HC Deb 28 July 1988 vol 138 cc378-9W
Mr. Andrew MacKay

To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the accounting treatment of the Export Credits Guarantee Department's comprehensive external trade and comprehensive bank guarantee facilities.

Mr. Alan Clark

The comprehensive external trade facility insured United Kingdom companies trading in goods shipped directly from one overseas country to another on short terms of payment. It was discontinued in July 1987 because losses accumulated on confirming house business and no viable basis could be found for continuing cover for that sector. Cover for multi-sourcing business of manufacturers and merchants continues to be available under the comprehensive short term facility.

The comprehensive bank guarantee facility, which guaranteed banks against non-repayment of advances made to exporters in respect of insured short-term export contracts, was discontinued in October 1985, as the original need for the scheme no longer existed and demand had fallen because alternative sources of such finance were available to viable companies. Residual claims payments and recovery action are likely to continue on the facility for several years.

At 31 March 1987, the ECGD had incurred cumulative cash flow deficits of £135.8 million (CBG) and £340.0 million (CET). These figures include notional interest on the borrowings from the Consolidated Fund. These deficits would continue to grow at an accelerating rate as notional interest accrued, thereby becoming a burden on the ECGD's other trading activities. It has therefore been decided that these facilities should properly be accounted for as public expenditure programmes and the losses incurred to date written out of the ECGD's trading account. The transfer will not affect the Government's aim to. minimise the ultimate losses on the facilities.

The necessary changes will be made in the ECGD's 1987–88 trading accounts. Their precise effect will not be known until those accounts have been finalised, but the best current estimate is that reserves reported at 31 March 1987 will be increased by £360 million, reflecting trading losses accumulated in previous years. Retrospective adjustments to public expenditure for the years 1982–83 to 1988–89 will be made as follows:

£ million
1982–83 58.0
1983–84 45.6
1984–85 84.7
1985–86 36.8
1986–87 17.7
1987–88 112.7
1988–89 2-4.4
1 provisional.
2 estimate.

These figures represent the net annual cash payments to exporters. They do not include notional interest, administration expenses and accrued income and expenditure.