§ Mr. Emeryasked the Chancellor of the Exchequer what is the present total of foreign borrowing by public corporations; what is the amount or the estimate of the £ sterling cost having to be borne by Government, not the public corporations, due to the alterations in exchange rates affecting this borrowing; and why costs when they arise are not a charge on the individual public corporation rather than being borne by Government, so increasing the central Government borrowing requirement.
§ Mr. Joel Barnett, pursuant to his reply [Official Report, 22 February 1979; Vol. 963, c. 266], gave the following information:
The purpose of the exchange cover scheme—which was introduced in 1969, suspended in 1971 and reintroduced in 1973—is to provide official external finance for the balance of payments. The scheme achieves this by encouraging public sector bodies to borrow abroad; the foreign currency proceeds of such 336W borrowing accrue to the reserves. The borrower is protected from the exchange risk and is allowed to retain some of the interest benefit from foreign currency financing compared with sterling financing. The balance of the interest rate benefit accrues to the central Government as a charge for providing exchange cover.
Total foreign currency borrowing by public corporations outstanding at 31 December 1978 amounted to $10.9 billion, of which $8.7 billion was borrowed under the exchange cover scheme.
For the period January 1974 to December 1978 the costs of providing exchange cover to public corporations in respect of their foreign currency interest payments and capital repayments were about £205 million and £125 million respectively. Central Government receipts for exchange cover were about £260 million. Estimates for the years before 1974 are not readily available. Central Government receipts and costs in the early years of the scheme were not, however, substantial.
These transactions between central Government and the public corporations do not measure the cost to the public sector of the scheme. The transactions between the Exchange Equalisation Account and the public corporations do not necessarily match any particular foreign currency transactions in the markets by the Account. For example, the Account might retain the proceeds of a particular exchange cover borrowing throughout.
Central Government costs relating to capital repayments of covered foreign currency borrowing are financing items, which do not form part of the central Government borrowing requirement. Central Government receipts for exchange cover and costs relating to covered interest payments are current payments which do affect the central Government borrowing requirement. For public corporations, the net effect has been to relieve the borrowing requirement by about £55 million between January 1974 and December 1978.
§ Mr. Emeryasked the Chancellor of the Exchequer whether he will list the total revenue, net of capital consumption, the total wages and salaries, the total interest paid and the surplus or deficit that then accrues, and the combined total of this deficit, from the accounts of public 337W corporations for the years 1963 to 1978; and if he will make a statement on what action the Government are taking to reduce this deficit.
PUBLIC CORPORATIONS £million Total revenue net of capital consumption(1) Total wage sand salaries etc.(2) Total interest paid Surplus + deficit− 1963 … … … … 2,133 1,930 333 −130 1964 … … … … 2,286 2,023 394 −131 1965 … … … … 2,403 2,138 421 −156 1966 … … … … 2,490 2,215 473 −198 1967 … … … … 2,668 2,393 552 −277 1968 … … … … 3,019 2,630 636 −247 1969 … … … … 3,187 2,759 722 −294 1970 … … … … 3,261 3,067 780 −586 1971 … … … … 3,525 3,394 865 −734 1972 … … … … 3,792 3,863 926 −997 1973 … … … … 4,173 4,328 1,133 −1,288 1974 … … … … 4,622 5,615 1,586 −2,579 1975 … … … … 6,869 7,691 1,906 −2,728 1976 … … … … 8,826 8,641 2,395 −2,210 1977 … … … … 9,964 9,563 2,522 −2,121 1978 … … … … Not available Total 1963–77 … … 63,218 62,250 15,644 −14,676 As to action to reduce this—already declining—deficit, the White Paper on the Nationalised Industries—Cmnd. 7131—made clear the Government's policy of allowing the industries to set economic prices within a framework of financial targets fixed by the Government. The profitability of the industries, and hence the proportion of their capital requirements financed from internal resources, have in consequence risen steadily since 1975–76. The profits of other public corporations—to which the general principles of the White Paper have some application—have also been improving recently.
Footnote:
Source: national accounts
(1) Total revenue equals sales, including sales to own capital account, and reecipts of rent less purchases of goods and services adjusted for the value of the physical increase in stocks and work in progress. Subsidies—including compensation for price restraint in some years—are excluded. Capital consumption is at replacement cost as estimated by the CSO.
(2) Includes employers' contributions to national insurance, etc. schemes and to superannuation and other pension funds.