§ Mr. Rost
asked the Secretary of State for Trade and Industry whether he has determined a financial objective for the British Steel Corporation; and whether he will now complete the capital reconstruction of the Corporation provided for in the Iron and Steel Act, 1972.
§ Mr. Tom Boardman
Yes. With Treasury approval and after consulting the corporation, my right hon. Friend has determined, under Section 5 of the Iron and Steel Act, 1969, that the rate of return on net assets which the corporation458W should achieve during the four years 1973–74 to 1976–77 should be an average of 8 per cent., after charging depreciation but before charging interest, taxation and certain exceptional costs.
As foreshadowed in the White Paper on the Iron and Steel Bill, the corporation expects to make a loss in 1972–73 and, for this year, I have agreed with the corporation that, subject to major and unpredictable eventualities, it will work within a loss limit of £70 million and keep the increase in net borrowing within a limit of £300 million. The corresponding limits set for 1971–72 were £100 million and £300 million.
I expect the corporation to move into profit in 1973–74, and though I do not expect a return as high as 8 per cent. in that year, an 8 per cent. average over the four years to 1976–77 should be attained from higher profits in subsequent years. After this period, when the corporation will be getting full benefit from its investment programme, I shall expect average returns to be higher.
I also believe it important that the corporation should have the backing of an adequate reserve. My right hon. Friend therefore intends, with Treasury consent, to complete the capital reconstruction provided for in the 1972 Act by reducing the corporation's indebtedness by £150 million as from 15th September, 1972. This sum will be added to the reserve created following the reduction of the corporation's public dividend capital by £200 million, from which the corporation has already been authorised to write off its accumulated deficit of £112 million at 1st April, 1972. I shall be prepared similarly to authorise the write-off of the loss incurred in 1972–73. The balance will be available as a reserve for purposes authorised by my right hon. Friend. It will remain possible to re-capitalise any part of it under Section 4 of the Iron and Steel Act, 1969.