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If you’ve kept up to date with the commentary around the levelling up agenda then you’ll no doubt be aware that the Treasury’s Green Book is frequently blamed for imbalances in public investment across the country. The thinking goes that this inflexible bureaucratic process ignores a swathe of reasons to invest in the north of England, and so funnels investment to the Greater South East.
But here’s the rub: Despite this widely-held view, which has been supported by a number of high profile politicians and business people, Centre for Cities’ latest report shows there is no evidence to back it up. While the Green Book process is not perfect, there aren’t any fundamental flaws with it either. The issue instead lies in the lack of national government strategy within which Green Book appraisals should operate.
Much of the ire of the Green Book centres round the ‘benefit-cost ratio’ (BCR), which balances the estimated costs and benefits of any one project. A line of argument goes that the flawed BCR methodology favours schemes in and around London. A problem with evaluating this statement is that the Government doesn’t keep a consistent record of BCR scores (and this needs to change from both a valuation and scrutiny perspective). But of the data that is available, there is no clear bias evident.
There’s a bigger misunderstanding at play though. Reading commentary on the BCR may lead you to believe that the BCR is the appraisal. But it isn’t. It’s one part of the Green Book (value for money is another, for example), which itself is only part of the full business case of an investment (this is why schemes with the highest BCRs don’t always get funded). The Green Book doesn’t take the investment decisions either. It is there to act as a selection tool within a shortlist – the politicians that take the decisions.
This is where the decision-making process runs into more fundamental problems. Successive governments have failed to set out a specific strategy for investment beyond vague rhetorical statements such as ‘rebalancing the economy’ or ‘levelling up’. Without this strategy setting a clear goal to be achieved and how this goal is to be achieved, there is no filter put on the investments that the Green Book is used to appraise.
If instead the current Government was to set out its levelling up agenda as about pulling up the productivity of Manchester, Glasgow and Birmingham say, as recommended in our report, then this sets both a measurable goal and a filter for investment proposals. It is then at this point that the Green Book should be used to help identify the best investments within this shortlist. Indeed, Greater Manchester does just that with its own investment decisions.
Now there may be much to disagree with the strategy that the Government sets out (see the recent revelations around the allocation of the towns fund for example, albeit not a publicised strategy). But to be clear, this is a political issue, not a Green Book one.
Much discussion around the geography of government investment decisions have a flavour of ‘computer says no’ about them – there’s a heartless cog turning process that doesn’t capture the truly transformational impact of schemes in areas x, y and z. There is no foundation for this view. And so, when the Treasury publishes its forthcoming Green Book Review, we should not expect recommendations to rip it up. But we should expect the Government to set out what it means by levelling up if there is to be a much sought-after change in investment across the country.
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