Investing in the UK's Flood Defences (or Not!)

[petagny]

You wouldn't think so from some of the theoretical literature, but it's actually pretty difficult to compare directly the economic feasibility of projects in different sectors using CBA - different assumptions, different forecasting approaches, differences in ability to quantify all benefits, etc. . All the same, the revelation that the UK government has set a threshold benefit/cost ratio of 8 for central government funding for flood defences suggests that there might be an imbalance and that shifting public investment from other sectors could yield significant efficiency gains - too late for those up to their knees in Staines though. Roads are justified at lower B/C ratios (as is the high speed rail link, HS2). There has been a sound methodology around for many years for analysing the costs and benefits of flood defences. Is it the notion of expected (in a statistical sense) benefits that the Treasury can't get their heads around? Or perhaps they fully understand the notion of expected values and just decided to take the risk.

Here's a very good article in the FT that analyses public expenditure in flood defences, which raises the above issue as well as others about trends in funding. It's a shame we don't see more in depth budgetary analysis of this kind in the press.

http://blogs.ft.com/off-message/2014/02/11/the-facts-behind-flood-spending/

[petagny]

The Treasury has been criticised by the UK Statistics Authority for the way it has presented public investment statistics. According to the FT:

'The statistics watchdog has criticised a Treasury chart for giving voters a “false impression” about the scale of investment in infrastructure, including flood defences.'

Apparently a logarithmic scale was used to present figures on spending in the National Infrastructure Plan, thus making spending on flood defences appear to be very little different from spending on big ticket areas like energy or transport - at least to those who did not look closely at the scale.

http://www.ft.com/cms/s/0/091fa6a8-900e-11e3-aee9-00144feab7de.html#axzz2t6nPtBmJ

The National Infrastructure Plan is attached. Look at page 9 and see what you think, but to me there is no reason to use a logarithmic scale when making the comparison between sectors, except to mislead. Spending on energy and transport is around 100 times greater than on flood defences. This is an important piece of information to convey visually - which is the purpose of a graph - and this could have been done using a conventional scale. The bar for flood defences would be very small, but still visible (I've just tried it in Excel!) and the right impression of the comparative weight of spending would have been given.