Green Book 2020 – a good step forward, but more is needed

Last week, the UK Treasury published its highly anticipated Green Book 2020 - the key Government instrument to appraise public sector proposals.

While its review was announced with a significant fanfare by the Chancellor in the Spring 2020 Budget Statement, the publication of the revised Green Book itself was hidden away among several other significant ‘levelling up’ policy announcements.

However, launching it alongside the Autumn Spending Review illustrates the importance it will have in the UK’s policy appraisal and decision-making process.

The review found that the previous Green Book may be undermining the Government’s ambition to achieve broad strategic objectives – such as ‘levelling up’ poorer regions and net-zero carbon emissions by 2050.

Its methodology and transport infrastructure investment decisions have long been critiqued for entrenching the regional socio-economic imbalance in favour of London and the South East. While the ‘core methodology was not by itself found to skew outcomes’, the review recognised that decision-makers needed to change how they used Green Book to inform investment decisions.

A ‘common failure’ by local project sponsors was their struggle to link the ‘strategic context in which the proposal fits’. The review said this failure meant that decision-makers became ‘heavily reliant’ on a Benefit-Cost-Ratio (BCR), with recent studies suggesting that BCR was a significant determinant in dictating government spending.

The response of Green Book 2020 is to promote a more strategic approach, considering the whole picture and not just a single-policy focus. Key improvements to the Green Book include:

• A stronger requirement to establish strategic objectives from the outset
• Clearer advice on what constitutes ‘value for money’ to ensure that projects are assessed on how well ‘they deliver policy objectives’
• New guidance on how to assess local impacts and employment effects
• Updated guidance on the appraisal of transformational changes
• Review of the Green Book discount rate for environmental impacts.

From April 2021, all the Governments Major Projects Portfolios will be required to publish a summary of their business case, which should improve transparency and accountability.

The changes in Green Book 2020 are a positive development and should lead to a more holistic review of projects across the UK. The changes can be seen as an evolution, not the revolution that so many were hoping for. The changes will not result in an explosion in transport investment across ‘left-behind’ regions, but the new environmental tools will assist in helping achieve the UK’s legal requirement to achieve net-zero carbon emissions by 2050.

However, we believe there are two significant cultural changes needed to actually implement the aspirations of Green Book 2020.

• First, the translation of project interventions to strategic outcomes will require new innovative approaches to evidence, drawing on a data-led approach that captures new behavioural datasets and combines these with existing data to create linkages and economic insights. Project sponsors and funding bodies will need to embrace new methods for testing projects.
• Second, greater institutional capacity outside of London and the South East will been to be developed to promote projects and business cases. After a decade of austerity, the public sector has limited fiscal, institutional capacity to prepare the business cases, let alone undertake the ‘soft’ campaign required to advocate for government funding. This can only be achieved by increasing devolution and the amount of central government funding that they received.   

All in all, considering the current ‘disruptive’ context created by the climate emergency, COVID, Brexit, levelling up the nation’s infrastructure has never been more important. This is why the changes in government approach to infrastructure spending along national priorities are so critical to get right.

In helping our clients, we understand the need for compliance but always aim to challenge the boundaries of guidance and explore ways to evolve business cases and strengthen the translation between ‘investments – outputs – outcomes’ to demonstrate value for money.

We use a data-led approach to push beyond compliance to create efficiencies to speed up the process, improving the chances of the right projects progressing. Underpinning our approach is the understanding that the infrastructure investment is about delivering social and economic value not just infrastructure-related outputs.