§ Mr. Kaufman
The Corporation is experiencing a period of severe financial difficulty, largely on account of the continuing low level of demand for steel. Despite BSC's successful efforts to reduce costs, the latest financial projections are for a loss which seems unlikely to be much less than £300 million in 1975–76. A significantly smaller but still large loss is expected for 1976–77 as a whole.
There are prospects for a recovery in the steel market in 1977–78–1979–80 when BSC expects to return to profitability. The Government judge the provision of further public dividend capital and loan finance to be justified in order to sustain the BSC's operations and finance essential investment. If the Corporation's financial prospects were to deteriorate seriously from those currently foreseen, we should need to reconsider the situation.
Subject to continuing review of the Corporation's viability, and to Parliament voting the necessary moneys, the Government propose to make public dividend capital available in the proportion of 55 per cent. of the Corporation's additional financial requirements, other than short-term, in the year 1975–76 and provisionally in 1976–77, and also to provide loans as necessary from the National Loan Fund towards the balance of those requirements.66W
The policy will result in a shift away from BSC's present gearing ratio which is 55 per cent. invested funds—PDC plus reserves—to 45 per cent. long-term loans. The shift will help preserve the credibility of the concept of public dividend capital to which the Government attach importance. It will result in the Government making loans to the Corporation in 1975–76 and 1976–77 for the purpose of replacing capital lost as a result of a deficit on revenue account. I am advised that such lending is authorised by the Iron and Steel Act 1975 and I feel it is justified in view of the Corporation's prospects in the medium term. Once the Corporation recovers profitability we shall certainly be prepared to look again at the position to ensure that the Corporation continues to have an adequate and viable capital structure.