| Previous Section | Index | Home Page |
TRADE AND INDUSTRY
Export Credits Guarantee Department
The Secretary of State for Trade and Industry (Ms Patricia Hewitt): Further to previous statements to the House regarding trading fund status for the Export Credits Guarantee Department (ECGD) on 22 July 2002, Official Report, columns 779–80W, on 17 December 2002, Official Report, column 45WS, and on 26 March 2003, Official Report, column 12WS, I can now tell the House about the measures which my right hon. Friend the Chief Secretary and I have agreed to ensure the future stability and effectiveness of the provision of export credits and guarantees to British exporters. These measures will provide greater certainty for ECGD's future and a better deal for British exporters.
This has proved to be a challenging and complex process. We have listened carefully to the representations made to us by ECGD's customers. We have also been able to take account of the relevant points made by the Trade and Industry Committee in its timely Report to the House on 15 June (HC 506–1) on the work of ECGD. I welcome the Committee's analysis of the issues and I acknowledge its request to end the uncertainty about ECGD's future.
The House will be aware that I have begun to strengthen the top management team at ECGD. Earlier this year I appointed Graham Pimlott as Chairman. He has considerable banking experience and helped prepare the plans I am announcing today.
1 Jul 2004 : Column 22WS
On 5 July, ECGD's new Chief Executive, Patrick Crawford, who also has a strong private sector background, will take up post.
They will be working with the Shareholder Executive, now part of the DTI, to prepare strategic and business plans for ECGD. Consistent with these measures, HM Treasury will adopt a more strategic approach to its oversight role.
We have all been aware of the comparisons made between ECGD and overseas export credit agencies, and we share a determination to see the standard of service rise to the world's best.
I can announce today that the Chief Secretary and I have agreed on a programme of action which will ensure ECGD has a firm basis for its future operations and enable the new top management team to introduce measures that offer British industry a world class export credit service.
ECGD will be authorised to offer its full range of current products and geographical spread of business.
ECGD will aim to reduce its premium rates to customers by up to £5 million per annum, as from April 2005, whilst complying with relevant international minimum premium benchmarks.
The DTI will invest up to £10 million over two years from 1 April 2005 to help ECGD improve the efficiency and effectiveness of its operating framework in order to sustain reductions in premium rates.
The Government will continue to press for the elimination of interest rate subsidy on a multilateral basis. In the meantime, ECGD will continue to run a limited fixed rate export finance (FREF) scheme within the trading fund framework. This will be reviewed after three years in the light of experience and progress internationally.
A trading fund will be established with a capital framework to enable ECGD to take a more confident and expansive approach to cover. The aim will be for ECGD to make cover available at the right price according to the assessment of risk.
The Chief Secretary and I are agreed on the structure for the trading fund:
Trading fund will have two separate accounts—realisations and new business. They will be capitalised and accounted for separately and have separate financial objectives.
Capital for new business will be £1.8 billion. This capital will maintain the risk -reward balance on cover and pricing. There will be adequate headroom to manage both business growth and risk volatility.
The new business account target rate of return will be an affordable rate, specifically designed to deliver ECGD's existing pricing regime. The Government have charged ECGD to continue pricing to break-even, in line with international agreements on export credit, not to maximise profits.
The Government estimate the economic cost of this commitment to be approximately £120 million per annum, and will be publishing budgeting arrangements for this in the 2004 spending review.
Introduction of risk management policies and systems based on best commercial practice.
Revised Treasury consent giving ECGD greater autonomy on cover and premium policies.
The new business account will have four aims: to provide a good quality of service at a reasonable cost to exporters, to break-even in financial terms, to maintain the current risk—reward balance, and to remunerate its capital at an affordable rate of return. This has been calculated to ensure it can be met from current premium rates without any across the board increase. Initially, the affordable rate will be set at 1.25 percentage points above the current national loans fund (NLF) rate of interest. At today's NLF rate, the affordable rate would be just under 5 per cent. per annum.
