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The business support that we now provide is often in the form of loan guarantees or loans. Those can offer better value for money for the taxpayer in the long term, as loans are repaid over time and only a proportion of guarantees will ultimately need to be met. The hon. Members for Hertford and Stortford (Mr. Prisk) and for Solihull (Lorely Burt) recognised and welcomed that.
I want to be clear that when we offer loans or loan guarantees, the full amount secured against public funds will count towards the section 8 limit. That is one of the reasons why we need to increase the limit; we debated the issue on Second Reading. We think that £12 billion is a sensible limit at the current time, when it is vital that we maintain sufficient flexibility to respond to the challenges ahead. I want to say something more about flexibility in a moment, because it is relevant to the hon. Gentleman’s point about the balance of funds between grant schemes, loans and loan guarantee schemes.
However, I also want to be clear that the section 8 financial ceiling does not itself authorise any actual expenditure. The Bill retains the accountability to Parliament contained in the existing legislation, and I can confirm that that is through the need for affirmative orders of the Commons, which would replace the existing limits with new, higher ones, reflecting the need for continuing support for industry when necessary.
We have maintained the £10 million limit for the referral of single expenditure schemes back to the House. As the hon. Gentleman said, an annual report will continue to be published in the Commons Library, setting out how single projects are funded. Combined, the measures provide an appropriate balance between accountability and providing the Government with the legal power to respond to business need.
Mr. Prisk: The annual report can be helpful, but as the Minister will understand and Members on both sides of the House will appreciate, when we are considering an order for an increase of the not insubstantial sums identified in clause 1, it will be helpful if we can see the current point when we debate the issue in Committee, rather than just having the annual report. That was what my point was about. Does the Minister not accept that that would improve the quality of scrutiny in the House?
Ian Pearson: I understand the hon. Gentleman’s point and I undertake to consider it. If we lay affirmative resolutions, we want to be able to give the reason why they are necessary. Obviously, that would relate to the spend or potential liabilities as a result of Government commitments.
The hon. Gentleman asked specific questions about the top five schemes. He can see them in the annual report. They include the grant for business investment—previously called “selective financial assistance”—the enterprise finance guarantee scheme and the Post Office reinvention programme; those would account for the bulk of it. The hon. Gentleman specifically mentioned the Post Office reinvention programme and, as he will be aware, we have made a commitment to the programme of £1.7 billion over the years 2006 to 2011. At this point, I cannot give the hon. Gentleman an actual
expenditure figure, although I am sure that some of that information can be made available. However, it is clear that there is a programme of spending going on over a five-year period, and that that spending will take place at the appropriate time for the business.
Mr. Prisk: The Minister tells us that the three principal schemes include the Post Office reinvention programme. Some Members will be surprised that that comes ahead of, for example, the automotive assistance package, which they might assume would be larger. Is he telling us that that package is not even one of the most important packages in the total number?
Ian Pearson: No, I am not saying that. I want to draw a distinction between schemes that have been in the annual report previously and new schemes that the Government have introduced. As the hon. Gentleman will be aware, the automotive assistance programme was launched as recently as on 27 January this year. It is a new scheme and, as with all new schemes, it had to go through a process of securing EU state aid approval, which was granted on 27 February. We are in detailed discussions with several automotive companies about the programme. He will be aware of the recent announcements made under the European Investment Bank element of the programme whereby Jaguar Land Rover and Nissan have been offered loans by the EIB. We will want to report to Parliament on the automotive assistance programme and on other programmes in due course, because we believe that there should be full accountability in this area.
The hon. Gentleman will also be aware that the enterprise finance guarantee scheme, which replaced the small firms loan guarantee scheme, is now very much up and running. It is spending significant sums of money, to the tune of about £30 million in loans offered every week. The latest figures that I have seen show that well over 2,000 businesses have made applications to it.
I think that it is now time for the hon. Gentleman and the hon. Member for Solihull to welcome the new scheme and to recognise that the Government have introduced it in a remarkably short period, and that it is providing valued support to companies and helping to make a difference to those that are receiving it.
Lorely Burt: I am sure that all Members welcome any funding that is finally trickling through to business. The Minister mentioned Jaguar Land Rover. Its assistance under the EIB element has not yet materialised, as it is still waiting for the Government’s due diligence to take place. It is obviously important that due diligence takes place, but it appears to be taking a long time. Why is that?
