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Author Topic: New Treasury Green Book - Effect on Rail Projects outside London and South East  (Read 255 times)
ellendune
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« on: November 21, 2020, 09:37:14 am »

The new Treasury Green Book which is used for investment appraisal of all capital projects is to be rolled out this week. How will this affect the case for projects in our area?

Rishi Sunak to reform anti-Northern spending bias (from the BBC)

Extracts below

Quote
The government has confirmed it will make a major reform to the way it assesses the value for money of big spending projects.

It plans to remove a longstanding bias that has affected funding for northern England and other regions.

Quote
It will mean - as the first portions of ?600bn in planned public investment are delivered - the process of ranking transport, energy, schools or hospital investment will be widened beyond a narrow definition of benefit compared to cost.

Those calculations, the Treasury now acknowledges, have inherently favoured the government investing continuously in the South East of England and London.

That's because the values of economic return are influenced by existing high property prices in those regions.

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grahame
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« Reply #1 on: November 21, 2020, 10:05:29 am »

Your quotes include

Quote
Those calculations, the Treasury now acknowledges, have inherently favoured the government investing continuously in the South East of England and London.

The article also includes a further admission of bias across other regions - not just the north

Quote
It plans to remove a longstanding bias that has affected funding for northern England and other regions.

The statements are also reported to suggest that it's all regions and not just "The North" that will be levelled.

Quote
The new process will update the equation to prioritise investments with regional impact, which will help Mr Sunak's levelling up plan and the government's green objectives.

BUT ... having written that (above), I note that all the people making the noise in the article and being reported on are from The North ... it may be that the South West benefits too, but no strong shout of welcome reported from (for example) our MPs in Somerset, Devon, Wiltshire or Dorset.

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Red Squirrel
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« Reply #2 on: November 21, 2020, 01:19:42 pm »

Worth noting that the Minister of State for Regional Growth and Local Government is Luke Hall - the MP for Thornbury and Yate. So we might be forgiven for hoping that the South-West will not be forgotten. Also I have recently picked up some interesting vibrations about local government. Many people will be aware of recent ructions between Bristol, WECA and North Somerset, but there is also something called FOLGIS (Future of Local Government In Somerset), and co-operation between Gloucestershire and WECA over MetroWest...

Watch this space?
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stuving
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« Reply #3 on: November 21, 2020, 03:46:58 pm »

Quote
Those calculations, the Treasury now acknowledges, have inherently favoured the government investing continuously in the South East of England and London.

That's because the values of economic return are influenced by existing high property prices in those regions.

Can anyone explain - in nice simple terms we can all understand - how a higher capital cost makes the return higher, and makes it even more higher than the cost it's going to be divided by to give a BCR?
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onthecushions
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« Reply #4 on: November 22, 2020, 05:40:05 pm »

Presumably if an investment is predicted to stimulate a local economy by 15% (say) then the assessed benefit is significantly greater for a region with a higher income (and therefore asset base).
 
London has a GDP/head of c?54.7k whereas the North West figure is c?28.5. The UK mean is c?32.0k. Also growth rates are relevant with London's etc being usually higher than the sticks.

If I were in the Treasury I would insist on the National figure always being used; this would probably make most schemes unviable, saving a mint and guaranteeing my knighthood!

OTC

PS pound sign?
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CyclingSid
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« Reply #5 on: November 23, 2020, 08:45:23 am »

Not to be confused with the NHS Green Book https://www.gov.uk/government/collections/immunisation-against-infectious-disease-the-green-book

Which might be of interest for completely different reasons at this time. As it was last updated 2 September 2014 there is likely to be nothing immediately exciting about our current concerns.
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stuving
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« Reply #6 on: November 23, 2020, 10:53:46 am »

Not to be confused with the NHS Green Book https://www.gov.uk/government/collections/immunisation-against-infectious-disease-the-green-book

Which might be of interest for completely different reasons at this time. As it was last updated 2 September 2014 there is likely to be nothing immediately exciting about our current concerns.

Most of the individual sections of the "book", including those on each disease, have been revised more recently. But the new section on "SARS-Cov-2" doesn't seem to be ready yet.
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stuving
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« Reply #7 on: Yesterday at 08:42:31 pm »

The Green Book has been revised every few years, and for much the same reasons as this time. Each time the main response has been that the changes are in the right direction but don't go far enough. I suspect the same will be said this time.

The review (done by the Treasury, of course) found out that the problem was not the Green Book itself, or the process it describes, but the users not understanding how to follow them. And their perception that HM Treasury only look at BCRs - though apparently the Treasury are going to change their ways anyway.

Their main point is that the process is meant to assess plans against policy objectives, and the economic justification is secondary. The trouble is that it's the easier bit to do, at least of you've got a good supply of numbers, whereas the broader assessment is hard - it's not easy even to understand the concepts.

I think that the geographical biases that have been seen result mostly from how the process reacts so much to the existing imbalances of wealth and income that it gives a much higher value to "benefits" in those favoured regions. And that may be inherent in the way they use market values to price costs and benefits. The revision (which is hard to judge from the document) doesn't alter that, but tries to offset its effects by giving the policy layer of assessment priority over the economic.

Here's just one short section from the review report:
Quote
2.4 This is a crucial issue. The BCR is a valuable tool for informing the choice of options at short-listing stage and provides a check to see whether the achievement of the objectives of the intervention are worth the total whole life costs to society. But a single and often spuriously accurate BCR, developed without reference to a strategic case, does not give a comprehensive view of the social value offered by an intervention and should never be the sole defining factor in appraising options. In particular, it risks:
? monetisation of spurious benefits that are unlikely to be realised
? ignoring costs or benefits for which there may be good evidence, but which are difficult or impossible to monetise
? giving a misleading impression of the degree of certainty and accuracy in cost and benefit estimates
? not taking proper account of risks; and
? ignoring the question of who the benefits go to and who bears the costs- fundamentally, it removes the decision to invest from its strategic context. In doing so, it reduces decision makers? ability to make informed decisions about which option will best achieve their objectives, ultimately risking undermining their ability to achieve them.

I thought the reason for using the economic method and CBA was that it's objective, in the sense that the opinions of the civil servants don't come into it. In theory you just get the data and turn the handle, and any criticism from colleagues will be about how well you did that. Assessing means to reach policy objectives can't really be done that way. Past governments have valued this kind of neutral civil service, but the style of the current administration is more in line with a politicised senior civil service, and preferring  "just do it" to objective justifications. That extra push at the top may make any change to the process more effective - but they may also just take less notice of the assessments in their decisions.
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