In establishing the framework for the trading fund, I had three objectives. First, it should provide a structure for managing ECGD's business consistent with the current risk-reward balance and business domain. In other words, ECGD should be able to maintain its support for current levels of business. Second, it should help to improve risk management. This is vital to assure taxpayers that they are getting value for money. And third, there should be transparent arrangements for reporting and accounting the economic costs to Government associated with ECGD's business.
These provisions will come into effect progressively from today. A period of operating a pilot trading fund from next April will give management the opportunity to test and assess these arrangements before we establish the right level of capital for a statutory trading fund to be vested in April 2007. During this pilot, we will consult customers on whether the Pilot has achieved its objectives, with the intention of informing Ministers' decision on the move to a statutory trading fund in 2007–08.
This challenging programme will put ECGD on a sound business and financial footing for the future. I have every confidence that it will allow ECGD's staff to deliver the service which its customers expect and deserve.
ENVIRONMENT, FOOD AND RURAL AFFAIRS
Flood Defence Committees
The Minister for the Environment and Agri-environment (Mr. Elliot Morley): On 20 April I announced the progress that we were making in implementing the outcome of the review of funding and administrative arrangements for delivering a more efficient, effective and accountable flood and coastal defence service. I said that I would be considering proposals from the Environment Agency for a single tier of flood defence committee in England to remove the bureaucracy and second-guessing of decisions involved in having two tiers of committee in several Environment Agency regions.
I have now completed this consideration and have decided to accept the agency's recommendations on the new structures. These recommendations, which followed extensive consultation by the agency, are that the local flood defence committees in the Anglian, Southern and Wessex regions should be abolished.
1 Jul 2004 : Column 24WS
I have concluded that the present Anglian region should be split to create three new regional flood defence committees. One would comprise the areas of the present Essex and Norfolk and Suffolk local flood defence committees; one the area of the present Great Ouse local flood defence committee; and one the area of the present Welland and Nene and Lincolnshire local flood defence committees.
In Southern and Wessex regions, I have concluded that each should continue to be served by a single regional flood defence committee with their boundaries unaffected.
I believe that these decisions strike the right balance between the need to have regions that are large enough to have a sufficiently strategic focus while also maintaining in appropriate degree of local representation. I have also taken account of other issues including the diversity of the regions and the relative complexity of their flood defence needs. While I have on balance concluded that the present Anglian region should be split into three, as the Environment Agency recommended, I have also decided that this should be reviewed after three years of operation.
The composition of the regional flood defence committees will be unchanged; constituent local authorities will continue to appoint a bare majority of members; the Environment Agency will appoint two members and my right hon. Friend the Secretary of State will appoint the chair and remaining members. However, in putting forward their proposals for new structures the Environment Agency suggested a number of changes to the size of committees; my officials will be working with the agency and others on these proposals. Consideration will also be given to the titles of the three new regional committees in Anglia.
The Environment Agency proposed that in future the committees be known as "regional flood risk management committees" to reflect the fact that their remit, and that of the agency, is about managing flood risk in an holistic way rather than simply building flood defences. Such a change is not possible given that their present title is enshrined in the Environment Act 1995. However, it is important to acknowledge that the approach adopted by the committees is much wider than their title implies.
The orders to give effect to these changes will be introduced as quickly as possible with a view to their taking effect from April 2005.
I also want to refer to the announcement made by Carwyn Jones AM, in the National Assembly for Wales on 29 June, about the intention to create a single tier flood defence committee for Wales, based on the administrative boundary of Wales. He and I have both emphasised the importance of our Departments and the Environment Agency developing effective arrangements for managing the cross border catchments once this change takes effect; we will set these out in due course. This decision means that adjustments will be necessary to the boundaries of the Welsh, Severn Trent and North West flood defence committees, which are currently based on river catchments. We shall pursue the orders to give effect to these changes in conjunction with the National Assembly for Wales.
1 Jul 2004 : Column 25WS
| Next Section | Index | Home Page |