Distributional Analysis and Weighting in Central Government Assessments

This report considers the use of distributional analysis and weighting in economic assessments within central government in Northern Ireland.
Distributional Analysis and Weighting in Central Government Assessments

Economic assessments are used to assist decision making within the public sector. Their purpose is to ensure that a wide range of economic, financial, social and environmental issues are considered before decisions are made. All economic assessments, whether economic appraisals, business cases or other such work including evaluation are undertaken utilising central government guidance. The overarching UK guidance is HM Treasury’s Green Book although separate guidance has been drawn up in Northern Ireland in the form of the Northern Ireland Guide on Economic Appraisal and Evaluation which is built on the principles and practice within the Green Book. A range of supplementary guidance has been added to this over a number of years to cover Northern Ireland’s specific situation including consideration of equality (‘Section 75’) and deprivation  policy  “Lifetime Opportunities”.

 

In broad terms economic assessments seek to identify the policy and strategic context within which a decision is being made. Appropriate objectives are developed for the project and it is considered in terms of its ability to meet these objectives in the most cost effective manner, taking into consideration a range of options which wholly or partially these issues. Good practice dictates that projects and programmes should be evaluated after some time to ensure that lessons are learnt and that the standard of decision making improves. 

‘Distributional analysis’ is the term used to describe the process by which the effect that a policy programme or funding decision may have on individual groups within society is measured. Treasury guidance sets out a specific approach to carrying out distributional analysis particularly in relation to people with different levels of income, recognising that £1 is more valuable to someone on a low income than it is to someone who has higher income. 

Consultation with government  economists across ten  government departments showed that the term “distributional analysis” is not commonly used in Northern Ireland and indeed there is little evidence of the Treasury guidance in this area being utilised.  In practice however some of the elements of distributional analysis are considered in equality impact assessments (EQIAs) and in considering a programme or policy’s fit with Northern Ireland Government policy on deprivation.  Many economists believe that these issues are considered more importantly at policy stage and therefore business cases which flow from these policies are likely to be assessed  in this context and may not need additional analysis to be undertaken. They are of course correct in noting that much Northern Ireland legislation is focused on addressing deprivation or lack of access to services. Northern Ireland guidance on economic appraisal and evaluation is given preference over UK Treasury guidance. Economists are generally more concerned with the quality of needs assessment and the range of options being considered in detail. They believe that since many departments focus all of their work with a strong equality, social inclusion and deprivation agenda the need for this to be analysed in more detail at individual case stages is less of a priority. 

Detailed assessment of a range of business cases, equality impact assessments and policy reviews is set in Section 3.1 of the report. This considers a wide range of projects and programmes of varying value but typically in the range of £1m to £50m. This analysis showed little evidence of distributional analysis as described by HM Treasury. However, it did show a range of variation in how distributional effects are considered.  Many of the documents reviewed looked at the equality implications (within the terms of Section 75 of the Northern Ireland Act) to some extent, with some looking at this is considerable detail. Most at least gave rudimentary consideration to deprivation factors. However, few showed the level of analysis or robust assessment that is recommended in the Treasury Green Book. Practice in local government was also considered in less detail and notes that equality screening and equality impact assessments are generally carried out in a thorough fashion. Despite this, there is little emphasis on other forms of distributional analysis within business cases. Typically, the business cases considered at local government level tend to involve smaller projects and may be undertaken using a pro forma approach to economic appraisal, which does not consider distributional analysis at all. It is clear that local government officers and elected members are very conscious of their equality obligations and the need to address deprivation and these issues generally figure highly in policy or programme development.

Discussions with the voluntary sector shows concern that too many government decisions are made for “political reasons”, rather than focused on a sound needs-based approach. Many in the voluntary sector felt that important statistics in relation to subgroups of people, available within public sector organisations, were not shared across central government. As a result, analysis that could be undertaken on the impact across different groups was often not used because such information had not been shared. Voluntary sector organisations believe that central government tends to consider policies or make funding decisions in a vertical decision manner rather than taking into consideration the wider horizontal factors associated with other departments and the impact of their policy on other departments’ work. Voluntary sector organisations were aware of the needs of groups they represent being negatively affected or failing to produce the positive impacts that were expected because of inadequate consideration. The voluntary sector would want a stronger coordinating approach by OFMDFM to ensuring that these issues were considered in detail by other departments and in a more strategic cross departmental approach. 

A number of recommendations are set out in Section 4.2. It is recognised that any changes in how Government carries out economic assessments must balance the cost of such alternative or additional assessment with the potential impact of the changes. Evidence of any changes made should be collated for a period to allow the value of any new process to be considered and, if necessary amended or abandoned. The recommendations include:

  • The need for much greater consideration of income and poverty factors within screening of projects at business case stage.
  • The potential to use a more comprehensive distributional screening approach,  aligned with equality screening,  to consider wider distributional impacts and to determine whether a more comprehensive impact assessment is required (suggested format set out in Section 5.1).
  • Projects should be evaluated taking into consideration the distributional impacts identified at appraisal stage to ensure that these outcomes have actually been achieved.
  • Government departments with a policy lead responsibility should  ensure that high level policies and programmes are appropriately reviewed at sub programme and project stage to determine that the distributional impacts align with the intended policy outcomes. 

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