§ Sir John StanleyTo ask the Secretary of State for Transport whether his Department's financial evaluation374W of British Rail's high-speed line proposal will be expected to show, after using a commercial discount rate, a positive net present value in the year in which construction commences to ensure compliance with the provisions of section 42 of the Channel Tunnel Act.
§ Mr. PortilloBefore this project can proceed, the Government will require any British Rail investment in it to show a positive net present value discounted at the discount rate agreed between the Department and British Rail. For the purpose of such calculations the year to which the costs and revenues are discounted is immaterial.
§ Sir John StanleyTo ask the Secretary of State for Transport what he estimates will be the minimum discount rate that will be applied to his Department's financial evaluation of British Rail's high-speed line proposed to ensure compliance with the provisions of section 42 of the Channel Tunnel Act.
§ Mr. PortilloIf the new line were to be financed by British Rail, the board would need to demonstrate that the project would produce a commercial return. The discount rate used to test this (currently 7 per cent.) will be agreed between BR and the Department. It will need to reflect the Treasury's required rate of return, which is intended to ensure that commercial public sector investment programmes (such as BR's) provide a rate of return which is broadly equivalent to that which could be achieved in the private sector. The required rate of return was set in 1978 and is currently under review.