Short payback tests can distort national infrastructure choices

What would you change about the Treasury if you became prime minister?

Reduce its power to veto elected programmes and judge national infrastructure over a time horizon suited to the asset.

Clarke would reduce the British Treasury's ability to veto elected programmes and require it to find workable financing for approved policy. Drach adds a criticism of what he describes as a five-year profit test, a horizon tied to an election cycle rather than an infrastructure asset's life. His example assumes three years of construction followed by an unusually generous 25 percent annual return, which would still recover only half the investment by year five. Nuclear power stations illustrate projects whose construction alone can outlast that period. He argues that relying instead on private investors can require expensive guaranteed electricity prices. The proposed reform would assess national infrastructure over a period appropriate to building and using it.