My right honourable friend the Minister of State for Trade, Investment and Foreign Affairs (Ian McCartney) has made the following Written Ministerial Statement.

I should like to make a Statement on the future status of the Export Credits Guarantee Department (ECGD).

I can now set out the financial framework under which the ECGD will undertake its functions from 1 April 2008.

On 1 July 2004 (Official Report, col. 22WS), my right honourable friend the Member for Leicester West, the then Secretary of State, told the House about the work she had put in place for the ECGD to assess the suitability of its operations becoming a government trading fund by operating a pilot of this status over a two-year period from April 2005. This period was subsequently extended to April 2008.

Since then, there have been some important changes in the environment in which the ECGD operates. In particular, against a background of changing UK industrial and trading patterns, buoyant private sector financial markets and benign global risk conditions, there has been a reduced demand for ECGD support and a reduction in its customer base. This has cast doubt about the ECGD's long-term suitability to operate within a trading fund structure. Moreover, the experience of operating as a pilot trading fund, combined with other reforms in ECGD's operations, has shown that the benefits from establishing an ECGD trading fund can be delivered in a more appropriate and effective way.

I am pleased to tell the House that the Chief Secretary and I have now agreed a new financial framework that is consistent with the objectives for the ECGD set out in 2004.

A number of key principles will underpin the new framework. First, there will be a cap on the risk exposure that the ECGD can commit without express consent from HM Treasury, but with sufficient headroom to meet current and potential demand from exporters. Secondly, robust systems will continue to be used to assess and control the assumption of new risks. Thirdly, the premiums which the ECGD charges on the transactions that it supports will continue to reflect the risk, including making a contribution to the cost of notional capital and to the maintenance of sufficient reserves, and to cover administration costs. Fourthly, the ECGD's administration costs will in future be subject to departmental expenditure limits and the disciplines of government spending reviews. The new framework will include revised financial objectives to enable Ministers to monitor the ongoing performance of the ECGD's operations.

Overall, this new financial framework will provide a structure for managing the ECGD's business that is appropriate to today's needs and which continues to balance the requirements of exporters against those of protecting the taxpayer and of achieving value for money.