Changing the governance of funding

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Changing how government works also means changing how government funds its work. All too often, funding processes are cumbersome and performative, increasing friction without actually reducing the risk of obtaining poor value for money.

Part of the Treasury’s role will inevitably be to say no on occasion, and apply control. And business cases are not inherently a bad thing. It’s a good idea to consider trade-offs and opportunity costs across government. But the way these tools are typically used and interpreted will make delivering through a test-and-learn approach almost impossible.

Business cases are weak because they only offer ‘point in time’ assessments when deciding where to make investments. They take months to write, and rarely get revisited once they’re “done.” The current Green Book process for appraising investment options doesn’t include a way of asking whether risky assumptions have been tested, or whether a programme is on the right track early in its life. But the fault is less with the Green Book itself, and more how the process it codifies is interpreted and applied across Whitehall.

The very fact business cases take so much time and effort to construct disincentivises teams from starting small, testing assumptions, and asking for small amounts of money to do so. Why ask for £1 million over a few months, when asking for £100 million over a few years would take little additional effort, and get just as much scrutiny?

There’s an urgent need to create room in investment governance that allows teams to pivot if the needle isn’t moving.

At the other end of the business case timeline is the “benefits realisation.” At the moment, anticipated benefits are outlined in business cases for programmes, but most of the “benefits realisation” activity is assumed to happen after an intervention has been “delivered.” In reality, conversations about benefits realisation are pushed into the long grass and rarely happen—and even if they do, the team has usually been disbanded by then anyway.

This approach to measuring benefits is largely pointless. Far better to understand value, and design the realisation of value as early in the process and as incrementally as possible—early enough to make design changes if the expected benefits aren’t materialising. And early enough to make the senior officials responsible for the programme unavoidably accountable for delivering outcomes, rather than a list of deliverables.