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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.
8.14 pm
Mr. Geoffrey Robinson (Coventry, North-West) : 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
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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 ?
Mr. Gerald Howarth : Has GEC considered taking the risk on its own books?
Mr. Robinson : That is 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
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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.Mr. Gerald Howarth : 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?
Mr. Robinson : 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
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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.
Mr. Tam Dalyell (Linlithgow) : 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?
Mr. Deputy Speaker (Sir Paul Dean) : I have had no request for a statement, but I am sure that the Treasury Bench has heard the point made by the hon. Gentleman.
8.26 pm
Mr. Martin M. Brandon-Bravo (Nottingham, South) : 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
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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
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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.Dr. John Marek (Wrexham) : I do not think that what the hon. Gentleman says is true. The staff terms and conditions will not be protected--especially the pensions. Perhaps, through the hon. Gentleman, I can ask the Minister to confirm that. However, I think that there is a serious question about it.
Mr. Brandon-Bravo : 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.
8.35 pm
Mr. Rhodri Morgan (Cardiff, West) : I speak tonight as the Member for Cardiff, West, not in my capacity as an 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
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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.
Mr. Janman : 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.
Mr. Morgan : 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
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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
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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.
Mr. Brandon-Bravo : 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.
Mr. Morgan : 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.
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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
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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. 8.56 pmMr. Tim Janman (Thurrock) : 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
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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 ;
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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.9.5 pm
Mr. Alun Michael (Cardiff, South and Penarth) : The repetition by the hon. Member for Thurrock (Mr. Janman) of the word "good" does not make good a bad 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
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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.
Mr. Gerald Howarth : 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?
Mr. Michael : 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
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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 :
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