Industry and Exports (Financial Assistance) Bill

Lord Fox Excerpts

2nd reading
Thursday 12th March 2026 Lords Chamber

[Lord Fox (LD)]

My Lords, the Minister called for wisdom and expertise. It is a great pleasure to follow the noble Baroness, Lady Alexander, who displayed both of those, but I am afraid the Minister now has me.

The Minister set the scene in his admirably concise introduction, but I want to look at some of the numbers. They are big numbers—not quite as big as our trade deficit with China, but big numbers none the less. We have heard that the Bill increases the Government’s ability to provide financial support to industry and exporters by raising long-standing limits. It boosts the cap on selective industrial financial assistance under the Industrial Development Act 1982 from £12 billion to £20 billion, which is a big increase. The maximum amount by which the Secretary of State can raise this limit has been increased from £1 billion to £1.5 billion, reflecting inflation over the period since it was last adjusted in 2009.

As we have heard, the Bill also significantly expands UK Export Finance’s statutory commitment limit under the Export and Investment Guarantees Act 1991, increasing it from the current equivalent of around £84 billion to £160 billion, converting the limit from special drawing rights to sterling to create some simplicity, and allowing further rises of up to £15 billion through secondary legislation without restricting the number of times such increases can be made. It will be helpful if the Minister can confirm that those numbers are correct. He did not use them in his introduction, but it is important for the record that we have them.

These changes are intended to maintain uninterrupted support for investment, exports and jobs, ensuring that the Government can back key sectors such as advanced manufacturing, life sciences and defence, without hitting the old limits. By raising these thresholds now, the Government say that the Bill prevents constraints on viable projects at a time when businesses are making critical investment and export decisions, providing necessary headroom to offer support only where justified, while safeguarding taxpayers and sustaining the UK’s credibility. On the face of it, this is a sensible uprating, which we support. However, its passage through the Commons was not without query and I will raise some of those queries again for the Minister to perhaps recap the answers.

In the Commons, MPs from several parties highlighted that the Bill authorises very large increases in industrial assistance and export guarantees with relatively light ex ante control. There are weak safeguards, limited transparency and scrutiny over what are, or could be, very large sums, and there are potential ethical and risk concerns around how export finance could be used. Critics argued that this scale of contingent liability exposes taxpayers to significant risk, with Parliament largely limited to retrospective annual reports rather than regular, detailed scrutiny of which firms and sectors are being supported—I think that was the point the noble Lord, Lord Pitkeathley, made about updates as to where the money is going.

In the Commons, cross-party amendments sought to block support where there is reason to believe that modern slavery or human trafficking are present in the supply chains. We on these Benches believe that it is unacceptable for any taxpayer-backed finance to underwrite that sort of exploitation, so it would be useful to know from the Minister how that will be overseen. Other amendments aimed to prevent UK Export Finance supporting goods which are likely to be re-exported to sanctioned destinations. It is very important that those safeguards are strengthened and any loopholes removed.

There are also questions about how all this fits in with the industrial strategy. The Bill certainly expands financial capacity, but what is the Government’s plan for which sectors and regions should benefit, particularly concerning steel, which is an ongoing issue, and other strategically important industries? Can the Minister confirm how the applications will be managed? Are they on a first come, first served basis? Does it stop when we run out of money, or will some sort of strategic overlay be put on to applications for drawing down on these funds? If it will, who will manage this overlay, and how will it be overseen and reported back to your Lordships’ House?

While we are talking about industrial assistance, I have spent the last eight years on the replumbing of the United Kingdom post Brexit. One of the many Acts I worked on was the Subsidy Control Act 2022. We would be very interested to know how industrial assistance will be managed within the Subsidy Control Act. The noble Baroness, Lady Alexander, also brought up the UK Internal Market Act, which was also part of the replumbing, and she asked some really important questions around that. There are constraints around what can and cannot be done, not least our own constraints, which were built looking at GATT and other things in the outside world.

Additionally, I am very grateful to the noble Lord, Lord Empey, for his really knowledgeable input on SMEs. I also have an observation that historically, the bulk of export finance money goes to larger firms; it does not go to SMEs. Although the Bill is being pitched as helping SMEs, there is no real indication in the Bill as to how that will be done. Experience shows that they will not be the major recipients of this uprating, so, like the noble Lord, I await the Minister’s views on this.

There is also this issue about government finance crowding out other finance, and how the process will be managed so that it is crowding in, not crowding out. It is really important that investment that would have come in any case is not being displaced. We really need to know that public money is going to be used genuinely as additional rather than substitutional. I look forward to the Minister’s response on these issues, but notwithstanding that, we support the changes being brought forward.

In conclusion, it is important to support investment, exports and jobs in sectors such as manufacturing, life sciences and defence, and it is vital that this support is extended to SMEs. On a broader note, a huge lever for UK exports would be to be included in the EU’s Security Action for Europe—so-called SAFE—financial instrument. As the Minister knows, this would give access to up to €150 billion of finance. Can the Minister update us on where we are on attempts to find our way into that programme? Of course, the looming threat of “Made in Europe” will do the opposite of what we are seeking to do here. It will exclude our businesses, our automotive businesses in particular, from exports. Clearly, the closer the UK is to the EU, the easier this will be to resolve—but, as the Minister knows, in this case, time is of the essence. The Bill is important, but sorting out our relationship with the European Union should be the priority. That said, we support the Bill.