Whenever the UK government decides to spend public money on a new project, it needs to weigh up the costs against the value of the benefits it hopes to achieve. And it’s rarely a simple calculation.
This is why Chancellor Rachel Reeves is changing the Treasury’s “green book” of rules which dictate how investment plans are made. Those rules, and the calculations they support, do not always work.
At one point for example, the benefit-cost ratio of HS2, the controversial high speed railway link between London and the north of England, was quite favourable – estimated as having a value of two. That meant the economic benefits were expected to end up being twice as high as the cost of building it.
