Benefits that can be quantified and valued

Where possible the value of benefits should be imputed from real or estimated prices associated with them. For instance, if a benefit is traded on the market, then this can be used to estimate its value, though suitable allowances may need to be made for taxes and subsidies. Where there is no market price available, then various methods have been developed to infer the value of a benefit.25

The revealed preference approach infers a price from consumer behaviour. For example, the relationship between house prices and levels of environmental amenity, such as peace and quiet, may be analysed in order to assign a monetary value to the environmental benefit. Another approach is based on estimating willingness to pay by imputing a price from questionnaires and interviews. For example, interviewees can be asked how much they are willing to pay for improving the quality of services, time savings, etc. or how much they are willing to pay to avoid undesirable outcomes. MAPPP's analysis (see Box 2) represents an interesting, and potentially valuable, variant of this approach.

Sensitivity analyses should be conducted to test how sensitive benefits are to changes in key assumptions.

Benefits that can be quantified

Some benefits may be quantified but not expressed in monetary terms. For example, improved educational attainment may be expressed in terms of grades obtained or numbers of years in schooling, but the value of this is difficult to assess. Similarly, user satisfaction can be difficult to monetise, though one can provide a scale for comparing satisfaction levels. Environmental impact in particular can be difficult to value. Where possible it should be expressed in established physical units but not in monetary terms should be measured in their respective units.26 By established or accepted physical measures we refer to those that have been thoroughly tested, are sustained by empirical evidence, are consistently applied across various investment projects within that sector and about which there is a high degree of consensus. When alternative physical measures are available one must select that which is most appropriate for the particular characteristics of the impact in question and correlates well with individuals' perceptions and satisfaction/ dissatisfaction ratings. Again, where appropriate sensitivity analysis should be conducted to estimate the vulnerability of benefits to key assumptions.

Other benefits

In some instances, impacts cannot be monetised or quantified but can only be identified. Examples of this include the aesthetic improvement to local area, consistency of proposal with government policy, replicability of innovation in future projects. In this case, they should be described in detail so that one can make an informed decision.