IfG calls for sharper cost benefit analysis of infrastructure projects

20 Sep 17

Whitehall needs to improve its cost benefit analysis or risk losing value from its £250bn infrastructure project pipeline, the Institute for Government has warned.

The think-tank’s How to value infrastructure: improving cost benefit analysis report argues that, with a quarter of a trillion pounds worth of infrastructure investment expected over the next five years, the government can’t afford expensive mistakes and unnecessary delays.

Nick Davies, research manager at the IfG and report author, said: “Picking the right infrastructure projects can help boost productivity and economic growth.

“Cost benefit analysis should be a crucial tool for ministers making these decisions but too often it is misused, inconsistently applied and poorly communicated.”

He urged Whitehall to learn from past failures and successes.

Davies added: “Equally, ministers should be far more honest with the public about the limits of modelling and the real reasons behind their decisions. Cost benefit analysis is a useful tool but it will only ever be as good as the people using it.” 

Poor cost benefit analysis risks the wrong projects being approved while valuable projects are either turned down or delayed, the report said.

The study argued that cost benefit analysis is sometimes used by ministers to justify decisions that have already been made. Not only does this erode public trust in government, it also harms the country’s long-term competitiveness.

However, the report finds that cost benefit analysis can improve decision-making – when used properly – and shouldn’t be abandoned.

Researchers at the think-tank recommend that the Treasury and relevant departments, including the Department for Transport, publish clearer guidance for analysts, based on more and better data, with more consistent assessment.

Ministers were also urged be more transparent about the way they make they make difficult infrastructure decisions.

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