New edition of Green Book launched

The Treasury is today launching the new edition of the Green Book, Appraisal and Evaluation in Central Government. This follows a consultation on the revised draft, which ended on 18th October 2002.

The consultation generated around 70 detailed responses from other government departments, agencies, private companies and other commentators. Overall, they were very favourable, and indicated widespread support for the main changes proposed, which included:

Greater clarity on the valuation of benefits of spending proposals;
An ‘unbundling’ of the discount rate into its constituent parts, setting it at 3.5% and treating separately other elements implicitly included in the bundle, in particular the tendency of appraisers to be over-optimistic when estimating project costs;
Guidance on distributional analysis;
Further guidance on the treatment of differences in the treatment of tax in appraisals;
Explicit advocacy of wider cross government steps to improve the effectiveness of project management (such as the OGC’s Gateway Review process, and guidance on writing business cases).

The consultation produced a number of valuable suggestions about the drafting of the guidance where matters could be made clearer and where the guidance could be made to address users’ needs more closely. These suggestions have been taken on board.

Technical changes as a result of the consultation

Overall, the consultation has supported the case for each of the main changes above. Amongst the improvements made as a result of the consultation are the following:

Recognition that benefits cannot always be valued, therefore allowing, in these circumstances, other types of analysis such as weighting and scoring techniques;
Less insistence on the need to make explicit monetary distributional adjustments, where this would be genuinely impracticable;
More explicit guidance on how to account for optimism bias;
Some flexibility during the transition period; and,
A stepped schedule of lower discount rates over the very long term (i.e. over 30 years)

The Treasury is grateful to all the parties who took the trouble to respond to the consultation on the draft revised Green Book which ran from 24 July 2002 to 18 October 2002.

Notes for editors

The Green Book is a technical, best practice guide to the techniques and issues that should be considered when carrying out appraisals and evaluations of government policies, programmes and projects. The previous edition was issued in 1997.

A number of documents and materials are published today on the Green Book section of the Treasury’s website.

The new edition of the Green Book;
Guidance on how to take account of optimism bias;
Guidance on how to take account of taxation in PFI appraisals;
Guidance on the transition arrangements that will apply until 1 April 2003;
Links to other useful sources of guidance; and
A slide pack, providing an overview of the Green Book and the main changes from the 1997 edition.

Press enquiries

OGC Press Office 0207 271 1366
HMT Press Office 0207 270 5238