The Green Book - GOV.UK

Chapter 1: Introduction Supplementary departmental guidance is produced by Departments and arms-lengthpublic organisations. It deals with the application of the Green Book in the particularcontext that is the organisation’s area of responsibility. This supplementary guidancemust be consistent with the Green Book, the Business Case guidance and supplementaryguidance on specific topics. When the Green Book is updated supplementary guidancemust be realigned as required to ensure consistency across government and the widerpublic sector.1.4 Green Book guidance applies to all proposals that concern public spending, taxation, changesto regulations, and changes to the use of existing public assets and resources – see Box 1 below.Box 1. Scope of Green Book GuidanceGreen Book guidance covers: policy and programme development all proposals concerning public spending legislative or regulatory proposals sale or use of existing government assets – including financial assets appraisal of a portfolio of programmes and projects structural changes in government organisations taxation and benefit proposals significant public procurement proposals major projects changes to the use of existing public assets and resources1.5 The role of appraisal and evaluation is to provide objective analysis to support decision making.Where the use of significant new and existing public resources is required the proportionateemployment of the Green book and its supplementary business case guidance is mandatory. Thedecision support process includes the scrutiny of business cases by approving bodies in governmentdepartments and other public organisations, Treasury Approval Processes and the RegulatoryImpact Assessment process. The Five Case Model and the methods and principles of the GreenBook should also support options appraisal when formal business cases and regulatory decisionsare not required. The relationship between Green Book guidance and government decision makingprocesses is shown in Figure 1.1.6 This guidance should be applied proportionately. The resources and effort employed shouldbe related to costs, benefits and risks involved to society and to the public sector as a result of theproposals under consideration.1.7 Monitoring and evaluation of all proposals should be proportionately included in thebudget and the management plan of all significant proposals as an integral part of all proposedinterventions.2The Green Book

Chapter 1: IntroductionFigure 1. The Green Book and Appraisal in ContextSpendingcontrolprocessGreen Book Appraisalis the definitiveanalytical guidancefor cessRegulatoryimpactassessmentTHE GREEN BOOKCENTRAL GOVERNMENT GUIDANCE ON APPRAISALAND EVALUATIONEvaluation - Magenta & Green Books1.8 This guidance has been designed to be accessible to a variety of users – from policy officialsto analysts. Accordingly, it follows a tiered structure where: a high-level overview is provided in chapters 1 – 3 detailed information for practitioners is provided in chapters 4 – 8 technical information and shared valuations for use in appraisal are provided inannexes 1 – 6 hyperlinks have been inserted to allow users to cross-reference within the Green Bookand associated supplementary guidance1.9 The Green Book’s chapters are as follows: chapter 2 provides a non-technical introduction to appraisal and evaluation chapter 3 provides an overview of how appraisal fits within government decision makingprocesses chapter 4 explains how to generate options and undertake longlist appraisal chapter 5 explains how to undertake detailed appraisal of a shortlist of options usingsocial cost benefit and social cost effectiveness approaches, and distributional andsensitivity analysis and accounting for unquantifiable factors it provides the Green Bookdefinition of public/social value for money chapter 6 sets out the approach to valuation of costs and benefits chapter 7 sets out how to present appraisal results chapter 8 sets out the approach to monitoring and evaluation annexes 1 – 7 provide further technical appraisal information and values for use inappraisal across governmentThe Green Book3

Chapter 1: IntroductionScope and relationship with other appraisal guidance1.10 The content and boundary of all Green Book guidance is determined by HM Treasury. Thecontent is peer reviewed by the Government Chief Economists Appraisal Group. It applies toall government departments, arm’s length public bodies with responsibility derived from centralgovernment for public funds and regulatory authorities.1.11 Departments also produce internal guidance, setting out how Green Book appraisal shouldbe carried out for their areas of responsibility. For consistency, departmental guidance should alignwith the Green Book. Where departmental guidance affects other government departments, orcontains significant developments in methods and approach, relevant sections should be agreedwith HM Treasury and the Government Chief Economists Appraisal Group.1.12 Throughout the guidance there are links to external supplementary guidance. These providefurther detail on subjects that are relevant across government e.g. the valuation of greenhousegas emissions. To provide background and support understanding, non-governmental researchand discussion papers are referenced in the Green Book. These documents do not form part ofthe guidance.4The Green Book

