§ Mr. Thorntonasked the Secretary of State for the Environment whether he has made any estimate, and, if so, if he will give figures for such past years as are available or could be estimated, of the estimated rate of return by direct labour organisations of local authorities compared with the rate of return achieved by private industry; and if he will give comparable figures for the rate of return which he is now requiring local authority direct labour organisations to achieve and the rate of return which he estimates as currently being achieved by the private sector in comparable work.
§ Sir George Young:Until the coming into operation, on 1 April 1981, of part III of the Local Government, Planning and Land Act 1980, local authorities were not required to make any rate of return on their direct labour operations nor to account for these in any way which would make estimates possible. The directions my right hon. Friend has made under the provisions of the Act now require local authorities to make a 5 per cent. rate of 89W return, on a current cost accounting basis, on the capital employed by their direct labour organisations. This requirement is intended to help authorities to identify the true economic cost of their direct labour organisations in the interests of improved financial management and better use of resources. As such, the rate prescribed in the directions is not intended to represent the current rate of return being obtained by private industry at any time, but rather the opportunity cost of capital over a period of time. Rates of return achieved in the private sector were published by the Department of Industry in "British Business"on 18 September 1981.