Mr. Spearingasked the Secretary of State for Transport, pursuant to his reply of 11 July, what is the full commercial return he expects from rail electrification schemes of a suburban, inter-urban, and inter-city character, respectively.
Mr. David MitchellWe use the same test discount rate, 7 per cent., for appraising all the railway investment schemes which come to the Secretary of State for approval. This means that we are looking for a 7 per cent. return on optional investment, above that contained in a "base case". For the commercial sectors, inter-city, freight and parcels, the base case will be the minimum investment consistent with meeting the financial target for the sector as a whole. This might in some instances be no investment. For the London and south-east and provincial sectors, the base case is normally the minimum expenditure needed to continue the service and the 7 per cent. return is sought only on the excess. This recognises the different nature of these sectors. In addition, we are also prepared—where appropriate—to take account of any wider social benefits that may result from investment in the non-commercial railway.