Q71 Mr Rendel: Indeed; but you must have had some estimates of what was likely to happen in order to make it worth while doing that deal.
Mr Gieve: Absolutely; we did look at that. We also took account of the fact that at the point we were doing this deal, the Office of Government Commerce issued binding guidance that deals like this had to achieve a 50% share of refinancing gains. That was being issued at the time we were doing the negotiations. So there was a question over whether we moved or whether we did not.
Q72 Mr Rendel: Is it correct that we said they had to? I thought it was our advice that they should try to?
Mr Gieve: I think it is Treasury guidance.
Mr Molan: The OGC promulgated advice in 2002.
Q73 Mr Rendel: But presumably if it is not worth it, if you cannot get a deal which makes it worth it, you would not do it.
Mr Gieve: Exactly.
Q74 Chairman: We are not going to have an argument about this. When this started, interest rates were much higher and companies were making huge profits from refinancing. Of course this Committee recommended departments should look at it and should proceed down that route. We never recommended that you should pay for refinancing if interest rates were so low that there was unlikely to be any refinancing at all. You cannot throw that back in our face.
Mr Gieve: I was not throwing it back in your face. I was just explaining how we approached this.
Q75 Mr Bacon: How much is the annual unitary charge?
Mr Gieve: The final annual unitary charge has yet to be determined because it will depend on inflation and on further variations.
Q76 Mr Bacon: Yes, I realise that. When you move in in 2005, what are you expecting to pay in your first year as a unitary charge? Page 11 says £39.2 million. Is that per year?
Mr Gieve: No, the unitary payment is part of that which is £30.3 million a year. It is the first column.
Q77 Mr Bacon: That is what you are expecting to pay as the annual unitary charge.
Mr Gieve: Subject to any variations.
Q78 Mr Bacon: Yes, subject to inflation. What is the inflation presumption in your model?
Mr Gieve: I think we are assuming 2%.
Q79 Mr Bacon: 2.5%?
Mr Gieve: We are not-
Q80 Mr Bacon: Treasury building was 2.5%, so was the MoD building. I am just asking whether it is the same.
Mr Gieve: I think it is a bit under 2%, but I will check that.9