Key facts
- Britain's Treasury is lowering the discount rate used to evaluate public infrastructure investments.
- The discount rate will be reduced from 3.5% to 3%.
- This adjustment is intended to boost investment by making long-term projects more viable.
- The reforms are part of updates to the government's 'Green Book' manual for approving capital projects.
- A new pilot program will assess the economic potential of entire investment areas.
Britain's Treasury announced on Friday that it will lower a key rate used to evaluate the long-term benefits of investment in public infrastructure projects as part of plans to boost investment across the country. The discount rate used for appraising public spending will be cut to 3% from 3.5%. Discounting is a method used by the Treasury to compare costs and benefits that occur at different points in time, treating money today as worth more than the same amount in the future. Lowering this rate reduces the gap, making it easier for long-term projects to demonstrate their full value. The government intends to publish full details of the plan, including its response to a review of the discount rate, at the budget on October 28. Finance minister John Healey is expected to set out details of the plan in a major speech on Monday. The changes are designed to give transport, housing, and social infrastructure projects a fairer consideration in government spending decisions by giving greater weight to benefits that take years to materialize. The Treasury is also testing a new approach that assesses the economic potential of entire areas for investment decisions, rather than evaluating individual projects. This approach is currently being piloted in Plymouth, Liverpool, Birmingham, and Port Talbot.