if Insurance Services were to be able to continue to provide our exporters with the service they need, it simply had to go through a change of status.
I make it clear, in response to a point raised by the hon. and learned Member for Montgomery (Mr. Carlile), that, according to the Kemp report, a financial track record should be established. This track record can be created retrospectively out of Insurance Services' past activities. This is being done so that investors will immediately have relevant information. Therefore, early privatisation is both possible and desirable for that reason.
My hon. Friend the Minister for Trade referred to the competitive and legal challenges confronting Insurance Services and the risk that, without a change of status, these challenges could deprive the ECGD of the best 75 per cent. of its business. It would clearly be a denial of the Government's responsibility both to our exporters and to the taxpayer to allow a situation to develop where the short-term business of this fine organisation was reduced to the status of an insurer of last resort, focusing only on exports to the developing countries.
I must repeat that these are the considerations that have led us to the conclusion that privatisation is essential and that maintaining the status quo is simply not an option. The other benefits that we can expect to flow from privatisation in terms of greater flexibility are icing on the cake. I shall deal now with some more specific issues. Some have played down the competitive pressures to which the insurance services business is subject. They have also challenged the Government's view that, even if it were a credible option on other grounds, which it is not, maintaining the status quo for the insurance services business will, in due course, become an option that will face serious legal challenge from Brussels.
The competitive challenge was mentioned in particular by my hon. Friend the Minister for Trade. We know, although some Opposition Members seem not to accept this, that competition is vital, and we cannot pretend that it does not exist. That is a luxury in which business managers cannot afford to indulge, and they certainly do not wait until they have lost their best customers before deciding that, yes, they do have a bit of a competitive problem about which they should do something. I accept that, at present, Insurance Services is the dominant supplier of short-term export credit insurance in the United Kingdom, but only a few years ago it enjoyed a virtual monopoly. This process of greater competition can only accelerate as the single market becomes a reality.
My hon. Friend is on to a good point. New entrants from the continental and American markets are already in the market in the United Kingdom and the ECGD no longer enjoys a monopoly. It has 70 per cent. of the market, and is under threat. Therefore, the Bill will provide the ECGD with an opportunity to restructure so that it can meet the challenge.
That is absolutely right. My hon. Friend knows about the competitive environment in which the ECGD exists, and is right to emphasise that point. British companies will cease for credit insurance purposes to compartmentalise their business into domestic, EC and OECD work. They will see, indeed are seeing, the advantages of a single insurance policy covering all their needs. They will be able to look at a wider range of insurers—companies throughout Europe which have been freed from the insurance directive to market their services throughout the community.
Where will Insurance Services be in all this if we do not change its status? Almost certainly, it will be struggling to maintain market share against a tide of new competition with one hand tied behind its back. This would be disastrous for the business, its customers—our exporters—the staff and the taxpayer. A privatised insurance service will be able to compete fairly and equally.
The legal challenge was lightly dismissed by the hon. Member for Gateshead, East (Ms. Quin). Although the Kemp report was written some years ago, increasing attention is being paid in Brussels to the problems associated with the single market and state subsidy of export insurance. We recognise that this work is being carried out. It is right to address that problem and to act in good time.
As my hon. Friend the Member for Epping Forest said most clearly, the treaty of Rome says all that is needed on the subject. Where state involvement distorts competition, article 92 makes it clear that this would represent state aid, which is incompatible with the Common Market.
I have article 92 in front of me. There are several exceptions in the article, which makes it quite clear that aid can be granted in specific areas and areas which can be agreed at any point by the European Council of Ministers. Would the Minister also accept that there is a tremendous variety of levels of state aid given in the European Community? In fact, both Germany and Italy give more than we do, and those aids are deemed compatible with the Common Market. Therefore, to rely on article 92, as the Minister and his hon. Friends have done, is a delusion in this case.
It is not a delusion. If the hon. Lady reads article 92, she will see that those exceptions do not apply to exports to EC and OECD countries. Therefore, her point does not apply. There is almost universal recognition within the relevant expert working group in Brussels that much short-term export credit insurance is an area of genuine competition between private sector and state insurers, and that the latter enjoy advantages which make for unfair competition under the treaty of Rome. Discussion is centering on how to make the playing field level, but while the debate goes on, virtually all EC Governments are considering steps to distance their official agencies from the state as far as cover for short term export credits is concerned.
