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

Published online by Cambridge University Press:  28 November 2008

Massimo Florio
Massimo Florio
Affiliation:
Economics, University of Urbino
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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.

Type
Articles
Information
Journal of Public Policy , Volume 10 , Issue 2 , April 1990 , pp. 103 - 131
Copyright
Copyright © Cambridge University Press 1990

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