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Note 8: Finance costs and income

£ million 2010 2009
a  Finance costs
On bank loans* (13) (34)
On finance leases (56) (75)
On hire purchase arrangements (7) (22)
On other loans* (65) (38)
Interest expense (141) (169)
Unwinding of discounting on provisions** (19) (12)
Capitalised interest*** 1 4
Change in fair value of cross currency swaps 2 (5)
  (157) (182)

*Total interest expense for financial liabilities not at fair value through the income statement is £78 million (2009: £72 million).

**Unwinding of discount on the competition investigation provision and restoration and handback provisions (note 29).

***Interest costs on progress payments are capitalised at a rate based on London Interbank Offered Rate (LIBOR) plus 0.5 per cent to reflect the average cost of borrowing to the Group unless specific borrowings are used to meet the payments in which case the actual rate is used.

£ million 2010 2009
b  Finance income
Bank interest receivable (total interest income for financial assets not at fair value through the income statement) 20 95
  20 95

c  Financing income and expense relating to pensions
Net financing expense relating to pensions (164) (34)
Net amortisation of actuarial (losses)/gains on pensions (37) 17
Effect of the APS asset ceiling 85   
  (116) (17)

d  Retranslation charges on currency borrowings
(14) (59)

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