Examples were quoted, particularly by the hon. Member for Warrington, North (Mr. Hoyle) about what is happening in other European countries. In Germany and in the Netherlands, the structure which we are trying to achieve, involving a private company handling short-term business but benefiting from Government backing in respect of the more difficult risks, already exists. In France, state reinsurance of the bulk of short-term political risks has been transferred to the commercial reinsurance market.
Denmark is considering the privatisation of its official agency. Portugal is moving partially to privatise its agency, and we know that the Belgians are reviewing the status of theirs. If that is not a picture of our competitors in the EC taking action to address his problem, I do not know what is. I do not believe that we could accept a halfway house. It is dangerously misleading to suggest that there is some safer, no-change haven which the Government are deliberately trying to ignore.
Some myths have been perpetrated in this debate. First of all, let me deal with exporters. At every stage in the process culminating in this Bill, there has been overwhelming endorsement by all interested parties of the Government's analysis of the threats confronting insurance services.
Contrary to the impression given by the hon. Member for Gateshead, East, the response has been overwhelming. I hope that exporters listen to the facts and are reassured. I cannot emphasise enough that the motivation behind the exercise has all along been a desire on the Government's part to ensure that the ECGD was placed in the best position to meet exporters' needs after 1992.
The truth about the alleged lack of interest is that some parts of the press, particularly The Guardian, have speculated and got it badly wrong. The fact is that serious interest has been and continues to be shown—[Interruption.] It is a pity that Opposition Members are not listening. Serious interest has been and continues to be shown in buying the business on the part of a good number of institutions from a variety of backgrounds. That should hardly be a surprise, given the expertise and experience of the business which is on offer. It is more surprising that the more pessimistic scenario should be given any credibility. Perhaps it suited the book of those opposed to privatisation to peddle such myths.
On staff implications, I pay particular attention to the comments made by the hon. Members for Warrington, North, for Dundee, East (Mr. McAllion) for Cardiff, South and Penarth and for Cardiff, West (Mr. Morgan). First, I emphasise the importance that the Government attach to maintaining the commitment and skills of the staff concerned. That is vital for the company's future success. The new owners will readily understand that when offering the transferring staff terms and conditions of employment to replace those that they currently enjoy in the civil service.
I still have some points to make, so I must continue.[Interruption.] The hon. Gentleman asked for certain assurances.
To the extent that the Government can do so through the Bill and other arrangements, they will give staff the reassurance that their terms and conditions would be at least as good as their present ones. Once a final package has been negotiated with the new owners—
No. I should have thought that the hon. Gentleman would have liked to have the assurance that I am now giving to the staff of the ECGD.
Once the final package has been negotiated with the new owners, the staff will be given a clear month in which to assess it and to state their final preferences as to whether they wish to join the new company or to remain in the civil service. It has throughout been the Government's intention that the eventual allocation of staff to the company and the ECGD should reflect the final preferences—I emphasise those words—expressed by staff, where that is consistent with the business needs of the new organisation.
In this debate, my hon. Friend the Minister for Trade and I have succeeded in showing that the impetus for the measure has not been imposed from above as a matter of ideology. It has come up from below, to meet the competitive challenge facing the industry and because of the legal position facing our exporters.
During the past 10 years, the Government have transformed the economic climate for our exporters. We in this Department are determined to ensure that the demands of society are met by the business environment. We have made that business environment possible by cutting taxes, by privatisation measures and by deregulation.
Contrary to what has been explained and claimed in the debate by Opposition Members, there has been an enormous interest in the privatisation measure. We must not disappoint those people who are interested in buying what will be a successful first-rate company and a major private institution standing up for Britain and for our exporters.
The Labour party's do-nothing approach is typical, but it ignores the real world. It simply will not wash. It ignores the legal and competitive challenge facing the industry. We are used to the Labour party doing the wrong thing for the wrong reasons, but it seems to be suggesting today that we should be doing the wrong thing for no reason at all.
