Full report (pdf - 1148KB) - National Audit Office

Appraisal and sustainable development 232.6 The Green Book andd impact assessment guidance require departments tomonetise the costs and benefits of each policy or project p optionn in order to helpchoose between them. Some forms of impacts - particularly p economic impacts - maybe directly measurable in financial terms. Some impacts may be quantifiable in nonafinancialfinancial terms (for example, changes in greenhouse gas emissions) andvalue placed upon them. A third category of impacts, such as impacts on biodiversity,may be difficult to monetise or quantify. Both the impact assessment and the tbusiness caseguidance aspire to 1000 per cent of costs and benefits being monetisedinthe final version of the appraisal (Figure 8), while recognising that there may beother relevantt factors which cannot befinancially quantified. q The latest impactassessment guidance recognises thatt significant resources r can be involved inmonetising impacts, and that the effort invested should be proportionate tothe likelyscale of the impacts.Figure 8: Stages in the monetisation of costs and benefits bSource: BRE Impact Assessment main guidance; HMT Business Case Assessment guidanceCost-benefit analysis2.7 The Green Book recommends the traditional cost benefit analysis approach asthe preferred method of appraising social welfare, though it recognises that otherrelated approaches may sometimes be appropriate. The latter include the benefit-costratio approachand the cost utility approach, both of o which are also used ingovernment.