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4.15 pm
The hon. Member for Hertford and Stortford (Mr. Prisk) rightly raised the issue of the problem of using the word “facilitating” when it comes to the supplies of goods or services. That has created difficulties for British exporters, because the Export Credits Guarantee Department cannot facilitate exports if they have already been supplied. As the hon. Gentleman rightly pointed out, and as I did on Second Reading, there are two main reasons why the problems occurred and why this amendment to the ECGD’s current powers was proposed.
The first reason is the way in which the high-value capital goods market now works, which often means that requests for ECGD support are made later in the process of export. Buyers or overseas project sponsors rather than the exporters often approach the ECGD for support and buyers seek support only after the exports have been procured and some of the relevant goods or services have been supplied. In many cases with these products, a process of supply takes place.
Secondly, the ECGD’s decision-making processes have evolved in recent years to implement wider Government policy on corruption and on environmental and social impacts. I think that all Members will very much welcome that fact. These are directed by the ECGD’s business principles and involve rigorous due diligence. Of course, that can take time and can delay the ECGD’s ability to make a decision until the supply has been completed. The amendment would allow the ECGD to support exports that have already been made by the time the ECGD has completed its due diligence, but I want to assure this Committee of the whole House that clause 2 does not in any way detract from the rigorous standards that we want to apply to any export that the ECGD is considering exporting.
Amendment 1 concerns the application of the ECGD’s environmental policies, I re-emphasise the fact that the clause does not alter the ECGD’s business principles or the triggers for their application to cases. If there were to be a change to the ECGD’s practices in that regard, ECGD’s business principles themselves state that the ECGD will consult.
I also report to the Committee that, as my noble Friend Lord Mandelson announced yesterday in the White Paper “New Industry, New Jobs”, the ECGD will in the weeks ahead consult on ways of further supporting levels of credit for UK exporters. The Government will ensure that the support offered by the ECGD plays a significant role in supporting UK exporters when demand picks up. It is right to consider at this time a wider role for the ECGD in providing support, but we will consult on that.
I invite the Committee to reject the amendment proposed by the hon. Member for Solihull (Lorely Burt), for three reasons. I do not believe that it is necessary, appropriate or workable, so let me try to explain why. The amendment is based on the assumption that clause 2 will somehow weaken the ECGD’s application of its business principles. As I have been at pains to make out, that is not the case. The assumption is mistaken. Clause 2 allows the ECGD to provide support for British supplies that have been made by the time assessments have been completed. It makes no change whatever to the business principles. The only difference is that the circumstances in which the ECGD may consider giving support have been
extended to include supplies already being made. It is thus the Government’s strongly held view that the amendment is simply unnecessary.
I believe that the amendment is also loosely drafted. It is not clear whether the requirement to carry out a case impact assessment is intended to apply to all exports supported by the ECGD or just to a sub-set of them, such as exports completed before it makes the decision to provide support or exports completed before the Bill comes into force and before the ECGD makes the decision to provide support. One interpretation of the amendment might be that a case impact assessment is required only in relation to exports completed prior to the Bill’s coming into force and/or to exports completed prior to the ECGD making a decision to provide support. It seems odd to require a case impact assessment for a sub-set of the ECGD’s business only.
The amendment could also be interpreted more widely to apply to all exports supported by the ECGD. A statutory obligation would be imposed on the ECGD to conduct a case impact assessment before entering into any arrangements in connection with exports under section 1 of the ECGD’s governing Act. That would represent a change in the ECGD’s policy in a way that is not within the scope of the Bill, and it would not be appropriate to change the ECGD’s environmental policy by statute.
I assume—although it is not made clear—that the amendment is intended to enshrine in statute the ECGD’s case impact assessment as it exists today, and to give statutory force to the assessment. I believe that that would be largely unworkable. The ECGD’s application of its business principles, including those that govern when a case impact assessment must be carried out, is a matter of publicly stated policy.
Maintaining the business principles as a policy allows them to be adapted to take account of changes in international standards: for example, to reflect new recommendations and common approaches issued by the Organisation for Economic Co-operation and Development on bribery and corruption, sustainable development or the environment. If the business principles or any aspect of them were enshrined in statute, it would be much more difficult for the ECGD to comply with its international undertakings, as primary legislation would be required on each occasion to allow it to adapt the relevant business principles to reflect changes in international agreements.
Similarly, primary legislation would be required for any increase in the rigour of the business principles, and I do not think that some of the groups mentioned by the hon. Lady would want that to happen. We want the ECGD to maintain high standards, but I do not think that enshrining the business principles in statute and having to pass primary legislation every time we wanted to change them represents a good use of parliamentary time. Given that—as Members will know—the OECD is currently discussing changes in some of these areas, I do not think that that would be workable in practice.
My main point, however, it that the amendment is unnecessary. I can give the hon. Lady the assurance that she seeks: no watering down is taking place. The ECGD’s business principles will continue to apply—on bribery and corruption, sustainable development and the environment—and the ECGD will continue to apply
them as rigorously as it does today. I hope that, given those assurances, she will seek leave to withdraw her amendment.