Ian Pearson:
Let me clarify the situation. Jaguar Land Rover has successfully applied to the EIB for a loan to undertake a number of green projects, and it will be up to the Government to provide a guarantee for that loan. That is part of the package of support that Jaguar Land Rover will need to secure its long-term future. We are in discussions with the owners of JLR, as well as its management and its banks, about a package to ensure that it can continue to develop its model programme and have a secure future. The hon. Lady knows JLR well because of her constituency connections. She will be aware that as a west midlands MP, I am also fully aware of its strategic importance not only to the
west midlands economy but more generally to the automotive industry in the United Kingdom. We need to continue the discussions that we are having. However, I emphasise the fact that JLR is a successful company that, as with all motor companies, is suffering from the severe economic downturn, which has affected its business just as other businesses in the automotive industry have been affected. However, it was making good profits in the period January to June 2008, and there is absolutely no reason why it cannot do so in future. We need to continue to consider what is the appropriate role for Government in providing support to JLR, and we are doing that in the discussions that we are taking forward with it at the moment.
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The other point that I want to make about clause 1 is related to the request from the hon. Member for Hertford and Stortford that we seek to break down how much has been provided in grants and how much will potentially be provided in loans and loan guarantees. I do not have those figures to hand, but clearly expenditure, whether in the form of grants, loans or loan guarantees, all contributes to the need for an authority to spend. We are seeking through the Bill an increase in the limits. However, I will reflect on whether we can provide more and better information, not just in the form of an annual report but on a slightly more regular basis. It would not be appropriate to have a running commentary every week or month, but I recognise that it is not unreasonable to want some more detail about spending progress.
Mr. Prisk: I am grateful to the Minister, not least for being generous in giving way. I return to my original point. He highlighted the fact that the annual report, for example, showed a certain balance of schemes, and now events have changed. He is right, and we understand that that will continue to be the case. It seems to me that a logical pattern would be that when the Government need to come forward with a request for an additional increase over and above the existing limit, that is the obvious moment at which we in the House would benefit from being able to see the current snapshot of the balance.
I am slightly disappointed that the Minister does not have the figures on the balance between loans and grants, but I wonder whether he will ensure that at least some information can be provided to Members. We will not have the chance to consider this further, as this is the last day on which we will have the opportunity to discuss the Bill. Given the fact that Ministers cited the balance between grants and loans as the principal reason for change, it would be helpful if we could at least have the evidence of what the current balance is and what the Government’s expectation of change is. Does the Minister accept that, and will he undertake to provide it?
Ian Pearson:
I certainly accept that the reason why we need to increase the limits is that a lot of the programmes that we have looked to introduce have been guarantee schemes. Whether the headline guarantee figure is £1.3 billion for the enterprise finance guarantee or £2.3 billion for the automotive assistance programme, it all contributes to the need for the authority to incur expenditure. In that sense, I have given the hon. Gentleman
some of the key figures. I shall happily write to him and put a copy of the letter in the Library, explaining a further detailed breakdown of the schemes as far as I can. Obviously some of that will depend on future draw-down of loan guarantees, so inevitably figures cannot be precise, but we can certainly provide more information. I am happy to undertake that that will be done.
Clause 1 accordingly ordered to stand part of the Bill.
Lorely Burt: I beg to move amendment 1, in page 1, line 23, at end add—
‘(3) Arrangements falling within subsection (2) may be made only if the Secretary of State is properly satisfied that an adequate case impact assessment has been carried out in accordance with the principles established for the Export Credits Guarantee Department or such other body performing comparable functions as the Secretary of State considers appropriate.’.
First, I extend my thanks to the Jubilee Debt Campaign, Transparency International and the WWF for the help and advice that they have extended. Clause 2 will amend the Export and Investment Guarantees Act 1991, which governs the Export Credits Guarantee Department’s remit, so that the ECGD can provide financial backing for exports that are already under way. My concern is that that will allow for the possibility that the ECGD’s business principles governing environmental standards, sustainable development impacts and corruption will be circumvented.
It is important that the Government do what they can to support British business in a time of recession. However, there is widespread agreement that such support needs to be sustainable and as green as possible, and that it does not do more harm than good. The worry is that the ECGD could, if it supports exports that have already been supplied without the usual due diligence, inadvertently support projects that have a negative impact on developing countries and add to their unjust and unpayable debt burdens. Civil society groups already have serious concerns about the role of the ECGD in supporting investments that have been linked to human rights violations, corruption, environmental damage and increased debt in poor countries. There needs to be an improvement in the ECGD’s involvement rather than a reduction of the existing standards.
Transparency International UK says that there is no evidence that the Government have consulted interested civil society organisations or the Export Guarantees Advisory Council. Given the speed with which the amendment to the 1991 Act has been drafted and the lack of consultation, the consequences are potentially serious and need to be tackled. We are concerned that there is no safeguard for applying the business principles and anti-bribery provisions. To satisfy the ECGD’s business partners’ need for certainty and ensure speed of decision making, the business principles and due diligence procedures may be watered down. Many sectors with which the ECGD has the greatest involvement are historical hotbeds of corruption.
