Changing the Green Book: the real challenge for the Regions
Last week the Chancellor announced a £156 billion investment for transport schemes in the North of England. The commentary in mainstream media peddled the now standard argument that the Green Book – the Treasury’s guidance for public sector investment - had been to blame for a systematic failure to fund projects outside London. The commentary added that a new version of this ‘investment bible’ would end the longstanding injustices felt by those north of Watford.
But please don’t hold your breath for a revolution in Government investment.
It is true that in transport economics - the minutiae of the guidance underpinning the Green Book has disadvantaged the regions. But we do not really need a new investment manual for everything. There are problems with the Green Book, but it is simply a framework for making decisions. The real failure has been in the way in which Whitehall economists interpret the Green Book and use an overly blinkered view of how regional economies work. Rewriting the Green Book will not change attitudes and philosophy. Let me explain why…
First – there is the perception that the Green Book only works for schemes in London and the south east. This is because Benefit Cost Ratio (BCR) - the currency of Whitehall decision-making – will always favour higher productivity and wealthier regions. While this true of transport schemes, it is not for housing, placed-based initiatives or other hard and soft infrastructure. Organisations like Homes England have taken conscious steps to expand their cache of place-based tools and there is a widespread national issue about viability.
Second, there is the perception that spending on regional development is and always has been a zero-sum game. This view permeates the media and the Treasury. For the press, it makes good copy to pitch region against the capital. For HMT, it reflects a wider neoclassical view of the economy that places a premium on supply side thinking and ignores 80- years of regional policy and academic debate.
The reality is that even now, skilled practitioners can use the Green Book to justify intervention anywhere. Indeed, Avison Young has had some notable recent successes in this context – including £90 million funding secured for housing intervention in Blackpool. But fundamentally the Green Book was designed to be a pattern for decision making, not a straight-jacket. Whitehall economists pay lip service to the importance of strategic thinking, but too often but they are only interested in numbers and the BCR.
This Treasury orthodoxy is derived from an uninspired style of economic thinking that permeates the way in which economics is taught and understood in British universities. Unless you are lucky enough to go to handful of institutions that teach place-based and regional economics – most undergraduates are no longer taught things like the Theory of Second Best or the Colin Clark’s insightful analysis on regional economic potential.
The real opportunity presenting itself to Mayoral Combined Authorities and other strategic authorities in the devolution era is to take decisions away from the home of economic orthodoxy and to embrace more progressive ways of understanding the spatial economy. In this sense, longer term integrated settlements for strategic authorities and greater transport powers administered away from Whitehall could embed a much more positive way of thinking.
We don’t need a new Green Book to do this. We need different and more open-minded economists to support policy and secure better outcomes.
Stephen has 25 years of experience as an economist and strategic adviser in area-based regeneration, impact analysis and labour market economics He has worked as an economist and analyst in four Government departments. He was HMRC’s and Treasury’s senior analyst on the commercial property market and was as an economic adviser in the central government helping to design financial incentives targeting urban regeneration and regional economic development.
Stephen has experience of applying cutting edge appraisal and evaluation techniques across all tiers of local, regional, national and European government. He has led economic and regeneration strategies across the UK, and wrote appraisal guidance on regeneration and the built environment. He was a lecturer in economics and economic history at London School of Economics and the University of Warwick, and completed his PhD on the history of regional policy in the UK.