§ Mr. Higginsasked the Chancellor of the Exchequer if he will estimate the effect on the public sector borrowing requirement and minimum lending rate and the sterling exchange rate of cutting the Export Credits Guarantee Department interest support costs by £369 million.
§ Sir Geoffrey HowePublic expenditure on Export Credits Guarantee Department interest support costs largely relates to existing commitments stretching over the outstanding loan periods to reimburse the difference between market interest rates and the fixed rates which were in force at the time the loans were taken out. Savings on future commitments would build up only gradually. The effect of reducing interest support costs is to reduce the public sector borrowing requirement by broadly similar amounts. This reduction in the PSBR would allow monetary growth targets to be met at lower rates of interest and the general effect would be to reduce the MLR. It is unlikely that there would be any significant changes in the sterling exchange rate resulting from the shift in interest support costs, because the volume of exports affected is relatively small, and the response would depend on whether other countries changed their policies at the same time.
Quantified estimates of these effects could be made only by carrying out a simulation on a complex economic model. For the reasons given by my hon. and learned Friend in reply to the hon. Member for Newham, North-East (Mr. Leighton) on 14 November 1979—[Vol. 973, c. 622–23]—I would not feel justified in authorising use of the Treasury's macroeconomic model for this purpose. My right hon. Friend may wish, however, to pursue his inquiry via access to the Treasury's economic model through the Library at the House.