The Government are determined to create a business environment in a changing export world where our exporters are fully supported. We intend to see the Bill through to its conclusion, and I commend it to the House.
|Division No. 43]||[10 pm|
|Adley, Robert||Burt, Alistair|
|Aitken, Jonathan||Butterfill, John|
|Alexander, Richard||Carlisle, John, (Luton N)|
|Alison, Rt Hon Michael||Chapman, Sydney|
|Amess, David||Chope, Christopher|
|Amos, Alan||Clarke, Rt Hon K. (Rushclifte)|
|Arbuthnot, James||Colvin, Michael|
|Arnold, Jacques (Gravesham)||Conway, Derek|
|Arnold, Sir Thomas||Coombs, Simon (Swindon)|
|Aspinwall, Jack||Cope, Rt Hon John|
|Atkinson, David||Currie, Mrs Edwina|
|Baker, Nicholas (Dorset N)||Davies, Q. (Stamf'd & Spald'g)|
|Baldry, Tony||Davis, David (Boothferry)|
|Banks, Robert (Harrogate)||Dicks, Terry|
|Batiste, Spencer||Dorrell, Stephen|
|Beaumont-Dark, Anthony||Douglas-Hamilton, Lord James|
|Bellingham, Henry||Dykes, Hugh|
|Bendall, Vivian||Eggar, Tim|
|Bennett, Nicholas (Pembroke)||Emery, Sir Peter|
|Benyon, W.||Evans, David (Welwyn Hatf'd)|
|Bevan, David Gilroy||Evennett, David|
|Biffen, Rt Hon John||Fairbairn, Sir Nicholas|
|Blackburn, Dr John G.||Fallon, Michael|
|Blaker, Rt Hon Sir Peter||Favell, Tony|
|Body, Sir Richard||Fenner, Dame Peggy|
|Bonsor, Sir Nicholas||Field, Barry (Isle of Wight)|
|Boscawen, Hon Robert||Finsberg, Sir Geoffrey|
|Boswell, Tim||Fishburn, John Dudley|
|Bottomley, Peter||Fookes, Dame Janet|
|Bottomley, Mrs Virginia||Forman, Nigel|
|Bowden, Gerald (Dulwich)||Forsyth, Michael (Stirling)|
|Bowis, John||Forth, Eric|
|Boyson, Rt Hon Dr Sir Rhodes||Fowler, Rt Hon Sir Norman|
|Brandon-Bravo, Martin||Fox, Sir Marcus|
|Brazier, Julian||Franks, Cecil|
|Bright, Graham||French, Douglas|
|Brown, Michael (Brigg & Cl't's)||Fry, Peter|
|Bruce, Ian (Dorset South)||Gale, Roger|
|Buchanan-Smith, Rt Hon Alick||Gardiner, Sir George|
|Garel-Jones, Tristan||Mans, Keith|
|Gill, Christopher||Maples, John|
|Glyn, Dr Sir Alan||Marland, Paul|
|Goodhart, Sir Philip||Marshall, John (Hendon S)|
|Goodlad, Alastair||Marshall, Sir Michael (Arundel)|
|Gorman, Mrs Teresa||Martin, David (Portsmouth S)|
|Grant, Sir Anthony (CambsSW)||Maude, Hon Francis|
|Greenway, Harry (Ealing N)||Maxwell-Hyslop, Robin|
|Greenway, John (Ryedale)||Mayhew, Rt Hon Sir Patrick|
|Gregory, Conal||Meyer, Sir Anthony|
|Griffiths, Peter (Portsmouth N)||Mills, Iain|
|Grist, Ian||Miscampbell, Norman|
|Ground, Patrick||Mitchell, Andrew (Gedling)|
|Grylls, Michael||Mitchell, Sir David|
|Hague, William||Moate, Roger|
|Hamilton, Hon Archie (Epsom)||Monro, Sir Hector|
|Hamilton, Neil (Tatton)||Montgomery, Sir Fergus|
|Hampson, Dr Keith||Morris, M (N'hampton S)|
|Hanley, Jeremy||Morrison, Sir Charles|
