§ Mr. Leighton
To ask the Secretary of State for Transport what percentage of investment in Network SouthEast has to earn an 8 per cent. return; and what investment projects do not have to earn this return.
§ Mr. Portillo
The basic criteria for all replacement investment in BR's subsidised sectors such as Network SouthEast are that the existing service should be maintained and that the chosen project should be the least cost option. An 8 per cent. discount rate is used to compare the costs and benefits of options, but there is no requirement for replacement investment as a whole to earn a financial return of 8 per cent. It is only when an option for investment includes an element of enhancement, for example the provision of first-class accommodation, or air conditioning, or represents an addition to the asset base, that this additional expenditure must normally be justified by its ability to earn an 8 per cent. return. We have however made it clear in the new objectives set for BR in December that where, exceptionally, additions to NSE's asset base cannot meet an 8 per cent. financial return, it is appropriate to consider whether there is a case on cost-benefit grounds. Most investment projects include elements of both replacement and enhancement, so it is not possible to provide the percentages requested.