Scope of costs and benefits

5.7 The relevant costs and benefits are those to UK society overall. All relevant costs and benefits which may arise from an intervention should be valued and included in Social CBA unless it is not proportionate to do so. The priority costs and benefits to quantify are those likely to be decisive in determining the differences between alternative options. The appraisal of social value involves the calculation of Benefits Cost Ratios (BCRs) - the ratio of benefits to costs - and Net Present Social Value (NPSV) - the present value of benefits less costs, as appropriate to the intervention being considered.

5.8 UK society generally includes UK residents and not potential residents or visitors. It is sometimes reasonable to include the costs and benefits for people living outside the UK e.g. service personnel posted overseas. Appraisal of Official Development Assistance (ODA) should include the costs and benefits to the recipient countries. The financial cost of ODA should be assessed in the same way as other public spending.

5.9 Appraisal of individual spending decisions is largely undertaken in the context of pre-determined budgets. Decisions concerning the overall level of public spending are macro-level decisions made separately from, and in advance of, individual spending decisions. The cost of raising public funds e.g. the cost of issuing debt or the impact of taxes, is therefore not considered in short-list appraisal.

5.10 A categorisation of potential costs and benefits that may be part of appraising social value is given in Box 7. Not all appraisals involve every category.

Box 7. Classification of Costs and Benefits

Costs in the appraisal of social value

total direct public costs (to originating organisation):

O capital

O revenue

total indirect public costs (to other public sector organisations):

O capital

O revenue

wider costs to UK society:

O monetisable including cash costs

O quantifiable but unmonetisable costs

O qualitative unquantifiable costs

total risk costs (the costs of mitigating or managing risks):

O optimism bias (decreased as estimated risk costs are included)

O estimated or measured risk cost

Benefits in the appraisal of social value

direct public sector benefits (to originating organisation):

O cash releasing benefits

O monetisable non cash releasing benefits

O quantifiable but not monetisable benefits

O qualitative unquantifiable benefits

indirect public sector benefits (to other public sector organisations):

O cash releasing benefits

O monetisable but non cash releasing benefits

O quantifiable but unmonetisable benefits

O qualitative unquantifiable benefits

wider benefits to UK society (e.g. households, individuals, businesses):

O monetisable including cash benefits

O quantifiable but not monetisable benefits

O qualitative unquantifiable costs and benefits