HC Deb 11 April 1978 vol 947 cc352-4W
Mr. Dodsworth

asked the Chancellor of the Exchequer what was the average rate of interest offered on new loans raised by Her Majesty's Government in 1977; and what was the ratio of this rate to the average of European Community loans in the same period.

Mr. Robert Sheldon

Her Majesty's Government raised new loans in 1977 from a number of different sources, both in foreign currency and in sterling, and this borrowing took the form of both fixed and floating rate loans. It is not therefore practicable to compute a single average rate on all new loans during the period.

In 1977, Her Majesty's Government raised new foreign currency loans from two sources: the International Monetary Fund, and the Eurodollar market.

IMF drawings in 1977 totalled SDRs 1,640 million, or some $2,030 million. The interest rate is currently 4⅜ per cent. rising over 5 years to 6⅜ per cent.

Eurodollar borrowing by Her Majesty's Government in 1977 comprised a $1.5 billion floating rate Eurodollar syndicated bank credit, which can be rolled over in tranches of three, six and 12 months maturity. The interest rate is expressed as a margin of ⅞ per cent. (rising to 1 per cent. after two years) above the relevant London Inter-bank offered rate. At noon on Thursday 6th April, the three, six and 12 month offered rates for Eurodollars in London were 7½ per cent., 7 13/16 per cent. and 8 1/16 per cent. respectively.

In addition to the above loans, there were subscriptions in 1977 to Her Majesty Government's offer of foreign currency bonds to countries with official reserve holdings of sterling. These bonds were offered in order to help deal with the problem of the sterling balances, and in accordance with the Government's aim of securing a reduction in the international role of sterling as a reserve currency. Interest rates, which vary with the currency of denomination and the differing maturities, range from 5⅞ per cent. to 8⅞ per cent.

Government borrowing in sterling included in the sale of gilt edged stock, the issue of Treasury bills, and sales of other forms of central Government debt such as national savings and certificates of tax deposit. During 1977, 16 new gilt-edged stocks were issued. The weighted average flat yield of these stocks, based on issue prices, was 10.5 per cent. In calculating this figure the two variable rate stocks issued during the year have been excluded, as have tranches of stocks reserved for the Commissioners for the reduction of the National Debt; no allowance has been made for the fact that some stocks issued during 1977 may have been left wholly or partially unsold at the end of the year; and no allowance has been made for stocks taken up by the Issue Department of the Bank of England and subsequently sold at prices other than their issue prices or for sales of stocks other than tap stocks. It is not possible to provide any precise figures for the interest rates payable on other forms of Government borrowing in sterling, or on borrowing by the rest of the public sector, though these rates will be generally lower because of the shorter period to maturity.

During 1977, loans to the United Kingdom public sector from the European Investment Bank had an interest spread of 8½ per cent to 9 per cent. Loans from the European Coal and Steel Community had a spread of 7.35 to 9.65 per cent.