Alongside this week’s Spending Review, the Treasury has published a revised version of its guidelines for policy appraisal – the Green Book. This report contains several major policy wins for CBI members who have long recognised the limits of the government’s approach for delivering long term strategic goals, such as levelling-up and achieving the UK’s net-zero targets.
For years, businesses in the regions have complained that the Treasury’s use of the Green Book has created a structural bias against investment in policy interventions in some areas of the UK where it is most needed. Businesses have also critiqued the Treasury and other departments’ overly narrow focus on the economic case for investment, arguing that key factors such as environmental impact, jobs creation, and the potential for transformational change have been undervalued.
- Ensure government takes a more strategic approach to investment and planning whole programmes of investments that meet wider objectives such as levelling-up
- Start a cross-departmental drive for better training in how to use the more complex and nuanced tools available for project appraisal
- Update appraisal processes and techniques to account for the UK’s legislation of a net-zero target
- Guarantee there is greater transparency about how the projects the Treasury funds meet the government’s wider strategic objectives through the publication of business cases for those investments that get the go-ahead.
The Treasury’s review into the Green Book was launched at the Spring Budget 2020 and has now concluded that current appraisal practice risks undermining the government’s ambition to 'level up' poorer regions and achieve other strategic objectives. While the core methodology was not by itself found to skew outcomes, the Treasury team concluded that significant changes will be required to both the Green Book and the way it is used in appraisal if ministers are to make the most of levelling-up, efforts to meet net zero targets, and other long-term priorities.
As a result, the Treasury has made significant amends to the document, such as:
- A stronger requirement to establish clear objectives from the outset that must be the drivers of policy development, and to show a robust logic of change from inputs to outcomes
- Stronger and clearer advice on what constitutes value for money, which will ensure that projects are being assessed first and foremost on how well they deliver policy objectives, rather than focusing on a purely economic assessment that doesn’t consider who benefits
- New guidance on how to assess local impacts, to capture different impacts on different places and local employment effects. Proposals without an assessment of place-based impacts will be challenged and business cases tested rigorously
- New guidance on the appraisal of transformational changes
- Measures to improve analysis on differential impacts, including under the Public Sector Equality Duty (PSED).
To improve use of the Green Book and to foster a better culture around the development of proposals, the Treasury has taken steps to:
- Place a new emphasis on the role of business case reviewers as critical gatekeepers, providing more training and support
- Instil a new approach to the Spending Review process to reflect the findings of this review. The report claims that this year’s Spending Review was informed by the early Green Book review findings. All capital investment proposals required a clear strategic case that set out objectives and how these will be delivered, as well as any place-based impacts. The ambition is that this will also apply next year with proposals developed using the new Green Book
- Deliver greater transparency with a new requirement to publish a summary business case after they receive final approval. This will begin in April 2021 for all infrastructure projects and programmes on the government’s major projects portfolio
- Provide more extensive and flexible support for users of the Green Book. This will be delivered through accessible online, bite sized training and a new network to link together those who use the Green Book so that users can share experience and expertise.
The Treasury has also announced that it will lead an expert external review on the application of the Green Book’s discount rates to environmental impacts. This will mean reassessment of how the Green Book advises valuation of the long-term benefits from policy interventions that will help to protect natural capital and preserve the world, taking into account the fact that the planet is a finite resource.
Businesses have been heard in the Treasury’s Green Book Review – now, the CBI and others will be interested to see how this change in project appraisal at the heart of government drives an improvement in outcomes from investment across the UK.
Businesses will be interested in seeing how changes made to the Green Book feed down to shifts in approach across Whitehall and local government driven by updates to departmental guidance for project assessment (e.g., the DfT’s WebTAG tools, MHCLG’s DCLG Appraisal Guidance, etc). Only a comprehensive shift in approach across all levels of government can ultimately deliver a noticeable change in the prospects for projects that offer the potential for truly transformational change to communities across the UK.
If you would like to discuss our work on the Green Book reforms in further detail, please get in touch with Freddie Hopkinson.