The Export Credits Guarantee Department and the Export Guarantees Advisory Council

Orders of the Day — Export and Investment Guarantees Bill – in the House of Commons am 4:45 pm ar 22 Hydref 1991.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Lords amendment: No. 2, in page 7, line 40, at end insert—

("(4) In exercising his duty under section 11(1A) of this Act, the Secretary of State shall consult the Export Guarantees Advisory Council.")

Read a Second time.

Photo of Ms Joyce Quin Ms Joyce Quin , Gateshead East

I beg to move amendment (e) to the Lords amendment, in line 4, at end add 'and shall be obliged to consult the Council in the exercise of his duty under that subsection if so requested by the Council'. The amendment strengthens the Lords amendment and places on the Secretary of State an obligation to consult the Export Guarantees Advisory Council if the council so requests. That is in addition to the Secretary of State's obligation under the Lords amendment.

Our amendment would allow the Export Guarantees Advisory Council to institute consultation rather than simply waiting for the Secretary of State to begin consultation with the council. We tabled the amendment because we felt that exporters might be worried that their views would be ignored by the Government.

There have been plenty of examples during the passage of the Bill and in recent industrial and economic legislation of exporters being ignored. Our amendment strengthens the Lords amendment. We feel that it is useful because the Export Guarantees Advisory Council may well wish the Secretary of State to look again at certain moments at the extent of reinsurance that the Government are willing to provide. Our amendment would enable such consultation to take place at a time deemed appropriate by the council and not only at the moment judged appropriate by the Secretary of State.

5.30 pm

We should have liked to widen the Lords amendment to include consultation with representatives of the British exporting community, including organisations such as the British Exporters Association, the Institute of Export and so on. But unfortunately, that is not possible under the terms of the Lords amendment, which refers specifically to the Export Guarantees Advisory Council.

Perhaps the Minister would be good enough to comment on whether he envisages a formal consultation process with exporters in general and with their representative trade associations. In other words, in exercising his authority under this part of the Bill, does the Minister feel that it would be advisable to consult not only the EGAC but as wide a range as possible of representatives from the exporting and industrial community?

The reason why we are so keen to strengthen the role of the Export Guarantees Advisory Council is that there is a great need for a watchdog role in this privatisation. In other privatisations, some sort of watchdog authority has been set up, even though its powers may have been disappointing to many of us who believe in strong regulation in the public and the consumers' interest.

However, the Bill creates what amounts to a private monopoly. We are used to the Government privatising and creating private monopolies. Some sort of regulatory function needs to be strengthened in this privatisation so that exporters and exporting companies, the consumers of the privatised company's services, have an opportunity fully to express their view, especially on the role of the Secretary of State in providing a reinsurance facility to the newly privatised ECGD.

I stress that the Government are effectively creating a private monopoly. The Minister may say that other export credit insurers may well provide services to the British exporting community. Those exporters include exporting outfits in other European countries which may come to Britain and try to gain business. But perhaps the Minister is not aware of the difficulties that one such company, Hermes, the German export credit insurer, has had in the British market. Those difficulties reinforce our view that the Government have created a private monopoly which other companies will find difficult to challenge.

I have in front of me a letter that Hermes sent to various people involved in exporting in Britain. It explains that, over several months, Hermes was interested in offering credit insurance to the United Kingdom market, but that, unfortunately, the enormous increase in the number of insolvencies in our economy in recent months meant that it was simply not viable to operate in Britain as it had hopes to do.

In the letter, Hermes refers to the adverse economical situation of a vast variety of United Kingdom companies". That has forced it to examine its current policy portfolio as well as its underwriting practices. That makes it clear that, while in theory there may be competitors for NCM —the new privatised company to which the Government have sold part of the ECGD—in practice, especially in the current economic climate, it is unlikely that there will be much in the way of competition. Therefore, the Government have effectively created a private monopoly.

For that reason, our amendment, which strengthens the role of the Export Guarantees Advisory Council, is important, because it will provide the only watchdog element in the process which could stand up for the customers of this new private monopoly. We are understandably attached to the ideas behind amendment (e) and we hope that the Government will look sympathetically on them.

