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How to spend it: What Green Book reforms mean for public spending

Fairer, Faster, Greener. The UK Government has clearly set out its vision for economic recovery from the pandemic, with ambitious objectives for ‘levelling up’ across the country and  decarbonising the economy to transition to Net Zero by 2050. 

The launch of the National Infrastructure Strategy in November 2020 set out a raft of infrastructure investment to support the realisation of this vision. But the Government faces a significant challenge. Given the size of public borrowing in response to the pandemic, and the scale of the Government’s ambitions, it cannot afford to invest in projects that will not deliver its objectives. And practically, to realise such a broad range of often competing outcomes, there will need to be a step-change improvement in how projects are appraised.  

Acknowledging this, the Government recently announced a number of significant reforms to the Green Book, its guidance on how public spending proposals should be appraised and evaluated.

How to spend it: What are the Green Book reforms?

  • More emphasis on objectives, less on pounds and pence. Business cases will need to demonstrate - and evidence - exactly how the proposal will contribute to the delivery of the Government’s strategic objectives for the UK (particularly Net Zero and levelling up (addressing regional and union imbalances)). Though value for money will remain important, this could mean that options with better ‘strategic fit’ with the Government’s objectives may be prioritised over alternatives where monetary benefits may be easier to demonstrate, such as further investment in the UK’s main hubs.
  • Places matter.  In a move away from the historical focus on national-level impacts, and in support of levelling up, proposals designed to deliver improvements to a specific place (i.e. those that have geographically defined objectives) should focus on their impacts on that place, for example, local employment. However, proposals for national level investment still need to show that where there are differential effects for different regions, these are well understood.
  • Nature is an asset.  All projects must do more to show how they contribute to Net Zero and recognise the environment as an asset. The recent Dasgupta review notes that, although the Green Book incorporated methods to value natural capital in 2018, there is ‘little evidence’ so far of business cases using them. 
  • The future matters too! Under the guidance, the effects that a proposal will have on future health outcomes, or on future generations, will now be given much more significance (through changes to the relevant discount rates). So, when developing options, project teams need to take a long-term view of the effects of a proposal, and particularly its environmental impacts, since these stretch far into the future.

These reforms will go some way towards delivering better projects, and the Government’s decision to support their implementation with additional training for project teams, and a strengthened role for reviewers, should make them even more effective. But it’s clear both further detail and a focus on delivery are still required to start a new chapter for the UK. 

  1. Firstly, and critically, more needs to be done to specify what ‘levelling up’ means, and how proposals can assess their contribution towards it. Whether this is redistribution of investment from the South East to the rest of the UK, between urban and rural, or from rich to poor - or a combination - it requires an unambiguous set of definitions and measures which can be used to appraise proposals consistently across the country. In the absence of this, government spending cannot, and will not, be directed to the right places. 
  2. Secondly, to develop the robust proposals that will ultimately deliver the pivotal change sought by the Government, business case teams will need access to specialist skills.  In particular, the increased requirements for place-based and environmental impact analysis included in the updated guidance will require economic expertise, whilst the strengthened strategic case requirements will call for input from those with specialist strategy skill sets. The creation of regional ‘centres of excellence’ (for example under the umbrella of HM Treasury or the Infrastructure Projects Authority) to ensure these skills are available to all business case teams, could be one way for the Government to underpin the UK’s future success, whilst immediately helping to level up these regions.
  3. Finally, a culture of ‘following the Green Book’ needs to be embedded across the public sector. Business cases are still too often seen as a bureaucratic write-up of a decision, rather than as a method of arriving at better decisions. A change in culture will need clear, consistent leadership from the centre that is echoed by reviewers. It is only by emphasising the importance of the guidance that the Government can be sure it truly turns the page.

The reforms to the Green Book are a welcome first step towards more effective public spending, but they are only a first step. If the Government wants to realise its vision, it needs to continue to invest in building the capability, systems and culture needed to support a complex and ambitious portfolio of public spending. The need to get our response right has never been greater. 

Contact us

Deren Olgun

Senior Economist, PwC United Kingdom

Tel: +44 (0)7483 416476

Dom Boyle

Cities & Sustainability, PwC United Kingdom

Tel: +44 (0) 7813 903 620

Lucy Gardiner

Director, PwC United Kingdom

Tel: +44 (0)7957 297379

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