§ Mr. Austin MitchellTo ask the Chancellor of the Exchequer what is the rate of return the Government apply in the case of data processing equipment; and how much of that is accounted for by depreciation and how much by the cost of borrowing.
§ Mr. NelsonThe Government specify a standard rate of discount, which serves as a cost of capital, to ensure that the use of resources by central government is no less efficient at the margin than resources used by the private sector. The rate of 6 per cent. in real term is applied to the internal costing of all central government activities, including acquisition of data processing equipment.
The rate of depreciation will depend on the expected life of the equipment, and will vary from case to case.
In industrial assistance cases, including assistance to manufacturers of data processing equipment, a discount rate of at least 8 per cent. in real term is applied, depending on the commercial rate considered appropriate for the particular investment.