2.5.32 The purpose of valuing benefits is to consider whether an option's benefits are worth its costs, and to allow alternative options to be systematically compared in terms of their net benefits or net costs. The general rule is that benefits should be valued unless it is clearly not practicable to do so. Even if it is not feasible or practicable to value all the benefits of a proposal, it is important to consider valuing the differences between options.
2.5.33 In principle, appraisals should take account of all benefits to the UK. This means that as well as taking into account the direct effects of interventions, the wider effects on other areas of the economy should also be considered These effects should be analysed carefully as there may be associated indirect costs, such as environmental costs, which would also need to be included in an appraisal. In all cases, these wider effects should be clearly described and considered.
2.5.34 Real or estimated market prices provide the first point of reference for the value of benefits. There are a few exceptions where valuing at market prices is not suitable. If the market is dominated by monopoly suppliers, or is significantly distorted by taxes or subsidies, prices will not reflect the opportunity costs and adjustments may be required and specialist economic advice will be needed.
2.5.35 The results of previous studies may sometimes be used to estimate the economic value of changes stemming from current programmes or policies. There will be increasing scope for using this 'benefit transfer' method as data-bases expand, though care must be taken to allow for different circumstances. The characteristics of the consumers or client group for which data exist may differ from those of the proposal under consideration. These factors can limit the extent to which values can be transferred or generalised.
2.5.36 In the absence of an existing robust (i.e. reliable and accurate) monetary valuation of an impact, a decision must be made whether to commission a study, and if so how much resource to devote to the exercise. Annex 2 of the Green Book sets out the key considerations that may govern a decision to commission research.
2.5.37 Where it is concluded that a research project to determine valuations is not appropriate, a central estimate, together with a maximum and minimum plausible valuation, should be included if possible. These figures should be included in sensitivity analyses to give assurance that benefit valuation is not critical to the decision to be made. A plausible estimate of the value of a benefit or cost can often be drawn out by considering a range of issues which are summarised in Annex 2 of the Green Book.
2.5.38 Most appraisals will identify some costs and benefits for which there is no readily available market data. In these cases, a range of techniques can be applied to elicit values, even though they may in some cases be subjective. There will be some impacts, such as environmental, social or health impacts, which have no market price, but are still important enough to value separately. Annex 2 of the Green Book describes the relevant techniques, and provides further information on how they are being applied in practice.
2.5.39 Costs and benefits that have not been valued should also be appraised; they should not be ignored simply because they cannot easily be valued. All costs and benefits must therefore be clearly described in an appraisal, and should be quantified where this is possible and meaningful. Guidance on the appraisal of non-monetary cost and benefits is given at section 2.7 below.