We are also worried about what may happen if the new company which takes over the ECGD finds itself in financial difficulties or is tempted to sell out to some other purchaser after a certain period. In such circumstances, it is important that the EGAC should have a watchdog role and that it should be able to oblige the Government to consult it, in addition to responding to the Secretary of State's invitation to meet him to discuss the export situation. It is vital for the EGAC to be fully involved in the process.

The amendment will also provide one way of overcoming the rather secretive approach of the Department of Trade and Industry to many export insurance activities. If the advisory council is involved, at least that will open out beyond the DTI and via the council into the wider exporting community the debate on how far to provide reinsurance.

Amendment (e) is modest in the sense that, although it strengthens what the Government propose, it still refers merely to consultation. Obviously, that still does not tie a Secretary of State down, but at least it would mean that those who will he considerably affected by the Secretary of State's exercise of this power will have the chance to make their feelings known. That is why we feel that the amendment is important. We hope that the Government will look sympathetically on it.

Photo of Hon. Tim Sainsbury Hon. Tim Sainsbury , Hove

The hon. Lady said that we were creating a private monopoly. I hope that she listened carefully enough during our earlier proceedings to recognise that the Insurance Services Group of ECGD, which is being privatised, is not a monopoly now and certainly will not be after privatisation. It is the general expectation of exporters that the level of competition in the market is likely to increase after 1992.

Interestingly, the hon. Lady referred to the letter from Hermes. The difficulties which that insurance provider has experienced in the British market are solely connected with domestic business and are not connected with export credit insurance. As the hon. Lady knows, the new company will be able to offer insurance in domestic sales after privatisation and therefore will provide a still better service to British exporters. ISG is not a monopoly now and certainly will not be after privatisation. The general expectation is that there will be increased competition. Competition will come not only from other insurers but through exporters using other methods such as forfaiting.

The hon. Lady referred to her amendment to Lords amendment No. 2 as modest. I find it not so much modest as puzzling. Perhaps I can best demonstrate my puzzlement by reading to the House the text of the Bill as it would appear if we accepted the Opposition amendment as well as the Lords amendment. It would read: In exercising his duty under section 11(2) of this Act, the Secretary of State shall consult the Export Guarantees Advisory Council and shall be obliged to consult the council in the exercise of his duty under that subsection, if so requested by the council. I do not understand how he shall be required to consult the EGAC and then be obliged also to consult it if he is requested to do so by the council.

The amendment seems not so much modest as unnecessary. For that reason, amendment (e), which the hon. Lady said was modest and a strengthening of the Lords amendment—I take that to mean that she approves of Lords amendment No. 2—would not have any such effect. Indeed, it would have no consequence at all. The advisory council need not be asked for consultation, because the amendment already says: the Secretary of State shall consult". I therefore feel that amendment (e) is redundant.

As for Lords amendment No. 2, I commend it to the House.

Like Lords amendment No. I, the amendment is related to the question of the reinsurance support that will be available from the ECGD after the privatisation of the Insurance Services Group. It forms part of the response that we gave to the desire expressed in both Houses for the Government's commitment on the reinsurance to appear on the face of the Bill. It also reflects the call for the Government to consult widely when conducting any future review of that support. We have undertaken to consult exporters generally about matters affecting them.

Lords amendment No. 2 is extremely straightforward. It simply requires the Secretary of State, when fulfilling his duty under new clause 11(1)(a) to determine the national interest case for providing reinsurance—which we have just discussed—to consult the advisory council. Although the amendment imposes a separate obligation on the Secretary of State, it is inextricably linked with the obligation imposed by new clause 11(1)(a) and is not entirely free-standing.

The purpose of the amendment is to ensure that, before reaching a conclusion on the need for ECGD reinsurance, the Secretary of State will have had the benefit of advice from the highly respected advisory council. The council's advice is an important resource, which we must use wisely. We must not overlook the fact that membership is honorary and that all the council's members have heavy responsibilities to discharge in industry and the City. We must avoid overburdening them. The Bill places no constraint on the demand for their time; indeed, it introduces some new calls that might be made on that time.

In practice, the ECGD will call on the council's services when it can be expected to make the most helpful contribution, while avoiding converting the council into a kind of supervisory board—let alone the watchdog suggested by the hon. Member for Gateshead, East (Ms. Quin). I am happy to commend that arrangement to the House. I feel that the requirement for the Secretary of State to consult a valuable body of advisers will strengthen the Bill, and will make it even more helpful to the interests of British exporters.

