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Right, let’s talk about discount rates. Before you click away into something more exciting (cat memes, Wordle or bleeding the brakes on your car), hear me out.
While most of us were swimming in a sea of eggnog and mince pies, His Majesty’s Treasury quietly kicked off a review of the Green Book discount rate. Exciting? Absolutely not. But if I could somehow squeeze out two blogs about land value uplift last year, this one should be a breeze.
Jam today, rather than jam tomorrow
When I was in Whitehall, the way I was taught to think about discounting came from Lewis Carroll and was later picked up by Keynes ‘jam today rather than jam tomorrow.’ In Treasury-speak, this captures the concept of ‘time preference’: the tendency for people to value benefits received today more highly than the same benefits received later. If you prefer jam today, you will value a benefit arriving next year less than the identical benefit arriving now. That preference is exactly what the discount rate captures.
If you’re wondering whether I’m only telling this anecdote so I can sneak in sticky-end references and spread a few jam puns, shame on you, and guilty as charged.
Discount rates, minus the equations
Put bluntly, the discount rate converts future costs and benefits into today’s money. The higher the rate, the less weight we give to outcomes that happen far into the future. The Green Book’s standard approach uses something called a ‘social time preference rate’ (don’t go, you’ve made it halfway) which has attracted some criticism because it can make slow-burn transformational projects look underwhelming on paper.
From my time as a mandarin in Whitehall, I can tell you this technical language masks political and practical consequences. Unlike Premier League football managers, the Green Book discount rate does not change every season. The last ‘boardroom vote of confidence’ was in 2003 when the headline rate was cut to 3.5 per cent.
Why economic development professionals should care
If your job is to make the case for patient investment in places, you will meet the discount rate early and often. Timing matters, as faster delivery brings benefits into the near term, which are worth more in present value terms (more HMT lingo), so speed can materially improve a project’s benefit-cost ratio without altering the fundamentals.
For residential schemes, tenure and cashflow also matter. Adjusting housing tenure or revenue models alters grant requirements and cashflow, which changes present value calculations. Small delivery or tenure tweaks can move a business case from marginal to investable, or vice versa.
There are also place-based benefits that spread through local markets, such as wider land value uplift that is sensitive to appraisal assumptions and discounting. How you value those spillovers can determine whether a project passes go or not.
A modest tweak to the rate or to how it is applied can change which projects clear approval and which remain stuck. Indeed, the consultation scope asks whether the discount rate should be adjusted for place-based objectives and environmental scarcity. These are not academic issues. It is the difference between a project becoming reality, or the next Manchester United manager.
Spreading the jam more evenly
This review sits inside a wider effort to make the Green Book more supportive of place-based cases and less mechanically obsessed with single benefit-cost ratios, and more attentive to how the jam is actually spread over time. The discount rate is central because it literally changes how the future is counted.
So yes, this is niche. It will not trend on LinkedIn (I’ve tried, twice). But like land value uplift, it is one of those quiet technicalities that decides what gets built, where and when. For economic development professionals arguing for patient, place-based investment, the Treasury’s conversation on discounting deserves a spot on your radar. Bring your spreadsheet, a mug of coffee, and remember that if the jam is always reserved for tomorrow, very little ever gets eaten.
The consultation authors will provide an interim update to HM Treasury on its emerging findings in March 2026. They will then deliver their final findings by the start of June 2026 and publish their final findings by the end of June 2026.
Simon Dancer is a Board Member of the iED, and a Director at AMION Consulting
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