Priority Action Area #3

Capture long-term value of every kind

Infrastructure provides many direct benefits, but many more which are diffuse across the whole economy and society, and endure through time. Typically, infrastructure investments are appraised using conventional cost-benefit and multi-criteria analyses. In the UK, this includes the approach set out in HM Treasury’s Green Book[35] which is are often elaborated with specific guidance for individual infrastructure sectors, for example by the Department for Transport’s Webbased Transport Analysis Guidance[36] and the Environment Agency’s Flood and Coastal Defence Project Appraisal Guidance.[37] Standard economic approaches typically assume that individuals are rational, markets behave in an efficient fashion and environmental, demographic and other socioeconomic factors are stationary. It is inevitable therefore that existing approaches only partially assess the true long-term economic, social and environmental cost and benefits of infrastructure. A key consideration for capturing value is the purpose of the infrastructure service; is it to maximise revenue, or to provide an affordable service or amenity to citizens and businesses?

Recommendation 7: Incorporate measures of social and environmental benefit (and cost) into infrastructure appraisal frameworks to recognise the wider outcomes and ascertain the broadest possible set of mechanisms to capture revenue and other values.

Recommendation 8: Implement a quantitative framework within the infrastructure appraisal process to assess the value of flexibility and resilience across the whole system over the long-term.

Recommendation 9: Local authorities and infrastructure owners should apply resource assessments as a matter of course to identify the potential of land and infrastructure assets to generate long-term, stable revenue streams and not just oneoff, short-term windfalls from selling-off assets.

Recommendation 10: Employ a new approach to infrastructure economics that recognises the long-term and system-wide value of infrastructure provision.