Water abstraction decision deals savage blow to cost-benefit analysis

The Environment Agency's efforts to develop the use of cost-benefit analysis in policy decisions received a serious blow in February. The Environment Secretary has accepted the findings of a public inquiry which valued the benefits of reducing abstractions from an important wildlife river at only £700,000 - some £13 million less than the Agency's figure. Cost-benefit assessments now under way for the water industry price review have been undermined, and the Government has unwittingly jeopardised its own position on water leakage reduction. The decision, which throws into stark relief the questionable nature of assumptions used in cost-benefit analysis, may have repercussions well beyond the water environment.

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