§ Lord Harris of Haringeyasked Her Majesty's Government:
(a) why the United Kingdom regards borrowing from the European Investment Bank and the European Investment Fund as counting against the public sector borrowing requirement and the general government financial deficit, while 13 of the other members of the EU do not do so; (b) whether steps are being taken to change the definition so that such loans do not count in the future; and (c) if no steps are being taken to do so, why this is. [HL1394]
§ Lord McIntosh of HaringeyAll central and local government current and capital expenditure, including that financed by borrowing from the EIB, scores in General Government Net Borrowing (GGNB) and the Public Sector Net Cash Requirement (PSNCR). Expenditure by public corporations, including that financed by borrowing from the EIB, only scores in the PSNCR.
Private sector borrowing from the EIB does not count in the calculation of GGNB or the PSNCR.
The calculation of GGNB is prescribed by the European System of Accounts (ESA95), which is mandatory in all EU member states for certain purposes. The UK practice is fully in line with the requirements of the ESA95.
The EIF, unlike the EIB, does not provide loans. It provides guarantees and equity investment. In the UK, such EIF support would normally be to the private sector and so it would not score in GGNB or PSNCR.
The PSNCR is a specific UK measure. It is not prescribed in the ESA95. Other countries may have no equivalent or may calculate any equivalent in different ways.
No steps are being taken to change the definition of GGNB and PSNCR in this regard as GGNB and PSNCR are designed to measure general government's or the public sector's need to borrow from outside general government or the public sector in the UK.