|Hannam, John||Morrison, Rt Hon Sir Peter|
|Hargreaves, A. (B'ham H'll Gr')||Moss, Malcolm|
|Hargreaves, Ken (Hyndburn)||Moynihan, Hon Colin|
|Harris, David||Mudd, David|
|Haselhurst, Alan||Neale, Sir Gerrard|
|Hawkins, Christopher||Nelson, Anthony|
|Hayes, Jerry||Neubert, Sir Michael|
|Hayhoe, Rt Hon Sir Barney||Newton, Rt Hon Tony|
|Hayward, Robert||Nicholls, Patrick|
|Heathcoat-Amory, David||Nicholson, David (Taunton)|
|Hicks, Mrs Maureen (Wolv' NE)||Norris, Steve|
|Hicks, Robert (Cornwall SE)||Onslow, Rt Hon Cranley|
|Higgins, Rt Hon Terence L.||Oppenheim, Phillip|
|Hill, James||Page, Richard|
|Hind, Kenneth||Paice, James|
|Hogg, Hon Douglas (Gr'th'm)||Patten, Rt Hon Chris (Bath)|
|Hordern, Sir Peter||Patten, Rt Hon John|
|Howarth, Alan (Strat'd-on-A)||Pattie, Rt Hon Sir Geoffrey|
|Howarth, G. (Cannock & B'wd)||Pawsey, James|
|Howell, Ralph (North Norfolk)||Peacock, Mrs Elizabeth|
|Hughes, Robert G. (Harrow W)||Porter, Barry (Wirral S)|
|Hunt, David (Wirral W)||Porter, David (Waveney)|
|Hunt, Sir John (Ravensbourne)||Portillo, Michael|
|Hunter, Andrew||Powell, William (Corby)|
|Irvine, Michael||Price, Sir David|
|Irving, Sir Charles||Raff an, Keith|
|Jack, Michael||Raison, Rt Hon Sir Timothy|
|Janman, Tim||Redwood, John|
|Jessel, Toby||Renton, Rt Hon Tim|
|Johnson Smith, Sir Geoffrey||Rhodes James, Robert|
|Jones, Robert B (Herts W)||Riddick, Graham|
|Kellett-Bowman, Dame Elaine||Ridley, Rt Hon Nicholas|
|Key, Robert||Ridsdale, Sir Julian|
|Kilfedder, James||Roberts, Sir Wyn (Conwy)|
|King, Roger (B'ham N'thfield)||Roe, Mrs Marion|
|King, Rt Hon Tom (Bridgwater)||Rossi, Sir Hugh|
|Knapman, Roger||Rost, Peter|
|Knight, Greg (Derby North)||Rowe, Andrew|
|Knight, Dame Jill (Edgbaston)||Rumbold, Rt Hon Mrs Angela|
|Knowles, Michael||Ryder, Richard|
|Knox, David||Sackville, Hon Tom|
|Lang, Ian||Sainsbury, Hon Tim|
|Latham, Michael||Shaw, David (Dover)|
|Lawrence, Ivan||Shaw, Sir Giles (Pudsey)|
|Leigh, Edward (Gainsbor'gh)||Shelton, Sir William|
|Lennox-Boyd, Hon Mark||Shephard, Mrs G. (Norfolk SW)|
|Lester, Jim (Broxtowe)||Shepherd, Colin (Hereford)|
|Lilley, Peter||Shepherd, Richard (Aldridge)|
|Lloyd, Sir Ian (Havant)||Shersby, Michael|
|Lloyd, Peter (Fareham)||Sims, Roger|
|Lord, Michael||Smith, Sir Dudley (Warwick)|
|Luce, Rt Hon Sir Richard||Smith, Tim (Beaconsfield)|
|McCrindle, Sir Robert||Soames, Hon Nicholas|
|Macfarlane, Sir Neil||Speed, Keith|
|MacGregor, Rt Hon John||Speller, Tony|
|MacKay, Andrew (E Berkshire)||Spicer, Sir Jim (Dorset W)|
|Maclean, David||Squire, Robin|
|McLoughlin, Patrick||Stanbrook, Ivor|
|McNair-Wilson, Sir Patrick||Stanley, Rt Hon Sir John|
|Madel, David||Steen, Anthony|
|Malins, Humfrey||Stern, Michael|
|Stevens, Lewis||Waller, Gary|
|Stewart, Allan (Eastwood)||Ward, John|