Photo of Ms Joyce Quin Ms Joyce Quin , Gateshead East

I have listened carefully to what the Minister has said. Although we approve of Lords amendment No. 2, which is an improvement on the previous wording in the Bill, I do not agree with the Minister that our amendment is redundant. We believe that it strengthens the text of the Lords amendment: it gives the advisory council an opportunity to oblige the Secretary of State to consult it at a stage that it—the council—considers appropriate.

It is really a question of timing. It is possible that the council will have been consulted by the Secretary of State about the provision of reinsurance in certain circumstances, but that the council itself will then deem that those circumstances have changed, and will wish to make further official representations to the Minister. Our amendment would give the council that statutory right; the Lords amendment does not.

We are convinced that our amendment strengthens the existing wording of the Bill. Given the need to make progress, however, I beg to ask leave to withdraw the amendment.

Amendment to the Lords amendment, by leave, withdrawn.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Gorllewin Caerdydd 5:45, 22 Hydref 1991

I beg to move amendment (f) to the Lords amendment, in line 4, at end add 'particularly with regard to the principles in accordance with which the Secretary of State shall determine whether any reinsurance may be provided under that section'. I am sorry that, for various reasons, some of my hon. Friends who—along with me—tabled the amendment are not present.

The problem with Lords amendment No. 2 is that there is still an element of "We shall consult if we feel like it." The guiding principle is that the Secretary of State will consult, but only if he considers it right to do so. There is no provision for the advisory council to express dissatisfaction formally with the way in which things are going.

Clause 13(2) states: There shall continue to be an Export Guarantees Advisory Council. That is a good guarantee, but subsection (3) goes on: The function of the Council shall be to give advice to the Secretary of State, at his request". If the Secretary of State does not request that advice, the council cannot give it.

That is not a very good recipe for any kind of exercise of independence or incisiveness by the council. It will not work if matters on the trade front continue to deteriorate, and the level playing field that British exporters are always asking for seems to be tilted further and further away from them because of Government timidity, inactivity and inertia—and all the other qualities that the CBI has cited to describe the Government's approach to long-term support for manufacturing industry. The front pages of today's Times and Financial Times highlight what has been said in a document that is bound to feature extensively for the next six months, or longer, in the run-up to the people's final verdict on 12 disastrous years of the Government's stewardship—if it can be called that—of trade and industry.

We want to get away from the "when I feel like it" approach that the Secretary of State is reserving for himself. He is setting up a body that is supposed to act as a sounding board, providing a second opinion and guidance from those in the appropriate field to prevent him from becoming even more isolated than he is now from the people on the chalk face of exporting. That body, however, cannot move unless he allows it to do so. He can say, "Well, chaps"—and perhaps there will be a statutory lady—"how do you think I am doing? Is it going OK?" If the members of the council reply, "It is not going too badly, Minister; perhaps you should ask us again next year", that will be the way in which matters will continue.

If, however, the council's members feel that he is going seriously wrong, rumours will reach the Secretary of State, who will say, "I will make absolutely sure that I do not ask them. If I do not ask them, they cannot tell me, and then no adverse report will be made." There will then be no possibility of the matter coming before the House, and no possibility that hon. Members will be told that the advisory council is not at all happy with the way in which the Secretary of State is handling his responsibilities for the provision of reinsurance for the new company.

Our amendment would ensure that the Secretary of State was required to consult the advisory council about the criteria that will determine whether Government reinsurance for the privatised ISG—reinsurance of a top-up, "national interest" variety—is to continue, or whether it should be eased off gradually. In the latter event, it must be established whether it is being eased off in a way that disadvantages those involved in exporting, in export finance or in export insurance.

Without the amendment, the Government will determine their criteria without the possibility of challenge, unless they choose benevolently to submit themselves to possible criticism from the council. That is not good enough, simply because the Government have been unwilling to lay out the criteria for top-up insurance. They have therefore earned considerable mistrust, as is evident from today's CBI report.

