§ Lord O'Hagan
asked Her Majesty's Government:
Whether they will explain the purpose of recent changes affecting those in Britain eligible for loans from the European Investment Bank.
§ The Minister of State, Treasury (Lord Cockfield)
Private sector companies are free to borrow from the European Investment Bank without any Government restrictions. To facilitate such borrowing the Government run a scheme whereby certain borrowers can be protected from the exchange risk on the currencies lent by the European Investment Bank, in exchange for a premium. The Government announced on 30th November that the scheme (which applies also to borrowing from the European Coal and Steel Community) would be extended for two years to 31st December 1983 subject to a ceiling of £400 million on new cover provided; this represents a substantial increase from the earlier ceiling of £220 million for the two years 1980 and 1981.739WA
Under the previous arrangements the premium for exchange risk cover was at a flat-rate, unrelated to the risks involved in the currency composition of the loan. It was set at 1 per cent. in Special Development Areas and Northern Ireland and 2 per cent. elsewhere. As was announced on 30th November, the method of charging has been changed. To match the premium to risks involved it will in future be related to the currency composition of the loan, subject to the provision that 740WA the premium-inclusive interest rate will be not more than 3 per cent. below the "broadly commercial" rate for loans given under the Industry Act. The old flat rate premium arrangements will continue to apply to loans advanced, approved or under consideration at 30th November.
House adjourned at twenty-four minutes past nine o'clock.