Implications of the new Green Book for the Towns Fund
Wendy Cheung
On 25th November 2020, HM Treasury published The Green Book 2020, an update to the 2018 Government guidance on how to appraise policies, programmes and projects, underpinning business cases for public investment.
This update follows the Government review of the guidance which took place throughout 2020 and was announced as part of the Budget 2020, to ensure the appraisal framework is designed to “make sure that government investment spreads opportunity across the UK”, as part of the government’s levelling up agenda. The outcomes of the review were also published in a separate report, detailing key changes to the Green Book.
This is important for the Towns Fund because business cases being produced to justify investments funded through the Towns Fund need to consider the latest changes to the Green Book and how to make the most of them. In this context, this blog post summarises the key points from the review and implications for towns.
Further detail can be found in the recently published guide.
Overview of the Green Book Review
Following a rigorous consultation process with key stakeholders such as academics, consultants and the National Audit Office, the Green Book review concluded that:
““…the current appraisal practice is likely to undermine the government’s ambition to “level up” poorer regions and to achieve other strategic objectives unless there is a step change improvement.””
The review also found the following issues resulting from the previous guidance and its application:
Weak Strategic Cases – failure to demonstrate the contribution of proposals within the strategic context sufficiently, including specific contribution towards the government’s wider objectives such as the levelling up agenda and net zero
Over reliance on the benefit-cost ratio to inform government decision-making, leading to considerable prioritisation, time and resource allocated to ‘boost’ the benefit-cost ratio, rather than focusing on presenting a compelling strategic case
Lack of place-based analysis – understanding and appraising the impact of proposals on different geographical areas and different people within a target area (e.g. age groups, income groups) has been limited and often overlooked. This limitation is perceived to be one of the major barriers to the government’s levelling up agenda.
Government’s response and changes to the Green Book
In response to the evidence and findings of the review, HM Treasury has introduced a number of updates to The Green Book guidance, as summarised below:
These changes are one of the initial steps by Government to improve the quality of appraisals and promote better decision-making.
Furthermore, HM Treasury will embed the lessons learnt from the review by strengthening the approval and decision-making process, including:
maximising the transparency of decision-making, including a new requirement to “publish a summary business case within four months of it receiving final approval”
incorporating clearly defined objectives and proposals in accordance with the Green Book into the Spending Review process
business case reviewers playing a larger role in scrutinising business cases, encouraging them to work more with scheme promoters and appraisers to ensure the expected standard is achieved at each stage of the appraisal process
The latest Green Book also reiterates the supplementary guidance and tools available to appraisers to capture the full extent of the impacts of their proposals, including the supplementary guidance Accounting for the Effects of Climate Change. Even if the primary objectives and outcomes of a proposal are not environmentally driven, the latest Green Book requires all environmental impacts to be considered, regardless of the magnitude of the impacts.
What does this mean for Towns?
Both MHCLG and TFDP are continuing to process the changes to the Green Book, and the subsequent implications on Towns Fund. Key points for towns to consider include:
The importance of the Strategic Case, clear objectives and the golden thread – this has been highlighted previously by TFDP and has now gained increased relevance. A strong Strategic Case can really help justify investments with weaker BCRs. Projects should also think about their specific contribution towards the government’s wider objectives such as the levelling up agenda and net zero
Place-based analysis – the requirement to analyse local impacts is an opportunity for towns to demonstrate local economic and social benefits such as employment which are now elevated in the economic case.
Need to consider environmental impacts – environmental impacts should be considered and follow new guidance including changes to discounting impacts
TFDP are currently working on a curriculum of content and events to help Towns on their business case development and delivery, in compliance with the 2020 Green Book. If there are any support (guidance, webinars, workshops etc.) on a specific topic you would TFDP to deliver, please speak to your Town Coordinator and/or your regional business case specialist.