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The new Green Book: how will schemes need to adapt to support ‘levelling up’?

 

The long-awaited Green Book refresh has been published https://www.gov.uk/government/publications/final-report-of-the-2020-green-book-review with the intention of enabling investment decisions to be made in a more balanced way, supporting the Government’s objectives for ‘levelling up’.

Those who read my earlier article on this subject will note that I have been eagerly anticipating this review. So what has actually changed? How should schemes seeking public sector investment adapt to meet the new requirements? To what extent will the changes support the levelling up agenda? I will try to keep it simple and control my excitement.

What is the Green Book?

The Green Book is a national government guidance document on how to appraise and evaluate policies, projects and programmes. Put simply, it is the “bible” of public sector investment decision and policy-making and is used globally as a best practice toolkit. Ever since it was first published in the 1970s, its purpose has been to provide a consistent approach to public sector decision-making through providing a framework to assess the value for money and risk of government intervention. It focuses on the Five Case model to establish the case for change; the strategic, economic, financial, commercial and management cases.

What was the problem with the existing version?

The Green Book has evolved over the years and the last update was in 2018, 15 years since the previous one. Importantly, this opened the door to being able to account for a number of wider economic benefits to assist to make a case for intervention, particularly reflecting a move towards environmental, health and wellbeing agendas. This also reflected the 2016 MHCLG Appraisal Guide switch towards a focus on Land Value Uplift (LVU) as a measure of private economic benefit for land and property-based interventions.

This, in my view, was developed to support a specific policy agenda at that time around the need to promote enhanced housing delivery where it could be delivered fastest – the South East. This was arguably at the expense of “regeneration” and “economic growth” investment elsewhere which cannot compete in LVU terms. This did little for the ”levelling up” policy agenda announced in December 2019 and, as a practitioner in this field, it became immediately evident that the new LVU approach simply did not work for non-residential schemes outside of high market value areas.

So what’s changed?

Government acknowledged this and recognised that whilst it is only ever intended to provide an overarching framework (it is not a mechanical or deterministic decision-making device), it still did not fully align with the commitment to “level up”.

Some of the key changes in the recent update include:

• Stronger focus on establishing the strategic rationale for intervention and clear objectives from the outset: business cases and intervention options should be developed to align with relevant local strategies/priorities.

• Move away from a dominant focus on the Benefit Cost Ratio (BCR) as the end game with a wider focus on delivering business needs and strategic objectives.

• Shift towards enabling the analysis of place-based regional and local impacts including allowing the calculation of employment and productivity based effects at sub-national levels, with UK-based analysis presented separately. New employment multipliers provided.

• Further guidance on appraising environmental impacts in line with net zero carbon ambitions.

• Commitment to upskilling and training users of Green Book methodologies to improve overall standards of public sector investment decision-making.

How should schemes and business case writers adapt to meet the new requirements?

• Importance of the early positioning of schemes at senior and political levels to align with strategic priorities, with clear SMART objectives developed from the outset.

• Ensuring that the option development process is not just a ‘tick box’ exercise.

• Focus on the ‘area of impact’ to inform a place-based approach where applicable.

• Consideration of appropriate benefit monetisation approach: schemes with employment/GVA benefits could achieve higher BCRs than schemes using the LVU approach.

• Consideration of wider benefits including non-monetised impacts such as contribution to net zero targets and wider social welfare and wellbeing agendas.

• Need to better integrate the cases of the business case to align with one another: the economic case needs to relate to strategic case and should not be developed in isolation. There needs to be a “golden thread” throughout.

• This reiterates more than ever the need to ensure the business case is not left to the eleventh hour.

How will it contribute to ‘levelling up’?

Some cynics might argue that in many ways we have gone full circle back to the old fashioned ways of assessing the value for money of government intervention. However, in my view the guidance has evolved, not gone backwards, and we shouldn’t moan. We have a £4 billion Levelling Up Fund on its way and an appraisal framework that promotes a place-based and more holistic approach to demonstrate the value for money of interventions at the sub-national/local area levels. We have an ability to consider local employment effects and are no longer constrained by having to push the boundaries of LVU to get schemes through. Instead, project promoters can focus on developing the optimum scheme to maximise local impacts and benefits in accordance with strategic priorities.

In conclusion, I welcome the changes and they align with what I hoped for as set out in my previous article. They will allow a greater level of flexibility for local areas to determine their investment requirements in accordance with place-based criteria, thus supporting the levelling up agenda. There is, however, clearly more to do, particularly around wider benefit monetisation and the new guidance fully acknowledges this. I look forward to seeing how it works in practice for the national Levelling Up Fund call for schemes early in the New Year.

Ben Pretty is a Director of the Institute of Economic Development and a Partner at Cushman & Wakefield

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