Britain plans to reduce the Green Book social discount rate to 3.0% from 3.5%. The change gives more weight to benefits that arrive decades in the future, improving the appraised value of some transport, housing and social-infrastructure projects. It is not a cut in government borrowing costs, a Bank of England policy move or a guaranteed funding decision.
What is changing
The Green Book is HM Treasury's framework for comparing the costs, benefits and risks of public-policy options. Its discount rate—formally the Social Time Preference Rate, or STPR—converts future social costs and benefits into present values. Under the existing framework, the real rate is 3.5% for the first 30 years, then declines for longer horizons.
Reuters reported that the Treasury intends to lower the initial rate to 3.0%. Full details, including the government's response to the independent review, are due with the 28 October budget. Until then, implementation timing and any accompanying methodological changes remain open.
| Future £100 benefit | At 3.5% | At 3.0% | Increase |
|---|---|---|---|
| In 10 years | £70.89 | £74.41 | 5.0% |
| In 20 years | £50.26 | £55.37 | 10.2% |
| In 30 years | £35.63 | £41.20 | 15.6% |
Why the distinction matters
A lower social discount rate can improve a project's benefit-cost ratio when benefits are long-dated. It does not change the coupon on gilts, contractors' financing costs or private investors' required returns. Projects must still pass affordability, strategic, commercial and delivery tests, and ministers must still allocate budgets.
The largest mathematical effect occurs on benefits furthest in the future. That can help rail, flood protection, housing-enabling infrastructure and other long-life projects, but it can also raise the present value of long-dated costs. A lower rate should therefore change appraisal—not replace scrutiny of demand forecasts, construction inflation or execution risk.
Potential market implications
- Construction and engineering: a larger viable project pipeline could improve future order books, but only after projects receive funding and procurement proceeds.
- Utilities and infrastructure funds: enabling investment may create opportunities, while regulated returns and private financing costs remain separate constraints.
- Gilts and sterling: the appraisal change alone is unlikely to determine yields or GBP. Fiscal totals, issuance and the 28 October budget matter more.
- Regional investment: the Treasury is also testing place-based assessments in Plymouth, Liverpool, Birmingham and Port Talbot, which may shift how linked projects are evaluated.
Bull case, bear case and what to watch
The bull case is that more realistic treatment of long-duration benefits unlocks high-productivity projects and crowds in private capital. The bear case is that stronger appraisal scores meet the same fiscal limits, leaving approvals unchanged, or encourage optimistic benefit assumptions that later collide with cost overruns.
Investors should watch the 28 October budget, the final rate schedule, transition rules for existing business cases, departmental capital envelopes, Infrastructure and Projects Authority milestones, tender announcements and construction-cost inflation.
Sources
Reuters report, 4 September 2026; HM Treasury discount-rate review; The Green Book 2026.