§ Mr. Nelsonasked the Chancellor of the Exchequer what advantages loans from the European Investment Bank and through the New Community Instrument carry over normal credit sources; and, on average, what has been the difference in each quarter of the last four years in interest rates charged from these sources and those pertaining in the international capital markets.
§ Mr. LawsonThe European Investment Bank operates by onlending funds which it borrows in the international capital markets. Direct comparisons are difficult, but we would not expect the terms on which it can borrow to be better than those available to the United Kingdom Government. The terms on which it lends will be fractionally worse than those on which it borrows, since the EIB, while non-profit-making, must cover its administrative costs. The position on the new Community instrument is similar.
A substantial part of the EIB's lending to the United Kingdom is taken up by public sector bodies. There is advantage to the United Kingdom in maintaining a stable and continuing programme of off-market borrowing from Community institutions. Private sector applicants can derive a direct cost advantage because they obtain better terms from the EIB than they would be able to obtain by direct borrowing in the markets. Much of the EIB's lending to the private sector takes place in foreign currency on which the United Kingdom Government offer an exchange risk guarantee scheme.