5. Finance expense and finance income

	2008	2007	2006
	£m	£m	£m
Finance expense
Interest on listed bonds, debentures and notes^a,b	629	623	831
Interest on finance leases^a	31	44	62
Interest on other borrowings^a	159	58	20
Unwinding of discount on provisions^a	3	3	3
Net fair value loss on financial instruments in a fair value hedge^c	–	–	–
Net foreign exchange loss on items in hedging relationships^d	–	–	–
Fair value loss on derivatives not in a designated hedge relationship^e	41	4	8
Interest on pension scheme liabilities	2,028	1,872	1,816

Total finance expense	2,891	2,604	2,740

^a	Calculated using the effective interest method unless otherwise stated below.
^b	Includes a net charge of £77 million (2007: £67 million, 2006: £41 million) relating to fair value movements on derivatives recycled from the cash flow reserve.
^c	Includes a net credit of £6 million (2007: net credit of £70 million, 2006: net charge of £71 million) relating to fair value movements arising on hedged items and a net charge of £6 million (2007: net charge of £70 million, 2006: net credit of £71 million) relating to fair value movements arising on derivatives designated as fair value hedges.
^d	Includes a net charge of £373 million (2007: net credit of £420 million, 2006: net charge of £330 million) relating to foreign exchange movements on hedged loans and borrowings and a net credit of £373 million (2007: net charge of £420 million, 2006: net credit of £330 million) relating to fair value movements on derivatives recycled from the cash flow reserve.
^e	Includes a loss of £2 million (2007 and 2006: £nil) recycled from the cash flow reserve arising on de-designation of derivatives from a hedge relationship.

	2008	2007	2006
	£m	£m	£m
Finance income
Income from listed investments
Net gain on held for trading investments	–	6	6
Interest on available-for-sale investments	–	1	38

Other interest and similar income
Interest on held for trading investments	–	39	31
Interest on available-for-sale investments	25	16	12
Interest on loans and receivables	40	17	84
Other interest and similar income^a	–	139	–
Net gain on disposal of available-for-sale financial asset^b	–	–	27
Net foreign exchange on items in hedging relationships^c	–	–	–
Expected return on pension scheme assets	2,448	2,292	2,070

Total finance income	2,513	2,510	2,268

Net finance expense	378	94	472

^a	2007 includes £139 million relating to interest on settlement of open tax matters disclosed as a specific item.
^b	On 11 August 2005, the group exercised its option to require early redemption of its US dollar convertible 2008 bond. Bondholders had the option to take redemption proceeds in the form of cash or shares in the group’s interest in LG Telecom. The majority of bondholders exercised their option to take the redemption proceeds in the form of LG Telecom shares. Other interest in 2006 includes a net bond redemption gain of £27 million. This reflects the write off of LG Telecom shares of £121 million and the associated release from the available-for-sale reserve of £35 million; the write off of the bond and transaction costs of £87 million and the associated option liability of £17 million; and the release from the translation reserve of £9 million credit relating to foreign exchange movements on the investment in LG Telecom to the date of disposal.
^c	Includes a net charge of £nil (2007: net charge £123 million, 2006: net credit of £85 million) relating to foreign exchange movements on hedged investments and a net credit of £nil (2007: net credit of £123 million, 2006: net charge of £85 million) relating to fair value movements on derivatives recycled from the cash flow reserve.