7.24 The principles on which public sector bodies should set prices for goods and services are set out in Chapter 6 of HM Treasury's Managing Public Money64 and possible legal restrictions such as those contained in the Competition Act 1998. The guidance will not formally apply to the JV if it is classified to the private sector but should still be applied in principle given the public sector's role in the JV.
7.25 Fees and charges should normally be set to recover the full cost of the service, while recognising that in some cases, e.g. some prescription charges and university fees, that may not be appropriate either for policy reasons or because the relevant legislation does not permit it (e.g. tax elements, commercial charging).
7.26 Some services are discretionary. Services of this kind are often supplied into competitive markets, though sometimes the public sector supplier has a monopoly or other natural advantage. For these services, the charges should be set at a commercial rate, albeit consistent with the fees and charges guidance set out above, including delivering a proper return on the use of resources acquired with public funds.
7.27 Besides the issue of fees and charges by the JV to the outside world, public sector bodies should also consider carefully arrangements by which the JV pays fees and charges to its sponsors (or, for that matter, arrangements by which the JV charges fees to its sponsors). These might include management fees or payments for facilities or services. This is a complex area and transparency will be required on all agreements to ensure that they are properly reflected in the overall evaluation of the proposed JV. The simplest approach is to ensure that payments and terms are consistent with what would be agreed on an arm's length basis. This is to avoid participants drawing out profits from contractual arrangements and upsetting the intended allocation of risks and rewards.
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