Radical Change to Treasury Green Book Will Unlock Investment in Trams

The difficulty of moving around fast in UK cities compared to their Continental equivalents has been shown by many studies to be a cause of the UK’s much-lamented lower productivity — the Green Book 2026 reforms directly address this structural failure.

The Light Rail Transit Association (LRTA) welcomes publication of HM Treasury’s Green Book 2026 as a major reform in how public investment decisions are assessed in the United Kingdom.

The revised guidance directly addresses a long-standing structural bias against high-capacity fixed-rail infrastructure. For many years, tram and light rail schemes were compared to bus alternatives on the Benefit–Cost Ratio — a measure of return per pound spent, not of the total value a scheme returns to the economy. BCR simply tells you the rate of return as a ratio: a bus scheme costing one fifth as much as a tram can show an identical BCR yet return one fifth of the net value — a fivefold difference in what the country actually gets back. The Green Book 2026 moves the primary metric from ratio to scale, requiring appraisal to be led by Net Present Value: the absolute economic surplus a scheme generates after all costs, including the cost of investment. In the end, the only way a country gets richer is by investing, and the reformed framework now requires decision-makers to ask not ‘what is the ratio?’ but ‘how much value does this scheme create?’

The productivity consequences of this long-standing bias are profound and largely unreported. UK cities that invested in trams consistently outperform those relying on buses alone: tram systems return £3–6 for every £1 invested under conservative UK appraisal methods, rising to £6–9 when agglomeration, land-value uplift, and labour-market effects are fully captured. The difficulty of moving around fast in UK cities — compared to equivalent continental cities with mature tram networks — is a direct and largely unacknowledged cause of Britain’s chronic productivity shortfall. Media commentators who lament the productivity gap almost never identify chronic underinvestment in high-capacity urban rail as one of its structural causes. The Green Book 2026 reforms, by requiring appraisal to be led by Net Present Value and by embedding place-based, transformational, and long-run agglomeration effects, correct the framework that produced this blind spot.The Green Book 2026. HM Treasury, The Green Book: UK Government Guidance on Appraisal 2026 (ISBN 978-1-918417-12-8). Available at.is https://assets.publishing.service.gov.uk/media/698dbcd17da91680ad7f4308/The_Green_Book_2026.pdf