Dec 9, 2020 | by Nancy HeyDeborah Hardoon

The Green Book review – what do the changes to government appraisal mean?

Nancy Hey, Executive Director and Deborah Hardoon, Head of Evidence at the What Works Centre for Wellbeing, discuss the Green Book review, and what policy making with a wellbeing focus should look like in practice.

Nancy Hey: 

“Ultimately public policy is decision making about what the public sector does, or does not do, and how it does it. It is essentially problem solving but done in a context and with a purpose. 

The Green book “is vital for designing interventions that both achieve government policy objectives and deliver social value for money – i.e. that maximise the delivery of economic, social and environmental returns for UK society for every pound of public funds spent.”

It is technical guidance aimed at helping officials provide advice to decision makers about how to achieve an explicit policy objective and maximise social value. It sets out a rigorous yet pragmatic approach to weighing up the costs and benefits. And is how an elected decision maker may best achieve their goals.

‘Policymakers’ is a commonly used term referring to a broad group of actors.  The review of the Green Book reinforces the important distinction between approaches used by officials to provide advice and elected decision makers who set goals, priorities and take decisions. This process is primarily a way to develop and decide on spending proposals in business cases. 

The review of the Green Book highlighted problems and assumptions made in implementation. In particular, that the strategic case is often not strong enough and not holistic enough, tending to default to impacts that can be monetised. These monetary benefits can be unrealistic, unrealisable, based on unclear levels of confidence and not informed by evidence, which also makes the process unclear – we agree with this.  

The review also recognises capacity issues in implementing the process at all levels, not enough evaluation of ‘what works’ to inform them and little consideration of equalities issues. This includes not taking into account the context of different places, and crucially for them, the people who live in those places.”

 

Deborah Hardoon:

“The Green Book review identifies a disconnect between the guidance for the technocratic aspects of policy appraisal (adding up all the benefits and costs associated with a policy) on the one hand, and on the other hand, the actual purpose of the policy, be it achieving strategic goals, such as net zero, or levelling up – or anything seeking transformational change. 

It finds that “the strategic case for many proposals is weak. This means that the first step in assessing options – longlisting – which is designed to identify a range of options that will deliver the proposal’s objectives, is fundamentally undermined.” 

Without clarity on what policies are ultimately seeking to achieve, no amount of cost benefit modelling is going to help identify the best option to get us there.

A wellbeing framework, which is a shared societal goal, can help to bridge this gap. It can take into account the social and economic features, inequalities and whatever else is part of the wellbeing mix in a place, whilst also providing the analytical tools, data and approach necessary for making investment decisions.”  

Wellbeing in the revised Green Book 2020 

The purpose of appraisal in Government 

The appraisal of social value, also known as public value, is based on the principles and ideas of welfare economics and concerns overall social welfare efficiency, not simply economic market efficiency. 

Social or public value therefore includes all significant costs and benefits that affect the welfare and wellbeing of the population, not just market effects. For example, environmental, cultural, health, social care, justice and security effects are included. This welfare and wellbeing consideration applies to the entire population that is served by the government, not simply taxpayers  

Green Book 2020 – 2.3 

See our report Wellbeing at the Heart of Policy for explanations of the terms social value, public value, prosperity and quality of life. 

What you do differently when wellbeing is the goal

What is the policy objective? Is it part of a wider strategy including one related to a particular geographical area?

How will the proposal achieve the objective? What is the logical process of change?

What evidence do you base this on?

A comprehensive view of the Social Value

Starting at SR20, appraisals must give a comprehensive picture of cost and benefits, including impacts that are difficult to monetise. In particular, options will be assessed first and foremost based on whether they deliver relevant policy objectives. Any option which fails to do so cannot be considered value for money.

Spending Review 4.33

  • After long-listing of options based on the strategic case, short-list appraisal follows and this is where expected costs and benefits to society are estimated, with risks and trade-offs are considered. 
  • The economic dimension of the case is where the social value for money is appraised. In most cases this will use Social Cost Benefit Analysis, taking into account significant monetisable costs and benefits through the BCR, but also, crucially, accounting for non-monetisable costs and benefits related to factors highlighted in the strategic case, as well as any other significant unquantifiable impacts. 
  • The economic case concerns social welfare values – or wellbeing. It is not limited to the consideration of purely economic effects and takes into account social and environmental impacts. It should assess all the relevant costs and benefits to society, not just narrowly economic ones
  • For social costs and benefits that don’t have a market price there are a range of valuation approaches including using subjective wellbeing measures. These non-market valuation approaches include using subjective wellbeing as below. It will be important to realistically quantify the social impacts even if they aren’t monetised.

See further arguments from Board Member Dan Corry here and Prof Paul Frijters here about monetisation

Beyond just GDP

To complement improvements to infrastructure, the UK must also invest in the protection and enhancement of the natural environment, which is crucial for national prosperity and wellbeing. 

Spending Review 3.40

This is important because many of the things we care about are not covered by GDP. Although useful and important – it’s the 5th biggest determinant of high wellbeing nations – GDP is not a measure of welfare and was not intended to be (see Prof Jan De Neve here and Prof Diane Coyle here). It doesn’t count things that are important to our wellbeing including volunteering, democracy, family, care, freedom, control or dignity and is silent on sustainability, risk and fairness for example or indeed the quality of our environment.

Non-market valuation approaches

Subjective Wellbeing 

Subjective wellbeing evidence aims to capture the direct impact of a policy on wellbeing. The evidence can challenge decision makers to think carefully about the full range of an intervention’s impacts and to consider a wider range of interventions. The evidence can also help challenge implicit values placed on impacts by providing a better idea of the relative value of non-market goods. 

For use in shortlist appraisal it may be appropriate to use subjective wellbeing as the outcome variable for Social CEA in certain circumstances.It is recognised that the methodology continues to evolve and it may be particularly useful in certain policy areas, for example community cohesion, children and families. Where valuations are considered robust enough for inclusion in Social CBA, benefits or costs must not be double counted, which could occur if a benefit or cost arising from a policy were counted by different valuation methods.  

Green Book – 6.21, 6.22

This section of the Green Book refers to our initial guidance on the use of wellbeing evidence in cost-effectiveness analysis

This includes an early version of our appraisal guidance from 2018, guides to wellbeing economic evaluation, measuring wellbeing inequalities, and a beta version of our  wellbeing policy tools

Our recent working paper on measurement and cost effectiveness with LSE, Cost Effectiveness Guide for Charities with Pro Bono Economics and others.

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