Below is the text of Mr Major’s written Parliamentary Answer on Capital Charges on 25th April 1989.
Mr. Ralph Howell To 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.