Big projects need proper assessment

Another of my perennial bugbears is the misuse of the Benefit:Cost methodology that is the way projects are assessed.

The Institute of Government has brought out a timely analysis of what is wrong with the way it is being used for big infrastructure projects such as HS2, and other big rail projects.

The report, entitled How to Value Infrastructure, argues that ministers tend to be far too optimistic about the regenerative and job-creation aspects of projects. While defending the methodology as the best current method of considering whether to give schemes the go-ahead (I would disagree!), the authors argue that ministers should be far more rigorous when making claims about the dynamic effects of big infrastructure projects. They highlight, in particular, an analysis produced by KPMG which suggested that there would be a £15 billion per year increase in GDP thanks to HS2 as a result of economic regeneration. This was later criticised by Henry Overman, a former adviser to HS2 Ltd, as “essentially made up”.

That is, however, my view of the whole panoply of tools used to make spurious claims about mega-projects in general. The search (as the report says) for a single number which represents the benefits in relation to costs is spurious. Costs are often underestimated and benefits are rather randomly calculated. We need a far more intelligent and thorough analysis of the impact of such schemes, using evidence from across the world of their impacts.