Lorely Burt: I am grateful to the Minister for his thorough explanation, and for all his technical explanations of why the amendment is not entirely appropriate. I think that it has achieved what it set out to achieve: to have placed on the record assurances from the Government that there will be no watering down and no circumvention of the business principles. Therefore, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 ordered to stand part of the Bill.
Clause 3 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill reported, without amendment.
4.24 pm
Ian Pearson: I beg to move, That the Bill be now read the Third time.
This is a small Bill with just three clauses, but as the House agreed when we considered it at an earlier stage, it is vital that we continue to help businesses as much as we can in these exceptional economic times. The Bill proposes two amendments to the Industrial Development and the Export and Investment Guarantees Acts.
The first clause is essential to enable the section 8 power of the Industrial Development Act 1982 to continue to be used to give financial assistance to industry for the purposes specified in that Act. That is necessary to continue to strengthen the provision of support for businesses so that they can come through the global economic downturn stronger. As has previously been explained, the Bill seeks to amend the cumulative limit on financial assistance that may be provided under section 8 to an initial ceiling of £12 billion increasable by four orders of £1 billion each to an overall limit of £16 billion. We have previously discussed this measure, and I think there is widespread support for it.
The new forms of support that the Government have been seeking to provide for industry have principally been loan guarantees or loans, and I think there has been acceptance on both sides of the House that that is an appropriate policy intervention. That is why we propose today to increase the limits. Let me offer the example of the enterprise finance guarantee scheme, which has been providing real help to viable businesses.
Since the launch of the scheme in January, almost £270 million-worth of eligible applications have been granted or processed or assessed from more than 2,300 firms. On 31 March, we announced the solutions for business portfolio, which makes it simpler for businesses to access the support they need. For the first time, all Government help for business, including section 8 support schemes, now share an easy, identifiable banner and can be accessed through Business Link. That has been welcomed by a wide range of business organisations, including the British Chambers of Commerce and the CBI, but without the introduction of the new limits, the legislative basis for those proposals under section 8 would be exceeded on reaching the limit of £6.1 billion allowed by the Industrial Development (Financial Assistance) Act 2003. We therefore need the new powers to ensure that viable businesses continue to receive the support they need.
Clause 2 has also been welcomed by the CBI, and I hope that environmental groups and groups that are active in the field of ensuring that the UK has high standards in combating bribery and corruption understand the points I was making in response to the amendment tabled by the hon. Member for Solihull (Lorely Burt) about the Government intending to continue to maintain high standards and their business principles when looking at large capital goods exports. The Export and Investment Guarantees Act 1991 governs the work of the Export Credits Guarantee Department, a Government Department that reports to the Secretary of State. As I have said, we have had difficulties with the facilitating of supplies and clause 2 seeks to address that. The high-value capital goods market works very differently now from the way in which it did a number of years ago, and the measure essentially clarifies and legitimises ECGD support, rather than in anyway diluting the standards that would apply when assessing individual applications for high-value capital goods; I am happy to confirm that.
If that amendment were not made, British exporters would continue to risk discrimination from overseas project sponsors, because ECGD would not be able to give the type of support that sponsors want. Other export credit agencies in competitor nations are not restricted in the same way in supporting exports that have already taken place, and without this change ECGD support would be reduced as a result of the increasing number of applications that are made to it at too late a stage in the project for its support to be given. That, of course, would be the position in any circumstances, but in the current economic circumstances support for British exports is particularly important. Over recent months, interest in ECDG support and applications for its assistance have, unsurprisingly, increased significantly. The export industry has made it clear that it feels that the problems that we are addressing through clause 2 are serious for it, which is why it has welcomed the amendment.
As I have made clear, the special interest groups that are concerned about this amendment can be reassured by the fact that the criteria applied to projects where the export has been completed will not be altered or made less stringent. The business principles, whether they relate to the environment or to bribery and corruption, are not weakened as a result of the amendment—indeed, it meets a recommendation of the Environmental Audit Committee that would, in the EAC’s view, strengthen the ECDG’s environmental scrutiny. A report on the ECDG and sustainable development that the Committee published last year recommended the following:
“No offer of support should be made, whether actual or provisional, until ECDG’s Business Principles Unit has completed its assessment”
of the project for which the exports are destined. Although I do not agree that the ECDG’s environmental scrutiny might be compromised by provisional offers of support, the Bill allows the ECGD to implement the EAC’s recommendation. Its environmental scrutiny can now be completed, and a final offer of support made thereafter, without regard to the timing of the delivery of the export.
We face a unique set of economic challenges. I am pleased that hon. Members from all parts of the House have recognised the need for these additional powers and have been supportive of the main aims of the Bill, and I am grateful for the constructive approach that Opposition Members have taken. This Bill may not
have had a lengthy passage—it has indeed been a short one—but there has been a proper opportunity for scrutiny on Second Reading and in Committee. These important measures will help to deliver the real assistance and support that business needs at these difficult times, and I commend the Bill to the House.
