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Channel Tunnel

Volume 118: debated on Monday 29 June 1987

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asked the Secretary of State for Transport if he will make a further statement on arrangements for financing the Channel tunnel project.

The financing of the Channel tunnel project is a matter for Eurotunnel.

There have been repeated assurances that no public funds or guarantees will be given for this outdated white elephant. Will my hon. Friend say something about the circumstances in which the European Investment Bank has been persuaded to provide a cheap loan of £1,000 million, when the rules of the EIB clearly state that any loan, no matter how small, must be guaranteed by a Government or a body of equivalent status? Finally, will he comment on the circumstances in which British Rail was persuaded to tear up its previous agreement and to agree to provide hundreds of millions of pounds of advance payments to the tunnel to make it slighly more viable?

The loan of £1 billion from the European Investment Bank is not public money and repayment will not be guaranteed by the Government. Security is being provided by the clearing banks that are participating in the project.

On my hon. Friend's second point about advance payments by British Rail, I understand that British Rail has not agreed to any advance payments to Eurotunnel. The proposal that has now been agreed is for regular minimum payments each year once the tunnel is open for use.

Does the Minister not agree that the European Investment Bank is guaranteed by the member states of the Common Market and that the £1 billion, which will be poured into that ill-starred venture, will represent, at least in part, some public expenditure? Would it not be better to put that public expenditure into electrifying the whole of British railways in a progressive plan, including the Leeds-Bradford section, instead of the project being continually sabotaged by the Minister and his Department?

No public expenditure is involved. The European Investment Bank obtains its operating resources mainly by borrowing in its own name and on its own credit in domestic and international markets. In this case there is no guarantee at all from the Government. This is entirely a commercial loan.

Will the Government insist that Eurotunnel sticks to its original guidelines for national investment quotas in the equity of this project? Surely even Channel evangelists such as my hon. Friend might have second thoughts if the British institutions invested as little as 10 or 20 per cent. in the project, thereby allowing it to become the famous Franco-Arabian-Japanese Channel tunnel?

My hon. Friend is, as usual, on his hobby horse on this matter. Eurotunnel has recently agreed a loan facility of £72·5 million to provide interim finance until its public share issue later in the year. That does not involve any Franco-Japanese or middle east finance.