What is the social discount rate established at in the UK?

The correct answer is 3.5%. The social discount rate is a crucial aspect of project appraisal in public sector investment decisions, as it reflects the opportunity cost of public expenditure. In the UK, the social discount rate is set at 3.5%, which is used to discount future costs and benefits in order to assess the value of public projects over time.

This rate strikes a balance between valuing present resources and considering the welfare of future generations, ensuring that projects are evaluated in a way that reflects their long-term impact on society. Setting this rate enables decision-makers to compare the value of different projects on a consistent basis, facilitating better allocation of resources for public good.

The other rates given do not align with the established standard practice in the UK, which is specifically noted in guidelines provided by the Treasury or relevant governmental publications. Therefore, 3.5% is the recognized rate used for such evaluations.