To ask Her Majesty’s Government what current financial exposure is faced by the Export Credits Guarantee Department (ECGD); and what plans they have for the ECGD.

My Lords, as of 31 March, ECGD’s total outstanding loans were £13.3 billion. ECGD aims to recover any money that it pays in claims and, over the past 20 years, has been cash-positive across its portfolio. As announced by the Secretary of State in New Industry, New Jobs, we are looking at existing and potential support offered by ECGD to ensure that the organisation plays a significant role supporting UK exporters through the recovery and beyond. ECGD is currently consulting on a letter of credit guarantee scheme and will launch a consultation on a credit insurance scheme for exporters by 19 June.

My Lords, I thank the Minister for that response. However, will she please comment on the announcement in the Pre-Budget Report 2008 that a £1 billion allocation specifically to support small business finance would be channelled through the ECGD, and the later report in this April’s Budget that consultations on the subject would start soon? Given the sheer importance of this £1 billion to small business finance, how has it taken eight months before even consultations can begin? Can she also please assure the House that there is absolutely no assumption that the £1 billion is any form of rescue or lending-ratio adjustment for the ECGD itself?

My Lords, I am very happy to clarify that the £1 billion was then converted into £10 billion and was launched in January as the working capital scheme, which is now current; £5 billion of that is for trade credit insurance, which is now current and being implemented, and £1 billion is set against the lending agreements signed by RBS and the Lloyds group, which are also current. So that scheme is being launched. As part of that, in anticipation of potential market failure, there is a consultation on letters of credit.

My Lords, does the noble Baroness agree that the environmental groups are extremely concerned by proposals possibly to expand the ECGD’s remit so that more taxpayer money supports more overseas deals such as the recent sale of 72 Eurofighters to Saudi Arabia? Will she undertake to ensure that projects that infringe UK human rights standards and the environment will not be supported?

My Lords, I am very pleased to confirm that we would not support projects that do not meet environmental standards or are an abuse of human rights. On taxpayer funding, as I said in responding to the Question, ECGD has been self-financing over the past 20 years.

My Lords, is it not the case that the fixed-rate export finance scheme has come to an end and that the new system to take its place was announced and came into existence in December last year? If that is the case, how is it that businessmen are not able to get any information or details about the new system? How can they possibly plan ahead unless they know what is going on?

My Lords, the extension of the scheme to which the noble Lord refers—FREF—will be announced in the autumn, but I point out that there have been only four loans under the scheme in the last seven years. There is not a huge demand for it. There is currently only one serious inquiry and that company is well aware of the position.

My Lords, when I was involved in promoting British projects overseas many years ago, especially in Latin America, we were always overtrumped and beaten to the punch by Coface and Hermes. Does the Minister have a view on whether that situation has improved?

My Lords, we provide a level of support to British exporters that, as a percentage of our exports, is equivalent to that provided by Germany and the United States, but not to the level given by certain countries such as Canada. Following the privatisation of the short-term business in 1991, we have had a lower volume of business than certain other countries. However, I will not apologise for the more rigorous risk analysis, relative to some other countries, and the environmental and human rights concerns that are taken account of by ECGD.

My Lords, will the noble Baroness explain how the banks got the money that she referred to? Was it for their own activities or the activities of their clients?

My Lords, the working capital scheme assigned a guarantee with Lloyds and RBS, under which they are required to sign a lending agreement whereby they are required to lend to UK companies. We have a specific, legally binding agreement—one of the first of its kind in the world—which we monitor on a monthly basis to ensure that the capital that is released goes to UK industry.

My Lords, can my noble friend assist me? She referred to the £1 billion that became £10 billion in the new schemes. Is that part of the £10 billion package that the Government announced to deal with our economic crisis and which Her Majesty’s Loyal Opposition opposed?

My Lords, it is a little unclear sometimes what Her Majesty’s Opposition do or do not support. I find it difficult to follow, because they appear not to have many detailed policies that we can discuss.

My Lords, given the Minister’s first Answer to my noble friend and the answer that she has just given, does she appreciate the irony that, after 12 years of the Treasury working very hard to conceal bad news, it has developed the habit of concealing good news as well?

My Lords, I am delighted that noble Lords have the good news now.

My Lords, the ECGD’s last annual report said that there was a need to reduce its cost base. How has the extra work announced recently affected any planned cost reductions?

My Lords, my noble friend the Secretary of State has announced that a review will be taken in very short order. The review will look at the skills, calibre and resources that the ECGD will need. That will feed into the cost-cutting exercise.