DEPARTMENT OF TRADE
1 VICTORIA STREET LONDON SWIH OET
Telephone 01-215 7877
AKG D
Ender
No gard
From the Secretary of State
The Rt Hon Leon Brittan QC MP
173/2
se as for pp
EPS
TRED
news
219
17
Chief Secretary
HM Treasury
Treasury Chambers
Parliament Street
London, SW1P 3AG
Dear
Chiet Levetory,
EK OFFICER
FA
عميرا
M
1981
---
Actor Tak
$
No Ima li ppptember 1981
11
ха
I have seen Kenneth Baker's recent letter to you about the £17 million order which Metro-Cammell Limited are pursuing for rolling stock for the Kowloon-Canton Railway in Hong Kong. I appreciate the importance of additional business to the company's future; it would be a pity if, because they were unable to negotiate this order as a supplement to the existing contract, it ended up going to the Japanese in an international bidding situation. However, I have to inform you of my conclusion, after discussion with my officials and legal advisers, that what is proposed would not represent a proper use of the relevant part of ECGD's Act.
The suggestion is that the Act be used to provide retrospective cost escalation cover (CEC), going back no less than three years. The scheme has always been represented to Parliament, both by our predecessors and by the present Government, as providing insurance against the unpredictabilities of future inflation levels. Last March Cecil Parkinson, in moving the scheme's extension to 1982, re-emphasised the Government's objective to make it viable and self-financing. It is also relevant to note here the assurance given to the House by our predecessors, that CEC would not be used to provide special assistance to firms facing difficulties for employment or viability reasons.
If the existing contract had included specific provision for the supply of these additional trains, perhaps in the form of an option, it might
have been possible to act as Kenneth has proposed. But it did not and
1
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