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Plan to "rip up" Treasury Green Book is an opportunity

Rob Turner Rob Turner

For decades the HM Treasury "Green Book" has guided and directed government policy and investment decisions.

Indeed, the phrase has become common parlance in any and every discussion around government investment. While the success and importance of the Green Book should not be discounted, there is room for improvement. The announcement of a review of the current spending rules, with a focus on re-balancing the national economy, provides us with a unique opportunity to assess where change would be most valued.

Is the Treasury Green Book a hollow promise?

By setting out approved techniques and a defined approach, the Green Book should create consistency, so that £1 of benefit to the UK economy will be the same whether you're in Land’s End or John O’Groats. The challenge has been that, while this may be true in theory, the reality is somewhat different.

With much, and in some cases all, of the evidence that forms the basis of an appraisal drawing on the current economic position of different regions - average salaries, gross value added (GVA) per job, etc - it is often those areas with stronger economies that come out more favourably. This can then make it harder to make a case for investment in the places that need it most.

The Treasury Green Book 2018

In March 2018, the Green Book was revised to capture more detail around environmental appraisal (particularly the use of natural capital) and provide a greater focus on distributional impacts, as well as capturing more on how to monitor and evaluate policies. Then, at the end of last year, a new review of the Green Book was announced to further balance the inequalities of the old process, in what The Times called the Treasury’s plan to “rip up public spending rules in cash boost for north and Midlands”.

The significance of this announcement did not go unnoticed by those of us who spend our time thinking about and supporting effective public sector investment. If seized properly, this opportunity for reform could have profound impacts on the UK economy by boosting economic wellbeing in under-privileged areas. To truly help bring balance to the UK economy in this upcoming review, we believe that further thought needs to be given to the following areas:

The focus of the appraisal needs to extend beyond economic benefits

The 2018 addition provided greater prominence to “wellbeing”, but a new revision needs to go further. As part of our work looking at sustainable growth, we have analysed places through six lenses:

  • prosperity
  • dynamism and opportunity
  • inclusion and equality
  • health, wellbeing and happiness
  • community, trust and belonging
  • resilience and sustainability

This broader framework should shape both the consideration of the options and the analysis of potential benefits. The benefits case, rather than the economic case, should contain analysis of each factor.

Ensuring that interventions that narrow the gap with national averages are prioritised

This should include work on identifying a suite of national statistics against which the gap can be measured, as well as the development of a robust methodology that enables suitable weightings to be applied to those interventions that will make the greatest difference on the factors where the gap is widest.

Working with the ‘What works’ centres to improve the evidence base and suite of metrics that can be drawn on in developing the appraisal of benefits

One of the reasons for the prominence of GVA is the relative ease in which calculations of the benefit can be made. Over time, this has enabled a wider evidence base to be developed, which in turn forms part of the evidence to justify future interventions. We would argue that it is not about breaking this cycle, but rather investing time and intellectual rigour to developing similar evidence for other factors such as wellbeing, inclusion and natural capital.

How to change the behaviour of the appraiser and the decision maker

This will require a culture and mindset shift, and it is one that will need to take place among those developing the appraisal, as well as those using the evidence to make decisions. In part, this will be achieved through the new guidance and changed language, but it will also require training and briefing. As the saying goes, ‘old habits die hard’, and there is a generation of people who have been trained to look at projects and programmes solely through the lens of monetary return.

If the government considers the above areas when improving the Green Book, it could be a huge boost for areas of the UK that are struggling and go a long way to fulfilling the initial promise of the legislation. Otherwise, this will simply be an opportunity that was wasted in favour of an empty policy promise.

For more information, contact Rob Turner.