|Stewart, Andy (Sherwood)||Wardle, Charles (Bexhill)|
|Stewart, Rt Hon Ian (Herts N)||Warren, Kenneth|
|Stokes, Sir John||Watts, John|
|Sumberg, David||Wells, Bowen|
|Summerson, Hugo||Wheeler, Sir John|
|Tapsell, Sir Peter||Whitney, Ray|
|Taylor, Ian (Esher)||Widdecombe, Ann|
|Taylor, John M (Solihull)||Wiggin, Jerry|
|Taylor, Teddy (S'end E)||Wilkinson, John|
|Tebbit, Rt Hon Norman||Wilshire, David|
|Temple-Morris, Peter||Winterton, Mrs Ann|
|Thompson, D. (Calder Valley)||Winterton, Nicholas|
|Thompson, Patrick (Norwich N)||Wolfson, Mark|
|Thornton, Malcolm||Wood, Timothy|
|Thurnham, Peter||Woodcock, Dr. Mike|
|Townsend, Cyril D. (B'heath)||Yeo, Tim|
|Tracey, Richard||Young, Sir George (Acton)|
|Tredinnick, David||Younger, Rt Hon George|
|Twinn, Dr Ian||Tellers for the Ayes:|
|Vaughan, Sir Gerard||Mr. Irvine Patrick and|
|Wakeham, Rt Hon John||Mr. Timothy Kirkhope.|
|Abbott, Ms Diane||Cryer, Bob|
|Adams, Mrs. Irene (Paisley, N.)||Cummings, John|
|Allen, Graham||Cunliffe, Lawrence|
|Alton, David||Dalyell, Tam|
|Anderson, Donald||Darling, Alistair|
|Archer, Rt Hon Peter||Davies, Rt Hon Denzil (Llanelli)|
|Armstrong, Hilary||Davies, Ron (Caerphilly)|
|Ashley, Rt Hon Jack||Davis, Terry (B'ham Hodge H'l)|
|Ashton, Joe||Dewar, Donald|
|Banks, Tony (Newham NW)||Dixon, Don|
|Barnes, Harry (Derbyshire NE)||Dobson, Frank|
|Barron, Kevin||Doran, Frank|
|Battle, John||Dunnachie, Jimmy|
|Beckett, Margaret||Dunwoody, Hon Mrs Gwyneth|
|Beggs, Roy||Eadie, Alexander|
|Bell, Stuart||Eastham, Ken|
|Bellotti, David||Evans, John (St Helens N)|
|Benn, Rt Hon Tony||Ewing, Harry (Falkirk E)|
|Bennett, A. F. (D'nt'n & R'dish)||Fatchett, Derek|
|Benton, Joseph||Fearn, Ronald|
|Bermingham, Gerald||Field, Frank (Birkenhead)|
|Bidwell, Sydney||Fields, Terry (L'pool B G'n)|
|Blair, Tony||Fisher, Mark|
|Blunkett, David||Flynn, Paul|
|Boateng, Paul||Foot, Rt Hon Michael|
|Boyes, Roland||Forsythe, Clifford (Antrim S)|
|Bradley, Keith||Foster, Derek|
|Bray, Dr Jeremy||Foulkes, George|
|Brown, Gordon (D'mline E)||Fraser, John|
|Brown, Nicholas (Newcastle E)||Fyfe, Maria|
|Brown, Ron (Edinburgh Leith)||Galloway, George|
|Bruce, Malcolm (Gordon)||Garrett, John (Norwich South)|
|Buckley, George J.||Garrett, Ted (Wallsend)|
|Caborn, Richard||Gilbert, Rt Hon Dr John|
|Campbell, Menzies (Fife NE)||Godman, Dr Norman A.|
|Campbell-Savours, D. N.||Golding, Mrs Llin|
|Canavan, Dennis||Gordon, Mildred|
|Carlile, Alex (Monf'g)||Gould, Bryan|
|Clark, Dr David (S Shields)||Graham, Thomas|
|Clarke, Tom (Monklands W)||Grant, Bernie (Tottenham)|
|Clay, Bob||Griffiths, Nigel (Edinburgh S)|
|Clelland, David||Griffiths, Win (Bridgend)|
|Clwyd, Mrs Ann||Grocott, Bruce|
|Cohen, Harry||Hardy, Peter|
|Cook, Robin (Livingston)||Harman, Ms Harriet|
