Homes England economist: understand aims of Green Book

Mr Wallis said that while it is a “very good thing” in theory, in reality “we often can’t quantify and monetise all the impacts” the interventions will have, particularly for regeneration.

Some of the BCR can be a “helpful” part of decision-making, Mr Wallis said, and it is possible to “prove what the BCR tells us, with robust research”. But he said it is important to recognise what the BCR’s purpose is: that it forms part of the decision-making process but is “not the decision itself”.

He said BCRs, by their very essence, can only capture part of the picture and do not tell the “whole story”.

Mr Wallace said the sector as a whole, including all those involved in delivering housing, needs to have a “much more simplistic and overarching understanding” of what the Green Book is trying to achieve.

“We need to have a much more simple and overarching understanding of what the Green Book is trying to do, proportionality in terms of when a full detailed cost-benefit analysis is required, and when it’s appropriate to do a more high-level analysis and ensure that we capture a more holistic assessment on value for money,” he said.

Mr Wallis told Social Housing: “[Central government and its delivery agencies] need to help ensure the sector has a good understanding, albeit at a high level, of what the Green Book is trying to do and that when it is applied in practice, it is done so in a proportionate way.”

Speaking at the conference, Mr Wallis said that working with the Ministry of Housing, Communities and Local Government, Homes England uses BCRs as part of value for money assessments but alongside other factors such as risk, uncertainty and sensitivity analysis in these value for money assessments.

“And then we form a view about what the overall value for money actually is; it isn’t just dependent on the benefit-cost ratio,” he said.

Recommendations in the Green Book Review

The Green Book Review was intended to ensure ministers and other stakeholders are receiving fair, objective and transparent advice on investments across different regions.

This followed criticism from housing groups such as the Northern Housing Consortium, which has said the current methodology has hampered some projects in the region, with the main component of a BCR being the level of land value uplift a scheme represents. 

The Green Book Review said the Treasury will update the Green Book to provide “greater clarity” on the role of the BCR in appraisal.

The review said: “[The Treasury] will make clear that the Green Book does not endorse the use of arbitrary ‘BCR thresholds’. It will outline that a BCR of less than one does not automatically constitute poor value for money.

“HM Treasury does not simply rank different projects, with different objectives, by their BCRs as a means of allocating funding.”

According to the review, the Treasury will also “clamp down on the over-emphasis” of BCRs in decision-making.

“HM Treasury will also improve the Green Book guidance on transformational change,” the review said. “This will help public servants to assess the potential of projects to bring about transformational growth more effectively. HM Treasury will clamp down on the over-emphasis on BCRs in government decision-making, while recognising that they remain one important summary metric used to inform judgements about value for money.”

Earlier this year, Social Housing and Inside Housing explored whether changes to the Green Book will alter the face of housing delivery.