11 - Group debt costs and other interest
Group debt costs and other interest of £201 million (six months to 30 June 2007: £190 million) comprise internal and external interest on borrowings, subordinated debt and intra-group loans not allocated to local business operations. Interest costs remained at prior period levels of £223 million (six months to 30 June 2007: £222 million). Within this, external interest costs were £128 million (six months to 30 June 2007: £129 million) reflecting higher interest on subordinated debt, due to hybrid debt issue in May 2008, offset by lower commercial paper interest as the proceeds were used to repay some commercial paper. Internal interest costs remain unchanged at £95 million (six months to 30 June 2007: £93 million). Also included is UK net pension income which represents the expected return on pension scheme assets less the interest charge on pension scheme liabilities. Net pension income fell to £22 million (six months to 30 June 2007: £32 million) reflecting lower asset returns due to equity de-risking.
Interest on the £990 million direct capital instrument issued in 2004 is not included within unallocated interest as it is instead treated as an appropriation of profits retained in the period. This appropriation is settled in accordance with IFRS and will be reflected in the second half of the year.
