§ Mr. Neil Thorneasked the Secretary of State for Transport what the figure of £1.50 for every £1 spent given in the 1986 public expenditure White Paper volume II, page 127, as being the estimated total user and safety benefit, for new investmen in trunk roads, produces as an annual rate of return; and how this is calculated.
§ Mr. Michael SpicerBroadly equivalent to an internal rate of return of 12 per cent. The ratio of £1.50 benefit for302W every £1 spent is calculated by comparing the discounted value of the benefits from estimated savings in travel time, vehicle operating costs and accidents of schemes due to he completed in the period 1985–86 to 1988–89 with their discounted capital costs, using the Department's standard COBA cost benefit techniques. The discount rate used is 7 per cent. in real terms. The internal rate of return is the discount rate which equates the value of the benefits with the costs.