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Government changes basis on which projects are given the go-ahead

24 February 2021: ICAEW supports the updates made to improve the appraisal process of the government’s projects, policies and programmes with more emphasis placed on the levelling up agenda and climate.

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Alison Ring, ICAEW’s public sector director, comments on the recent Treasury Select Committee consultation on Changes to Treasury’s Green Book stating that ‘HM Treasury have identified and addressed the key areas for improvement but only time will tell whether the updates will actually result in better decision making.’ 

The Green Book – what is it and why does it matter? 

The Green Book sets out a broad framework for the appraisal and evaluation of all policies, programmes and projects. It details a rigorous yet pragmatic approach to weighing up the costs and benefits and highlighting the key issues, uncertainties and risks about public spending, taxation, changes to regulations, and changes to the use of existing public assets and resources. It supports the design and appraisal of proposals that both achieve government policy objectives and deliver social value. 

The Green Book matters because it forms the foundations upon which many big spending decisions are based. In the past, the guidance placed heavy reliance on relatively simplistic cost/benefit ratios, which in turn favoured more densely populated and wealthy areas. That is why some have argued that government spending on things such as transport, housing and roads are more heavily concentrated in London and the south-east of the UK. 

However, the Green Book will not on its own achieve the Government’s objectives, whether that be to level up opportunities across the country or to deliver net zero carbon emissions. It should instead be viewed as one tool of many that support high-quality financial decision making by government departments and other public bodies. 

What changes have been made to the Green Book?

A key change made to the Green Book guidance is to improve the linkages between objectives and spending. Linking departmental objectives to government strategies, in particular on infrastructure, the environment and achieving net zero, should help make it easier to deliver on priorities at the same time as ensuring value for money.

Another area of focus has been on the levelling-up agenda with the Green Book making location-based spending a key factor to be considered in the decision-making process. To be successful, the objective of levelling-up requires a change in priorities and in the resources allocated. In terms of the Green Book this means increasing the assessment of social value placed on developing less prosperous communities compared with the more quantifiable, and often more immediate, economic and financial value generated from investing in existing more prosperous areas.

Decentralising decision-making from Westminster could help, but a number of structural and cultural obstacles would need to be overcome, in particular in England where a regional tier of government only exists in some areas and local government is not currently positioned or resourced to deliver the level of investment required.

What impact do we expect the reforms to have?

The Green Book update rightly identifies the importance of culture, good financial management and leadership to the decision-making process. While positive, the changes to the Green Book are not – in themselves – adequate to ensure that the Government’s objectives are achieved or that value for money is delivered. A clear investment strategy, good leadership, strong financial management and better financial and non-financial data are just as, if not more, important, together with continuous review and scrutiny both internally within and across government and externally, including by Parliament.

We also anticipate that training requirements will need to step up. Financial skills are essential to good decision-making leading to a range of training needs that have rightly been identified by the Treasury Select Committee as being of paramount importance. We are pleased to see that a new Civil Service core curriculum is being developed by the Cabinet Office. 

Lastly, we hope to see greater transparency in the decision-making process. Requiring departments and public bodies to provide an assessment in their annual report of how they have applied the Green Book principles, particularly in the case of material programmes and investments, would enable stakeholders, including select committees, to understand the trade-offs involved in the choices made, as well as how public resources have been applied to delivering key objectives. Ideally, this should be linked to improvements (or otherwise) in key performance indicators with a summary of post-investment appraisals carried out.