The ECGD currently carries out a case impact analysis to ensure that the principles will not be breached. We simply ask that the Secretary of State certificate that in some way. The ECGD, not the supplier, should undertake the due diligence. That is basically an on-the-record assurance that the case impact analysis has been done.
I am not trying to delay matters, but we must make provisions to ensure that, when the Government exercise discretion and award guarantees when the export process has already begun, at least the same principles are used to approve guarantees as those that apply when companies wait for approval before going ahead.
Mr. Elliot Morley (Scunthorpe) (Lab): I want to make several points about clause 2, which are very much in line with the comments of the hon. Member for Solihull (Lorely Burt).
I greatly welcome the general powers in the Bill, especially in clause 1, to support industry. My hon. Friend the Minister knows that I represent a steel constituency, and support for manufacturing, when justified, is important, especially in the current circumstances. I appreciate that he, too, represents a manufacturing area. I strongly welcome the powers to provide support for manufacturing.
The hon. Lady made some important points about clause 2. My hon. Friend knows that there have been several meetings about the powers that the ECGD should have to ensure that supported projects fulfil high standards of sustainable development, and have good environmental and social standards. He also knows that new guidelines have been drawn up for the ECGD. A debate is continuing with organisations such as WWF about whether the guidelines are adequate and meet the standards.
There is a worry that because of the wording of clause 2 some existing arrangements do not meet the ECGD’s guidelines on sustainability and environmental standards. I would certainly welcome some assurances on that, because the issue might be one that my hon. Friend the Minister’s Department could address by ensuring that even if there is some element of retrospection, as provided for in clause 2, an assessment could still be made of any potential scheme. That is important to the non-governmental organisation community, as well as many hon. Members in all parts of the House, including me, and I would welcome some assurances on it.
I would also appreciate perhaps just a comment about the wording of clause 2(1), which gives the Secretary of State clear powers to
“make arrangements under this section in connection with supplies by persons carrying on business in the United Kingdom of goods or services to persons carrying on business outside the United Kingdom.”
That seems quite a broad definition, so I wonder whether my hon. Friend could clarify whether it gives the Department some flexibility in the potential standards that it might apply in relation to any loan guarantee.
Mr. Prisk: I commend the hon. Member for Solihull (Lorely Burt) for tabling amendment 1, not least because I hope that it will enable the Minister to put on record the Government’s full position.
At the heart of clause 2 is the Minister’s stated wish to update the facilitating role of the Export Credits Guarantee Department, notably, as we have heard from hon. Members on both sides, with more challenging export and overseas projects. The Government are right to say that the way in which high-value capital goods are transacted today has changed considerably since the original Export and Investment Guarantees Act 1991 was passed. Conversely, the scope for social, ethical and environmental due diligence by the Government has, for all the best reasons, increased over that period quite significantly. The net result can be, although not in all cases, to slow the ability of the ECGD to keep up with modern business timetables. There is therefore a case for trying to enable British exporters to trade, while not reducing our national approach towards ethical and environmental standards.
That is why clause 2 has the support of the CBI and, quite rightly, the British Exporters Association. It is also why we support the Government’s aims in making such a change. After all, it is vital, as the right hon. Member for Scunthorpe (Mr. Morley) rightly pointed out, that we ensure that businesses can compete in a modern economy, now more than ever. However, there are reasonable questions about the effect of the clause, especially in the minority of cases where projects may have an important ethical or environmental consideration. As the hon. Member for Solihull rightly pointed out, the World Wildlife Fund has rightly set out questions about how projects might be underwritten retrospectively and about how the Government will ensure that they have not breached human rights or created unacceptable environmental damage. Other people are also concerned about the potential problem of bribery in those areas where corruption is rife.
Large-scale infrastructure projects would be especially challenging to police or to audit retrospectively. Equally, if a substantial contract—perhaps for a new dam or a bridge—is commenced, what is the likelihood of the ECGD subsequently withholding support, given the likely economic, employment or political difficulties in such a case? Those are reasonable questions.
Furthermore, as I understand it, the ECGD currently conforms to the standards set by the World Bank. I have tried to consider those and, as I see it, the standards clearly require assessments to be completed before financing is agreed. If that is true, does clause 2 not breach World Bank standards? It would be helpful if the Minister could confirm or clarify that.
For both those reasons we support amendment 1, which has been tabled by the hon. Member for Solihull. I hope that, in his response, the Minister will clearly set out the Government’s policy and assure us that their standards will not be diluted as a result of clause 2.
Ian Pearson: I can indeed assure the Committee that there is nothing in clause 2 that dilutes the high environmental standards or the policies against bribery and corruption that are adopted by the Government. Let me respond to the debate by saying some words about the reason for clause 2. I apologise if I go slightly broader than amendment 1, but other hon. Members have done so, and it seems appropriate for me to do so, too.
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