§ The Chancellor of the Exchequer (Mr. Denis Healey)The refinancing by the Government of fixed-rate credit for exports and shipbuilding imposes a major charge on public expenditure and the PSBR which threatens to exceed previous forecasts. Partly to deal with this, I have asked the clearing banks to finance from their own resources an additional £100 million of fixed-rate sterling business in each of the next two years, and I am glad to say that they have agreed to do so.
We believe that by funding medium and long term export credit in foreign currency instead of in sterling we can reduce the burden which export credit imposes on public expenditure, the PSBR and the balance of payments. We are therefore taking steps to encourage the use of foreign currency financing and to control the rate at which new offers of fixed-rate sterling finance will be approved by ECGD.
All these measures will reduce expenditure on refinancing and together produce a net saving of £100 million in 1977–78 and £200 million in 1978–79, below that shown in Cmnd. 6393.
We are aware of the concern of industry about the future of the cost escalation scheme which, as matters stand, is due to end in March 1977. We now propose that it should be continued for a further year. The necessary draft order will be laid before the House in due course.
Revised expenditure programmes for 1977–78 and 1978–79, taking account of these measures and of other adjustments made during the Public Expenditure Survey, will be set out in the public expenditure White Paper in due course. These decisions will reduce planned expenditure by a little over £1 billion and £1frac12; billion in the next two financial years. Both figures are at 1976 survey prices. In current prices they will be much larger.