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By John Redwood's Diary
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The European Investment Bank

Thursday, October 20, 2016 22:27
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Yesterday I was asked onto the BBC World at One to explain how the UK will manage if we lose access to EIB loans. This was a rehash of a story Remain used in the referendum campaign.

Sir Brian Unwin did the usual thing of trying to undermine the UK position by telling us how crucial it will be to retain full membership of the EIB. He pointed out last year we received 10 % of the loans advanced. So many EU enthusiasts want us to have a whole list of demands like staying in this bank which would force us to offer all sorts of compromises we have no need to make.

The UK has put up 16% of the capital so it has not got its full proportion of the loans. Over the time we have been in we have received 8% of the lending, half our share of the capital.

We could offer a simple choice to our former EU partners. Either we stay in the Bank, and they need to promise a reasonable share of the loans for us, or they buy us out.
Our shares amount to around £12bn taking starting capital and share of accumulated reserves. This would enable us to set up our own Investment Bank. If it borrowed and geared on the same basis as the EIB it would enable us to lend another £100 bn or so for good projects.

If they wish us to stay in we need to remember we are liable to supply another £36 bn if they lose money and need capital top up. The EIB earns small margins on its asset base and has substantial gearing. It is certainly not worth offering anything in order to stay in.

It owns investments in government bonds, which it could sell to buy the UK out. The UK would probably be better off out controlling our own money, but we could life with a continuing shareholding in the EIB if they want that. WEx woukd need to take a continuing interest in the management if the bank given our underwriting if the bank


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