4.32 pm
Mr. Prisk: I thank the Minister for the courteous way in which he deals with my many and often detailed questions. I hope that they keep him and his office busy, but my intention is to ensure that the House’s scrutiny is thorough. He is always courteous in how he handles it, despite being on a sticky wicket, and he defends his position with patience and a degree of calmness that I suspect others would not achieve; I appreciate that, as I am sure the House does. May I also take the opportunity at the beginning of Third Reading to thank the Clerks for their support, because the legislation of this House makes progress only with the aid of their efficiency and effectiveness? We rarely commend and thank them, but we should do so more often; I just wanted to put that on the record.
The Minister has alluded to the fact that the passage of this Bill has been brief, and that brevity belies the huge sums attached to it. After all, it is not every day that three clauses equate to £16 billion. Conservative Members support raising the upper limits, and we are satisfied that the House will have the appropriate opportunity to scrutinise the process. We also recognise the need to update the law on exports and for Government to help British business to remain competitive. We, along with other Members, have raised our concerns in respect of ensuring that ethical and environmental standards are maintained, and I accept the assurances that the Minister has given.
Our concern lies not so much with the legislation or the intentions that it will enact, but with the wide gap between Ministers’ rhetoric and the speed and effectiveness of their actions. As with the Chancellor’s Budget tomorrow, it will not be the words expressed from the Dispatch Box that will lead this country out of recession but how effective Ministers are in delivering real help. On that, this Government’s record has been at best slow, at worst inadequate and all too often incompetent. For the sake of hundreds of firms and thousands of workers, we need change and we need it now.
4.34 pm
Lorely Burt: As the Minister said in his opening remarks, this is a small Bill of huge importance to industry and the future prosperity of this country. It is certainly big on cost, with financial assistance of £6 billion which could be increased to a total of £16 billion. It is also big on help for our exporters. In 2007-08, £1.8 billion in export loans was guaranteed. It is also big in its implications for Britain’s reputation overseas on the environment, human rights and sustainable development, as well as potential corruption and how we deal with it. So it is a big Bill, although it has not received great scrutiny.
We support the first clause, and we agree on the emphasis on a shift from grants to loans and to loan guarantees. Unlike the Conservatives, we believe that in times of great economic difficulty we should do all that we can to help companies, but it has to be real help in real time. Like the hon. Member for Hertford and
Stortford (Mr. Prisk), I feel that the gap between Government announcements and the provision of real money is still too great. Earlier, I asked the Minister whether he could comment on why due diligence was taking such a long time, and whether other issues were hampering the provision of financial help to companies through the Government schemes that have already been announced.
The Minister was good enough to mention Jaguar Land Rover and the £350 million European Investment Bank funding under the clean transport facility loan. That brings me on to green issues and the assistance provided by Government loans and guarantees. JLR is the leading automobile research and development company in Britain, so any help is well merited. We welcome the announcement of the £5,000 to be given towards the purchase of electric cars from 2011, but why were electric vans not included? I have in mind LDV, which has electric vans ready to roll off the production line. If we are talking about reducing carbon emissions, it would be hugely beneficial to substitute many of the vans on the roads today with electric vehicles.
On Second Reading, the Minister did not answer three of my questions, so I shall give him the opportunity to respond to them now. I asked him about help for lease financing companies, which have not been included in the banking industry support schemes although those companies afford tremendous help to small businesses that are arguably the most vulnerable in these difficult economic times. On the issue of the small business automatic rate relief, I suspect that the Minister will tell me off and suggest that I wait until tomorrow. I hope that we will hear some good words from the Chancellor on that.
I also floated a minimal cost idea, which involved a register of administrations and the publication of whether a proposed customer has a history of liquidating companies. It would be relatively easy to see what sort of relative risk would be afforded if one went into business to supply a company whose directors had a history of liquidating companies.
We support the scheme in clause 2 in principle, with the provisos that the Minister has already given to us in amendment 1. However, it is worth looking at who benefits. I looked up the Export Credits Guarantee Department’s annual review and resources account for 2007-08. What did I find? Of the total business support of £1.8 billion, more than £500 million went to Airbus, whereas £750 million went to BAE Systems and was spent on defence—
Madam Deputy Speaker (Sylvia Heal): Order. I have given the hon. Lady some leniency, but on Third Reading we are meant to be discussing the content of the Bill, rather than posing questions as the hon. Lady is doing.
Lorely Burt: I am grateful for your guidance, Madam Deputy Speaker. I was merely trying to talk about what the Bill will achieve in terms of supply and about where guarantees paid for out of taxpayers’ money are being directed. We have a worry—there was a conversation on this subject earlier in the debate—about the proportion of supply that went to smaller companies and to larger companies. My point was that the huge companies seem to be swallowing the guarantees while a relatively small amount of money goes to smaller exporters.
In conclusion, although we welcome the Bill overall, we have some reservations. We would be grateful if the Minister considered conducting a review after a year or so to allow the House to scrutinise whether the Bill is working as well as we all hope that it will.
Bill accordingly read the Third time and passed.
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