Cost-Benefit Analysis and the Control of Public Expenditure: An Assessment of British Experience in the 1980s

Massimo Florio

Journal of Public Policy, 1990, vol. 10, issue 2, 103-131

Abstract: This paper examines approaches to public investment appraisal as theyare currently recommended in the British Treasury and implemented byevaluation units within the Department of Health, Department of Transport and the Home Office. The evidence suggests that spending departments have reacted to the pressure for increased selectivity in their expenditures by adopting a heterogeneous blend of appraisal techniques, including financial analysis, cost-effectiveness and option appraisal, withcost-benefit analysis eventually playing a minor role. The imposition of cash limits rations capital expenditures. When these constraints bite departments differently, either a unique social discount rate for projectappraisal is inappropriate or the rations themselves are giving wrong signals to the departments The departments do not have an incentive todevote time and effort to cost benefit analysis and other techniques of a more limited scope are implemented.

Date: 1990
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