§ Mr. Spearingasked the Secretary of State for the Environment what loans have recently been negotiated by the 625W public sector of the water supply industry from the European Investment Bank; how the rate of interest compares with current domestic borrowing; and what the effect will be of further changes in the value of the £ sterling on these loans.
§ Mr. Denis HowellThe public sector of the water supply industry has, since October 1975, negotiated loans totalling £30.5 million from the European Investment Bank.
The rates of interest—9½ per cent. on earlier loans of £20.5 million and 9 per cent. on the recent remainder—compare with 12⅝ per cent. and 15 per cent. respectively on loans on the same dates for the same period from the National Loans Fund which is the only statutory source of sterling loans to water authorities. In fact, loans from the National Loans Fund for water authorities' capital expenditure are for 25 years, and on these the interest rates were 15 per cent. and 15¾ per cent. at the relevant dates.
Interest and repayments have to be made from time to time in the same currencies as those in which the original loan was made. The sterling equivalent of such payments will therefore vary with the exchange value of the £ sterling. Water authorities can, however, take advantage on payment of a premium of the guarantee offered by Her Majesty's Treasury which protects them against adverse exchange rate fluctuations.