2Introduction to Appraisaland Evaluation2.1 This chapter provides a non-technical introduction to appraisal and evaluation.Principles of appraisal2.2 Appraisal is the process of assessing the costs, benefits and risks of alternative ways to meetgovernment objectives. It helps decision makers to understand the potential effects, trade-offsand overall impact of options by providing an objective evidence base for decision making.2.3 Appraisal The appraisal of social value, also known as public value, is based on the principlesand ideas of welfare economics and concerns overall social welfare efficiency, not simply economicmarket efficiency. Social or public value therefore includes all significant costs and benefitsthat 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 welfareand wellbeing consideration applies to the entire population that is served by the government,not simply taxpayers. A summary outline of the key steps in appraisal is shown below in Box 2.2.4 The first step in appraisal is to provide the rationale for intervention, a process covered morefully in chapters 2 to 4 and in the business case guidance. Appraisal is a two-stage process, thefirst stage of which is the consideration of a longlist of option choices and the selection of arational and viable set of options for shortlist analysis. The options framework and filter processused for longlist analysis and shortlist selection is explained in Chapter 4. The second stage inappraisal is shortlist analysis using social cost benefit analysis (CBA) or social cost effectivenessanalysis is explained in Chapter 5.2.5 In government as in many large private sector organisations, major changes involve a sequenceof decisions at several levels. Typically, organisations will have their high level purpose expressedin some form of mission statement and may even talk about their intentions in terms of a vision.To make these rather high level statements into implementable programmes and projects, thereneeds to be another level of more specific strategic policy objectives. Realisation of these strategicobjectives requires the organisation and planning of programmes and projects which are bestmanaged in related strategic portfolios. Policies provide direction and high level objectives, theseenduring parameters drive and direct the required changes the organisation is working to bringabout. The definitions of key terms used in this guidance are given in Box 3.2.6 At each level of decision making, objectives are set so that the proposal being consideredmeets the needs placed upon it by a preceding, higher level proposal. For example, a programmeto deliver signalling for a new railway line will be part of a wider programme to construct thefixed infrastructure the line requires. The signalling system will need to meet the requirementsof both the rail infrastructure plan, and the operational needs of the new line, so that it enablessafe running of planned train speeds and frequency. Individual projects within the signallingprogramme will each deliver a component of the overall system, and need to be understood inthat context.The Green Book5

Chapter 2: Introduction to Appraisal and EvaluationBox 2. Summary Outline of Key Appraisal Steps Preparing the Strategic case which includes the Strategic Assessment and Making the Casefor Change,2 quantifies the present situation and Business as Usual (the BAU) and identifiesthe SMART objectives. This Rationale is the vital first step in defining what is to be appraised.Delivery of the SMART objectives must drive the rest of the process across all dimensions of theFive Case Model as explained throughout this guidance. Longlist analysis using the options framework filter considers how best to achieve theSMART objectives. Alternative options are viewed through the lens of public service provision toavoid bias towards preconceived solutions that have not been rigorously tested. A wide range ofpossibilities are considered, and a viable shortlist is selected including a preferred way forward.These are carried forward for further detailed appraisal. This process is where all complex issuesare taken into account and is the key to development of optimum Value for Money proposalslikely to deliver reasonably close to expectations. Shortlist appraisal follows and is at the heart of detailed appraisal, where expected costs andbenefits are estimated, and trade-offs are considered. This analysis is intimately interconnectedto the, Strate

Box 17. Navigating the Appraisal Framework the Option Selection and VfM 50 Box 18. A Definition of Value for Money 52 Box 19. Switching Values – Worked Example 53 Box 20. Valuation Methods for Non-Market Prices 59 Box 21. Uses of Evaluation 71 Box 22. Core Evaluation Questions 74 Box 23. Identifying whether an intervention may affect Natural .