The Ryrie Rules were formulated by a National Economic Development Council (NEDC) working party in 1981 under the chairmanship of Sir William Ryrie, then Second Permanent Secretary to the Treasury. The Rules sort to establish criteria under which private finance could be introduced into the nationalised industries. The Ryrie Rules said that:
(i) decisions to provide funds for investment should be taken under conditions of fair competition with private sector borrowers; any links with the rest of the public sector, Government guarantees or commitments, or monopoly power should not result in the schemes offering investors a degree of security significantly greater than that available on private sector projects;
(ii) such projects should yield benefits in terms of improved efficiency and profit from the additional investment commensurate with the cost of raising risk capital from financial markets. 5
The Rules were revised in February 1988 to take account of the privatisation of the previously nationalised industries and the introduction of schemes such as contracting out, opting out, mixed funding and partnership schemes. The two fundamental principles of the guidelines were:
• private finance could only be introduced where it offered cost effectiveness; and
• privately financed projects for public sector programmes had to be taken into account by the Government in its public expenditure planning (ie such projects had to have public expenditure cover).
In a speech to the Institute of Directors in May 1989, John Major, then Chief Secretary to the Treasury, formally retired the Ryrie Rules on the grounds that they had outlived their usefulness.6 The retirement was intended to further encourage "the private sector to bring forward schemes for privately financed roads, which offer value for money for the user and the taxpayer". In the same speech Mr Major gave an "explicit assurance" that he "would not seek reductions in the [public] road programme on a scheme by scheme basis to offset privately financed projects".
_________________________________________________________________________________________________________
5 House of Commons Library Deposited Paper 3639.
6 HM Treasury, Private Finance for Roads, News release 41/89, 5 May 1989.