Rethinking Cost-Benefit Analysis in Major Projects

Ever wondered why Britain’s roads are riddled with potholes, why the trains keep breaking down and why there aren’t enough hospital beds? Simple. Britain is not making enough capital investments. Taking the public and private sector together, it amounts to about 6 percent of GDP, well below the 22% in the US - which has its own infrastructure problems. China can spend as much as 40% of GDP on capex projects.

Steve says there are two reasons why Berit5ian’s infrastructure is failing. First, not enough engineers. There needs to be more teaching of STEM subjects in schools. But more importantly the adherence to the notion that governments need to balance budgets means capex investment is often pushed aside by more pressing short-term spending. Phil asks whether the sensible way forward is to allocate an amount of money for capex investment that sits outside the budget that the government tries to balance each year.

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