§ Mr. Ralph HowellTo ask the Secretary of State for Health what grounds underline the decision to use an interest rate figure of 6 per cent. in the new capital accountancy system to be introduced into the National Health Service in 1991.
§ Mr. FreemanThe 6 per cent. interest rate is a real (as opposed to nominal) rate based on the long-term cost of capital, and is the same as the discount rate used for the non-trading part of the public sector. The discount rate is based on the cost of capital for low-risk purposes in the private sector, and aims to ensure that investments in the public sector are broadly comparable, in terms of economic efficiency, to those undertaken in the private sector.