§ LORD BARNBYMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government what is the total value of overseas deposits of sterling attracting guarantee and what is the total sum paid or incurred against such guarantee for the first six months of 1974; also what is the total of loans raised overseas by (a) Government, (b) municipal and public authorities; (c) civilian corporations during the first half of 1974 and what is the total service in interest incurred.
§ LORD JACQUESMy Lords, this Question involves two elements which are not wholly related. First, there is the 723 guarantee extended to sterling depositors of overseas funds. Compensation of some £80 million became available in the first half of 1974 on those official sterling balances which were covered by the six months' guarantee which expired at the end of March. The second element in the Question is the loans raised overseas. None of the Eurodollar loan of 2.5 billion dollar arranged by Her Majesty's Government and announced in the Budget has yet been drawn. I should add that there is no official short or medium term debt now outstanding. Foreign currency loans raised by local authorities and nationalised industries in the first half of 1974 totalled 1,956.5 million dollars Foreign currency borrowed by the private sector amounted to some 900 million dollars in the first quarter, which is the latest period for which figures are available. Since much of the foreign currency borrowing is on floating-rate terms no precise figures can be given for the servicing burden of loans contracted. However, at present interest rates the annual interest burden on loans drawn by the public sector in the first half of 1974 would amount to 245 million dollars.
§ LORD BARNBYMy Lords, I certainly thank the noble Lord for the full ness of that reply. They are massive figures which merit careful study. Arising out of them, may I ask two questions? With regard to the first category of loans raised abroad, can the noble Lord say whether the transfer from guarantee of sterling to that of the weighted currencies has added to the facility of getting these loans? Secondly, since the basis of the guarantee was changed from the sterling guarantee to the weighted currency guarantee, is it to be understood that the prospect is better for recycling of the Arab payments generated in this country into sterling deposits by reason of the changed basis of the guarantee?
§ LORD JACQUESMy Lords, I would say that it has added to the facility only in the respect that if one treats overseas people in the right way, as we did in the case of the guarantee, then when it comes to a question of raising loans one will receive more sympathetic consideration. So far as the oil producers are concerned, the guarantee arrangements are strictly limited and do not apply to new accruals in sterling which include the oil producers.
§ LORD PARGITERMy Lords, can the noble Lord say whether or not he is satisfied that this massive borrowing should go on, having regard to the fact that it is reflected in the British reserves and perhaps gives us a false picture of how well off we might be?
§ LORD JACQUESMy Lords, the amounts are certainly large, but they do not pose an unmanageable burden. The maturity dates are all well spread out with the last repayment due in the late 1980s. The Treasury and the Bank of England take the pattern of payments into account before approval is given to each of the loans.
§ LORD ROBBINSMy Lords, can the noble Lord say whether there is any other way by which we may remain in equilibrium?
§ LORD JACQUESMy Lords, the position is that if you have a deficit in your balance of payments there is a choice: you either export more goods and services, or import less goods and services, or finance the deficit. If it is decided in all the circumstances that one must finance the deficit, then it is done in the most advantageous way; and I believe that that is what has been done.
§ LORD DAVIES OF LEEKMy Lords, is my noble friend aware that the significance of his answer appears to some noble Lords—or to myself if to nobody else—to be that one of the things we may well lose, because of the possibilities of the movement of the City of London into a centre in the Common Market is the power of increasing our "invisible" exports? Is he further aware that we have never balanced our trade directly for probably over seventy or eighty years, and without the know-how of the City, whatever politics we may have, we should not be able to carry on as a nation "in the black"?
§ LORD JACQUESMy Lords, I do not accept two bases of my noble friend's question: first, that there will be a transfer of the City of London to somewhere else; and secondly that we shall lose any of our "invisible" trade as a result of our contacts with the E.E.C.
§ LORD DAVIES OF LEEKMy Lords, is the noble Lord aware that some of us will not accept that so easily? This is 725 part of the contest of the effort of financing over the world. I believe there should be an opportunity for this House to debate this issue at some time, and I hope it will be soon in order to give the House a chance of discussing it and to hear some of the expertise there may be on that side of the House or this side on this problem.
§ LORD DAVIES OF LEEKMy Lords, the question is: May we have such a debate?
§ LORD BARNBYMy Lords, reverting to the noble Lord's reply, is it to be understood that the further deposits of Arab funds in this country would or would not attract the guarantee of the weighted average? Secondly, arising out of the success in the last few months of the Government in raising funds from other than banking sources, is the intention to discourage public authorities from larger borrowing in the overseas field now which must burden the balance of payments by "servicing" later on?
§ LORD JACQUESMy Lords, there are two questions there. The first relates to the oil producing countries. As things stand at the moment, they would not attract the guarantee. The second question concerns the future position in regard to the raising of loans overseas. It is still continuing to be an advantageous way of financing the deficit, and for the moment it is not considered necessary to take the action which the noble Lord, Lord Barnby, thinks should be necessary.
§ LORD SHINWELLMy Lords, is my noble friend aware that his answer to the supplementary question from the noble Lord, Lord Robbins, is the clearest exposition of our financial position that has ever been exhibited in your Lordships' House?