§ 23. Mr. BurnettTo ask the Chancellor of the Exchequer for what reason the Treasury discount rate is set at 6 per cent. in real terms. [11353]
§ Mr. Andrew SmithThe discount rate is based on several factors, including the cost of public sector capital and the estimated rate of social time preference. The 6 per cent. rate currently recommended was set in 1989 and was derived from the evidence then available. A review is currently under way of the project appraisal and capital appraisal system to ensure it embodies best practice in present circumstances.
§ 27. Paul HolmesTo ask the Chancellor of the Exchequer what recent analysis his Department has undertaken of the influence on the relative values of public sector comparators and public-private partnership costs of changing the discount rate. [11359]
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§ Mr. Andrew SmithThe project appraisal and capital approval system used in government is currently under review. However, the rationale for any change in the discount rate would have implications for other parts of the appraisal process, so the overall effect would depend on a combination of these factors.