§ Mr. Cashasked the Secretary of State for Trade and Industry if he will make a statement on the accounting treatment of the Export Credits Guarantee Department's tender to contract and forward exchange supplement scheme.
§ Mr. Alan ClarkThe tender to contract and forward exchange supplement scheme, which provides a measure of protection to United Kingdom capital goods exporters who tender in foreign currencies against exchange losses in the period between submission of a tender and award of contract, has been operated by the Export Credits Guarantee Department as a trading facility since 1977. The risk of adverse exchange rate movements, which the scheme sets out to insure, does not lend itself to the type of underwriting assessment and control through which ECGD seeks to ensure the financial viability of its other trading facilities. For this reason, it has been decided that the scheme should more properly be accounted for as a public expenditure programme and the losses incurred to date written out of ECGD's trading accounts. It remains the Government's aim that the premium charged for this cover should be sufficient to cover ECGD's costs and any underwriting losses.
The necessary changes will be made in ECGD's 1986–87 trading accounts. Their precise effect will not be known until those accounts have been finalised, but the best current estimate is that the combined reserves and estimated open year trading surpluses on the national interest account will effectively be increased by £123 million. This comprises £68 million underwriting losses and administration costs and £55 million notional interest paid on the scheme's cash balance with the Consolidated Fund. The anticipated public expenditure costs of the scheme from 1987–88 were included in the 1987 public
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Net capital expenditure in manufacturing industry1 by standard region of the United Kingdom from 1975 to 1984 in current prices Region 1975 1976 1977 1978 1979 £ million £ million £ million £ million £ million North 462 576 562 681 683 Yorkshire and Humberside 441 412 482 595 634 East Midlands 197 262 319 382 466 East Anglia 81 91 142 169 207 South East 656 729 1,035 1,357 1,698 South West 145 165 238 290 349 West Midlands 376 403 517 606 702 North West 411 460 608 787 990 Wales 249 265 294 331 495 Scotland 426 465 493 551 597 Northern Ireland 92 68 84 94 124 1 Orders III to XIX Standard Industrial Classification, Revised 1968. expenditure White Paper (Cm. 56). The retrospective adjustment for the years 1982–83 to 1986–87 will be shown in the 1988 public expenditure White Paper as follows:
£ million 1982–83 31.6 1983–84 10.5 1984–85 1.8 1985–86 -13.9 1986–87 118.9 1 Estimated. These figures represent the net annual cash payments to exporters. They do not sum to the estimated trading account adjustment because the latter, apart from covering the entire period from 1977–78 to 1986–87, also includes notional interest, administration expenses and accrued income and expenditure.