|Corbett, Robin||Heal, Mrs Sylvia|
|Corbyn, Jeremy||Healey, Rt Hon Denis|
|Cousins, Jim||Henderson, Doug|
|Crowther, Stan||Hinchliffe, David|
|Hogg, N. (C'nauld & Kilsyth)||Pendry, Tom|
|Hood, Jimmy||Pike, Peter L.|
|Howells, Geraint||Powell, Ray (Ogmore)|
|Howells, Dr. Kim (Pontypridd)||Prescott, John|
|Hoyle, Doug||Primarolo, Dawn|
|Hughes, John (Coventry NE)||Quin, Ms Joyce|
|Hughes, Robert (Aberdeen N)||Radice, Giles|
|Hughes, Roy (Newport E)||Randall, Stuart|
|Illsley, Eric||Redmond, Martin|
|Ingram, Adam||Rees, Rt Hon Merlyn|
|Janner, Greville||Reid, Dr John|
|Jones, Barry (Alyn & Deeside)||Richardson, Jo|
|Jones, Martyn (Clwyd S W)||Robertson, George|
|Kaufman, Rt Hon Gerald||Robinson, Geoffrey|
|Kinnock, Rt Hon Neil||Rogers, Allan|
|Kirkwood, Archy||Rooker, Jeff|
|Lambie, David||Rooney, Terence|
|Lamond, James||Ross, Ernie (Dundee W)|
|Leadbitter, Ted||Ross, William (Londonderry E)|
|Leighton, Ron||Rowlands, Ted|
|Lestor, Joan (Eccles)||Ruddock, Joan|
|Lewis, Terry||Sedgemore, Brian|
|Litherland, Robert||Sheerman, Barry|
|Livingstone, Ken||Sheldon, Rt Hon Robert|
|Lloyd, Tony (Stretford)||Shore, Rt Hon Peter|
|Lofthouse, Geoffrey||Short, Clare|
|Loyden, Eddie||Skinner, Dennis|
|McAllion, John||Smith, Andrew (Oxford E)|
|McCartney, Ian||Smith, C. (Isl'ton & F'bury)|
|Macdonald, Calum A.||Smith, Rt Hon J. (Monk'ds E)|
|McKay, Allen (Barnsley West)||Smith, J. P. (Vale of Glam)|
|McKelvey, William||Smyth, Rev Martin (Belfast S)|
|McLeish, Henry||Snape, Peter|
|McMaster, Gordon||Soley, Clive|
|McNamara, Kevin||Spearing, Nigel|
|Madden, Max||Steel, Rt Hon Sir David|
|Mahon, Mrs Alice||Steinberg, Gerry|
|Marek, Dr John||Stott, Roger|
|Marshall, David (Shettleston)||Strang, Gavin|
|Marshall, Jim (Leicester S)||Straw, Jack|
|Martin, Michael J. (Springburn)||Taylor, Mrs Ann (Dewsbury)|
|Martlew, Eric||Taylor, Rt Hon J. D. (S'ford)|
|Maxton, John||Thompson, Jack (Wansbeck)|
|Meacher, Michael||Trimble, David|
|Meale, Alan||Turner, Dennis|
|Michael, Alun||Vaz, Keith|
|Michie, Bill (Sheffield Heeley)||Walker, A. Cecil (Belfast N)|
|Michie, Mrs Ray (Arg'l & Bute)||Wallace, James|
|Mitchell, Austin (G't Grimsby)||Walley, Joan|
|Moonie, Dr Lewis||Warden, Gareth (Gower)|
|Morgan, Rhodri||Wareing, Robert N.|
|Morley, Elliot||Welsh, Michael (Doncaster N)|
|Morris, Rt Hon A. (W'shawe)||Williams, Rt Hon Alan|
|Morris, Rt Hon J. (Aberavon)||Williams, Alan W. (Carm'then)|
|Mowlam, Marjorie||Wilson, Brian|
|Mullin, Chris||Winnick, David|
|Murphy, Paul||Wise, Mrs Audrey|
|Nellist, Dave||Worthington, Tony|
|Oakes, Rt Hon Gordon||Wray, Jimmy|
|O'Brien, William||Young, David (Bolton SE)|
|O'Neill, Martin||Tellers for the Noes:|
|Orme, Rt Hon Stanley||Mr. Frank Haynes and|
|Parry, Robert||Mr. Thomas McAvoy.|