In the Chancellor’s Comprehensive Spending Review (CSR), much was made of the Government’s intention to “level up” decision making, and remove the perceived bias that favoured investment in schemes being delivered in traditionally more affluent areas.
But, what has actually changed and how will it achieve these policy aims – “to make sure that government investment spreads opportunity across the UK.”
The answer lies in the 2020 refresh of the Green Book (HM Treasury guidance on options appraisals) and the more accessible Green Book Review 2020 paper published concurrently with the CSR.
We’ve summarised the changes and what it means for schemes utilising the new guidance below:
What has stayed the same?
Firstly, it is important to note, that whilst there’s a fairly significant shift in ambition and intention, much of the 152-page Green Book remains the same.
There is still an expectation that capital investment will follow a structured decision-making process, conduct a thorough options appraisal, and select a preferred option that will deliver best social value for money.
The 5-case model, which evaluates the Strategic, Economic, Commercial, Management and Financial Cases for investment is also unchanged.
So… what has changed?
The review paper is keen to further define what the Green Book is and, just as importantly, what it is not. It emphasises the use of the Green Book as a methodology or framework for decision making, not something which sets policy objectives or determines the actual decision itself – decision making is reserved for those specifically entrusted with this power, either elected members or appointed officers.
The processes set out in the Green Book, and the Business Cases it results in, should enable those decision makers to determine which course of action they should embark on, or investment they should make, to most effectively deliver their objectives.
This can only happen if the objectives are clearly set out, and take into account the alignment with national strategies as well as local strategies and major interventions.
In our experience this stage is often overlooked, or underplayed, as project teams are usually only established once an idea has gained sufficient traction to proceed. Understandably projects tend to feel more real to stakeholders and senior commissioners if something tangible is committed to paper, for example an artist’s impression of the solution. This keenness to put pen to paper however risks not fully considering the problem that they are trying to solve, other potential options, or whether it warrants investment in the first place.
The refresh also includes more specific guidance on adopting a place-based analysis, clarifying how the impact on local employment can be considered, as well as the impact on surrounding areas.
The aim of this is to reverse the historical over-reliance on UK wide benefit cost ratios, that encouraged the assessment of UK wide benefits, and what could be considered as spurious but monetisable benefits, over consideration of the actual impact the project could have on the lives of the local population and economy.
It also includes a new annex specifically focussing on appraising “Transformational Changes” to enable consideration of those benefits which are harder to assess and easier to understate.
The other significant change in this year’s Green Book is the highlighting of specific tools that should be applied when appraising projects or policies with environmental impacts. This builds on recent guidance issued by DEFRA on accounting for the effects of climate change and reflects the UK’s commitment to achieve net zero carbon emissions by 2050.
What does this mean for Business Cases?
It is important to note, that much of the guidance in the Green Book and the refresh is aimed just as much at Civil Service policy development and ministerial decision making, as at locally delivered projects. Much of the updated guidance is drafted therefore to reflect this range of applicable scenarios, but that doesn’t make it any less relevant for those seeking to produce a Green Book compliant Business Case.
Business Case authors need to ensure therefore that they start with a robust Strategic Case. This is one that fully understands the current operating context of the organisation, makes a compelling case for why investment is needed and explains robustly, and with evidence, how the investment will deliver the intended outcomes and benefits.
More focus should be placed on how options identified in the economic case, actually deliver against both national and local objectives, identified in the strategic case. If the strategic case for a project is weak, or backfilled to justify a decision already made, then the assessment undertaken in the economic case is already flawed.
Larger projects, requiring the most capital investment, should also be justified by reference to the national strategic objectives, portfolios and programmes they sit within, and assessed as to the importance of the contribution they make to these, recognising that a single project cannot deliver a whole government strategy single handedly!
When undertaking the economic appraisal, Business Cases should consider a place-based analysis focussing primarily on the defined geographical area where the intervention is being targeted, with the UK wide benefits being required to be shown separately. A refined cost benefit analysis methodology that takes into account the costs and benefits related to relevant groups, rather than homogenously, can also be used.
We believe this is a very welcome development and will allow assessments to focus on how options will make a difference to the lives and experiences of local people, rather than subconsciously encouraging teams to devise a list of less relevant benefits that are more readily able to be quantified.
Conclusion
Your Business Case should follow the refreshed Green Book, and specifically address the following priority areas of refocus:
- Ensure a robust Strategic Case is developed at the start of the project and regularly revisited. This will form the golden thread of the Business Case and should include as much focus on local characteristics, goals and strategies, as on national ones.
- Ensure the Economic Case addresses how well the options will deliver improvements and outcomes aligned with the specific objectives, as well as the more traditional and general cost/ benefit ratio. Do take account of the important local, but non-monetisable, impacts as well as your Equalities Impact Assessment
For further discussion about what this might mean for you project, contact Nikola Idle to learn more on 07973 619738 or nikola.idle@sharedagenda.co.uk.
