§ Mr. Ralph HowellTo ask the Chancellor of the Exchequer at what level the interest elements of capital charges are set for public sector capital assets; how this figure is arrived at; and if he will make a statement.
§ Mr. Major[holding answer 24 April 1989]: I assume my hon. Friend has in mind the returns the Government expect the public sector to earn on capital assets. I refer him to my statement on 5 April, at column 187.
Fees and charges for non-trading public bodies will normally be set to recover a cost of capital of not less than 6 per cent. in real terms. This is based on the real pre-tax costs of capital to a private sector company raising funds for low-risk purposes.
Trading bodies such as nationalised industries are required to earn a real rate of return of 8 per cent. on their new investment programmes as a whole. This is derived from the average pre-tax real rate of return achieved on assets in the private sector.