§ Mr. Sillarsasked the Chancellor of the Exchequer what is the effect of the increase in minimum lending rate on Public Works Loan Board rates to Scottish local authorities; and if he is able to estimate the total extra interest payments this increase will demand in the current financial year.
§ Mr. Denzil DaviesThere is no direct relationship between any particular change in minimum lending rate—MLR—and changes in Public Works Loan Board—PWLB—lending rates. PWLB rates are based on the Government's own cost of borrowing as measured by the yields on gilt-edged stocks. These yields reflect conditions of demand and supply in the gilt-438W edged market which are dependent on a wide range of factors, of which the level of MLR is only one. The level of PWLB rates has in fact fallen since the announcement of the change in MLR on 8th June. But it is in any case not possible to estimate the effect on interest payments of changes in PWLB rates as this will depend on how local authorities adjust the pattern of their borrowing in response to changes in interest rates generally.