UK Cuts Discount Rate to Channel Investment Beyond London
The UK government has announced a significant change to its infrastructure appraisal framework, aiming to shift investment beyond London and toward regional economies. The discount rate applied to long-term investments has been cut from 3.5% to 3%, making it easier for projects with delayed benefits to demonstrate their value.
The Treasury's Green Book reforms aim to give more 'fairer treatment' to transport, housing, and social infrastructure schemes outside London. This change is part of Prime Minister Andy Burnham's mission to rebalance the UK economy.
However, critics argue that the new approach may make it easier to approve projects with less economic value but potentially more social benefits in regional areas.
The government faces mounting fiscal strain, and Chancellor John Healey has warned that the autumn Budget could be tough due to global turmoil. The Treasury is piloting a 'place-based' business case system to direct more investment to regions.