A two-way relationship is needed, with the Secretary of State being able to consult the advisory council and the advisory council being able to consult the Secretary of State. It must not be a one-way street, for that would confirm all the worst aspects of the deterioration in relationships between the DTI and trade and industry. We want to make sure that the advisory council can come back at the Government if it thinks that things are going the wrong way. The Government will then have to respond constructively to the council's criticisms and will be able to steer the DTI back on to the right course so that industry does not feel that it has been let down. It has been let down in the past and it is being let down at present. It may be let down in the future by the DTI without our amendment. That would be insupportable, if we are to recover our position as a major trading nation.

Photo of Hon. Tim Sainsbury Hon. Tim Sainsbury , Hove

As we heard to our delight on many occasions during the Committee proceedings on the Bill, the hon. Member for Cardiff, West (Mr. Morgan) has once again been carried away by the exuberance of his own verbosity. I fear that he was carried so far away that he forgot what it was that he was putting to the House by way of an amendment.

The hon. Gentleman said that consultation was a two-way street. My impression—I suspect that it is widely supported in the House—is that the Secretary of State is responsible for his decisions and is answerable to the House for them. I do not therefore see how the Export Guarantees Advisory Council could consult the Secretary of State. It is not the responsible body. As I explained when we discussed the previous amendment, its role is to give advice from its great knowledge and background experience of exporting to the Secretary of State, who is the person with the responsibility, who has to take the decisions and who is answerable to the House.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Gorllewin Caerdydd

The point that I made was that, without our amendment, it will be a one-way street. The Secretary of State needs to consult the council only when he feels like it. That is hardly a healthy relationship. There is no possibility of the council approaching the Secretary of State and saying, "We wish to be consulted, because things are going wrong and we want you to put them right."

As the Secretary of State for Trade and Industry will seek to avoid embarrassment when things are going wrong, he will avoid consulting the council. The council will then have to remain silent. The council will be of no value, except when things are going well, when it does not need to be consulted. What is the Minister's answer?

Photo of Hon. Tim Sainsbury Hon. Tim Sainsbury , Hove

I was pointing out that it is the Secretary of State who has responsibility and who is answerable to the House. The hon. Gentleman's amendment refers to consultation particularly with regard to the principles in accordance with which the Secretary of State shall determine whether any reinsurance may be provided under that section. We are discussing a Lords amendment—with which the hon. Member for Gateshead, East (Ms. Quin) says the Opposition agree—which places an obligation on the Secretary of State to consult the Export Guarantees Advisory Council. He will consult, when appropriate, on a broad range of issues. I have no doubt that the council will make the Secretary of State aware of its views on any matter of which it believes he ought to be aware. Moreover, the council consists of individuals with considerable experience of industry, banking, financial services and exporting. As people in senior positions, they will have other opportunities to make their views known, perhaps through other organisations.

We shall continue, as we do now, to consult widely and to listen carefully to the views of industry, in particular to the views of exporters. It is not practicable for the Secretary of State to be asked to delegate to another organisation the determination of the principles on which he will base his decisions. He will have to take into account a wide range of issues. The role of the advisory council is, as it has always been, to assist the Secretary of State by bringing its financial and commercial knowledge to bear upon the ECGD's business.

The hon. Gentleman referred to setting up a body. I remind him that the Export Guarantees Advisory Council has been in existence for a long time. Its members have always been appointed from industry and financial services. As I said before, we do not want to overburden them. They will be consulted, as required by the previous amendment. They will have every opportunity to put forward their views on all relevant issues. Their advice will continue to be of value to the Secretary of State.

The Secretary of State will continue, as he does now, to support the work of British exporters, not only in the ways to which I have referred but through the continuing work of the Export Credits Guarantee Department. In addition to the 2,000 staff to whom I have referred, he will have the services of all the excellent and experienced staff of that department. British exporters will continue to have the services of the ECGD, and also the services provided by a privatised Insurance Services Group, based in Cardiff, which is known for its expertise and skill and for the excellent service that it now provides for British exporters. As the hon. Gentleman well knows, as a result of privatisation it will be able to provide a still better and a more flexible and responsive service to help British exporters to continue to achieve the excellent results that they have already achieved, as announced today, but which seldom, if ever, are praised from the Opposition Front Bench.

Amendment to the Lords amendment negatived.

Lords amendment agreed to.