HC Deb 13 November 1980 vol 992 cc445-7W
Mr. Adley

asked the Chancellor of the Exchequer if he will provide details of any schemes of differential interest rates, aimed at assisting commerce and industry, operated in any of the other member States of the EEC.

Mr. Lawson

[pursuant to his reply, 4 November 1980, c. 538]: There are schemes which apply on a country wide basis in four EEC member States: Germany, France, Italy and Belgium. Broad details are given below. In the other four EEC member States, interest rate subsidies or rebates, where available, are provided as part of regional development programmes. The answer does not cover export credit, which is widely subsidised throughout the EEC.


A limited amount of credit at subsidised interest rates is channelled to small and medium-sized companies through the Kreditanstalt fur Wiederaufbau (KFW) which was founded in 1948 to help finance the reconstruction of German industry under the European recovery programme. Most subsidised credit is financed by KFW itself, and therefore the volume of its lending is dictated by its own earnings. In 1978 it lent around $1.1 billion but it is not known how much of this was at subsidised interest rates.


Credit for French industry at preferential interest rates is supplied either by State controlled credit institutes, for example Credit National, or through special Treasury accounts, principally the Fonds de Development Economique et Social (FDES). The credit institutes normally direct preferential loans towards specific sectors, or sometimes individual projects. FDES credit may be for general investment purposes, but with emphasis on regional development, employment and structural adaptation. In 1979, total interest rate subsidies to the private sector amounted to about 3.1 billion francs, or 0.6 per cent. of budget expenditure.


There are over 30 special industrial credit institutes in Italy which, besides lending to industry on normal commercial terms, are empowered to extend credit at below market rates under a series of laws designed to stimulate investment. In 1979, about one-quarter of lending for industrial investment was subsidised, although much of this represented regional assistance.


Since the 1950s a number of laws have been passed to promote industrial investment and these have included concessions on interest charges. The most important of those which apply to any part of the country are: the Loi d'aide generale of 1959 which provides for a general 2 per cent. subsidy for up to 3 years on half of an investment contributing directly to the creation, extension or modernisation of industry and the Loi de reorientation economique of 1978 which provides small and medium-sized companies with a 5 per cent. interest rate subsidy on 75 per cent. of an approved investment.

In the United Kingdom, assistance to industry is mainly in the form of investment-related grants and allowances. Given the complexities of the United Kingdom's financial system it would not be possible to ensure that the availability of cheap funds was confined to a desired class of recipients. In any event, the Government would inevitably have to subsidise, either directly or indirectly, lower interest rates for industry, thus adding to the public sector borrowing requirement.