While welcoming changes to the government’s ‘green book’, Hannah Vickers argues that the UK needs a robust and comprehensive infrastructure appraisal methodology based on value.
The rewriting of the ‘green book’, the official guidance on the assessment of infrastructure spending, has been positioned by the government as a panacea to addressing of the inherent bias of investment which, to date, has meant more money for London and the south east.
Perhaps this symbolic gesture is what is needed to kickstart a shift in culture within government. There is a reason the book is known as the bible of public appraisal of spending after all. But the truth is that we cannot address levelling up in any meaningful way until the benefits are viewed in broader terms than simply an uplift in land value.
While much has been made of this symbolic gesture, little has been written about the possible downsides to this decision. Business cost ratio (BCR) is one of those terms that makes people working outside of government fall asleep, but it is one of the few consistent and transparent datasets used by government. It is the key metric for deciding whether a project gets the go ahead.
The recent National Audit Office report into major projects has already highlighted a number of instances where projects have overrun – do we really want to tinker with this safeguard? Added to this concern, is a frankly appalling recent track record when it comes to digital transformation projects where a new appraisal methodology hugely overestimated benefits. The political fallout was significant and still lingers today.
Actively choosing to invest in the regeneration of a northern town, despite the fact that the BCR shows that it would compare poorly to the regeneration of Reading, Slough or Watford, for example, should be recorded as such. BCR has its place as a sense-check for understanding the financial returns of a project, not as the key determining factor as to whether it should go ahead.
What we need now is to be braver and bolder in our approach to project appraisal. We need to be clear that when we make decisions on investment, as the chancellor has this week, we are investing in our future and to support a post-pandemic recovery. We need to be confident in investing in projects which deliver future health, social or environmental returns, rather than purely economic ones. The appraisals conducted now should acknowledge this and be transparent in their approach.
To help us build more certainty into the system, there are a few additional tweaks that could be made.
Firstly, we should encourage government departments to integrate their different appraisal methods and approaches. For example, the DfT should be looking at the same benefits that BEIS focuses on, such as job creation. These tools already exist but have been siloed to date. Secondly, we can encourage local authorities and LEPs to develop strategic programme business cases for investment in local growth plans and industrial strategies – demonstrating how a group of lower BCR projects deliver greater than the sum of their individual parts.
While tweaking a spreadsheet formula will help, we need a robust and comprehensive appraisal methodology based on value, as well as politicians who are prepared to take difficult decisions. With the community’s best interests at heart, it is local authorities and devolved leaders who are best placed to make them in a transparent way and be held to account for the delivery.
Hannah Vickers is chief executive of the Association for Consultancy and Engineering.