§ Mr. Iain Mills
asked the Secretary of State for Trade and Industry (1) what is the cost to public funds of subsidising guaranteed interest profits earned by the banks on loans to United Kingdom companies to back export sales where the deals are insured by the Export Credits Guarantee Department; and if he will make a statement;
(2) what is the current level of lending by banks under the scheme insured by the Export Credits Guarantee Department;252W
(3) what is the current level of guaranteed margin on loans for exports under schemes backed by the Export Credits Guarantee Department; and if he will make a statement.
§ Mr. Alan Clark
The cost to Her Majesty's Government of paying the interest margin over London interbank offer rate to the banks under the fixed rate export finance scheme depends on the level of the margin at any time and the amount of finance outstanding. In 1985–86, the cost was approximately £105 million (1984–85, £113 million). The level of lending under these schemes is currently £10.5 billion. The current level of the margin over LIBOR for sterling loans is ⅞ per cent. for the first 12 years of the credit and 1 per cent. thereafter. For foreign currency loans, the margins range from ⅜ per cent. for loans repayable within four years from signature to ⅞ per cent. for loans repayable over more than 14 years.
The Government have notified the banks of their intention to review the remuneration received by them for providing fixed rate export finance. Detailed discussions with the banking associations will commence within the next month and are expected to lead to reduced margins payable on future business. A statement will be made at the appropriate time to report the outcome of these negotiations.