§ Mr. Maxwell-Hyslopasked the Chancellor of the Exchequer, for each year since the scheme was commenced 413W in 1973, and cumulatively, how much profit or loss the Treasury has incurred by requiring local authorities to pay a premium when borrowing from the European Investment bank as an insurance against losses resulting from changes in sterling parities.
§ Mr. Ian StewartMy hon. Friend is referring to the Treasury's exchange cover scheme. Local authorities which borrow under this scheme surrender the proceeds to the exchange equalisation account (EEA) in return for sterling, and pay an exchange cover charge in return for which the EEA undertakes to provide foreign currency at the guaranteed rate for the servicing and repayment of the loan. The charge is calculated in such a way that the total sterling costs of the loan to the borrower are equivalent to the interest it would have paid on a comparable loan from the Public Works Loans Board (PWLB), less a margin which is at present per cent. on new loans. The EEA holds the foreign currency proceeds of the loan in the form of foreign currency assets, as part of the Government's overall reserves management operation. Provided the foreign currency assets match the foreign currency liability on the loan, the EEA's net overall position will not be affected by exchange rate movements during the life of the loan. As the EEA holds its foreign currency assets in the form of a pool, EEA transactions cannot be attributed to particular sources of funds.