6. The Government's existing view is embedded in the Green Book.3 The academic debate on the discounting rate is around whether to use actual cost of funds, the opportunity cost of capital, social time preference or some combination of the three-with or without adjusting for the value of risks transferred. We think that the Government's position is essentially an arbitrary one, albeit with the justification which is articulated in the Green Book. We believe that the discounting rate debate is drawing focus away from the projects themselves and from realising the maximum benefit out of their implementation. This results in compromised efficiency of public expenditure.
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3 HM Treasury (2003) The Green Book.