At the National Audit Office, we come across many business cases when looking at government programmes. A strong business case is vital for effective decision making and for successfully delivering intended outcomes.
The foundation of a business case is a clear understanding of what success will look like for a programme – the strategic case. But when it’s not clear what a programme is trying to achieve, it’s hard for decision makers to know if this programme is the right thing to do, or to plan and focus resources. It creates the risk that different stakeholders have different expectations about what will be achieved. It makes it harder to spot where other programmes may contribute to similar goals or where there may be adverse impacts. And for the public, parliament and us as auditors, it makes it hard to understand if the programme has delivered good value for money.
Promoting the strategic case
The November 2020 update to HM Treasury’s Green Book (its guidance on how to appraise and evaluate spending proposals) introduces a stronger requirement to establish clear objectives up front. Proposals should be assessed primarily on how well they deliver policy objectives, and cannot be considered value for money without delivering these.
But for proposals to be assessed this way, the strategic case needs to be robust. Therefore, when auditing major programmes, we ask the seemingly simple question – is it clear what objective the programme is intended to achieve?
Our recent learning from COVID-19 re-emphasised the importance of government being clear and transparent about what it is trying to achieve, so that it can assess if it is making a difference. For example, HM Revenue & Customs agreed clear principles for its employment support schemes. Although the Bounce Back Loans Scheme achieved its initial objective of quickly supporting small businesses, a lack of more detailed scheme-specific objectives will make it difficult to measure its ultimate success.
The government’s commitment to ‘levelling up,’ and uncertainty over what this means, may create difficulties for programmes to set out what they will achieve. They will need clarity to produce a business case. It could be interpreted as giving everyone access to the same opportunities, or at least to the same minimum standards – say of health outcomes or broadband access. This prioritises spreading prosperity to deprived areas. However, it also could be framed as addressing gaps in potential by, for example, investing where an area should be showing higher productivity. This prioritises value for money investments. As these different goals require different policy solutions, it can be challenging to set out how an intervention will achieve ‘levelling up’. Later this year, government will publish a levelling up White Paper setting out how new policies will improve opportunity and livelihoods across the UK.
Whilst defending the economic case…
A strong strategic case alone does not mean an intervention is justified. There might be other ways to meet an objective which could be better value for money. We often see business cases that seem to justify a pre-selected solution, rather than exploring a range of options for meeting the objectives – what the Green Book calls ‘the long list’.
Our report on Hinkley Point C found that alternative ways of the government providing support for the planned nuclear power station could have resulted in lower costs to consumers over the life of the project, but weren’t considered. We have also seen departments not considering different options when thinking about how to deliver policy – nine out of the 24 business cases we reviewed as part of our report on arm’s length bodies did not consider a long-list of options.
The economic case is important in setting out value for money, often through formal modelling, the results of which will need to be considered alongside the strategic case. Our early work on High Speed 2 found that the relationship between savings (with the Department for Transport putting a high emphasis on journey time savings) and the strategic reasons for doing the programme, such as rebalancing regional economies, was unclear.
So, what do we expect from strategic cases?
Throughout a programme, the strategic case needs to help ensure effective decision-making. As well as specifying what should be achieved (with a clear, logical set of assumptions) it needs to:
- Be easily understandable so effective trade-offs can be made. Our lessons from major programmes describes how objectives need to be clear enough to be translated into a programme scope (what will be required and when). For example, overnmen has been considering which objectives to prioritise for the roll-out of gigabit-capable broadband. In our report, we found that prioritising the speed of programme delivery over other objectives posed a risk to value for money.
- Help prioritise cross-government objectives. We see cases where objectives are neither coherent when taken together, nor clearly prioritised when tensions emerge between them. In November 2020 we considered progress in achieving government’s long-term environmental goals. The government set out 10 overarching goals but did not provide a clear and coherent set of objectives, with, for example, varying and often unclear timescales.
- Be measurable (where possible).The strategic case will capture those assumptions that cannot be equated to a monetary equivalent. And, the easier assumptions are to quantify, the easier it will be to assess progress. Our early High Speed 2 review found the strategic case should have been more developed. For example, it included limited evidence on forecast passenger demand which provided a weak foundation for securing and demonstrating success. The Department was working to strengthen its analysis. Also, our Hinkley Point C report found the Department put more weight on the wider, unquantified strategic case when the economic case weakened but had little control over these benefits and at the time of our report no plan to realise them.
Government plans to invest heavily in programmes, with £100 billion expected investment in 2021-22 alone. For government to secure best value from this it must set out clearly and logically what it wants, how to best deliver this and how it will show what has been achieved for the investment.
Authors
Emma Willson
Emma leads the team and has worked at the NAO for almost 20 years, auditing a wide range of government programmes, from welfare reform to large-scale defence equipment projects.
Emma is a qualified chartered accountant and holds an International Association for Contract and Commercial Management (IACCM) qualification.
Ruth Kelly
Ruth is our Chief Analyst and leads the Analysis Insights team. She has wide experience of applying economics and other analytical approaches to support policy evaluation, investment decisions and risk management.
Prior to joining the NAO, Ruth held business evaluation and risk management roles for a global resources company, and advised clients on carbon and energy issues for an economic consultancy practice.
