This page provides details on the principles of appraisal as applied to policy and programme cases.

3.1 Basic principles

3.1.1 Public expenditure has a major impact on the use of Northern Ireland's resources, and the quality of life of its people, through the operation of numerous policies, programmes and projects. The latter may be distinguished, broadly, as follows:-

  • a policy is a high level plan of action incorporating general goals. An example is the provision of free primary school education for all children of the appropriate ages. Policies are decided at the highest level, for example, by Northern Ireland (NI) Ministers or the NI Executive.
  • a programme is a body of procedures and projects designed to implement policies and achieve their aims. For example, the primary school building programme is designed to help implement the policy of free primary school provision. Programme details may be decided at a slightly lower level, for instance they may be generated in collaboration between Ministers and senior officials.
  • a project is a separate component within a programme, for example a proposal to build or extend a certain primary school to serve the needs of a specific local school population. Projects are decided at the lowest level. They may be generated by officials, or (particularly where the programme involves financial assistance to non-government bodies) they may represent proposals from the private, voluntary or community sectors.

3.1.2 It is vital that all policies, programmes and projects are thoroughly appraised, managed, monitored and evaluated to ensure that NI's resources are put to the best possible use, and to satisfy the need for public accountability. This section deals specifically with issues that arise at policy level, although most of it applies equally to programmes.

3.1.3 In 2016, The Executive Office (TEO) produced a revised version of a Practical Guide to Policy Making covering all of the issues relevant to policy making. For example, it explains the features of good policy making, the importance of evidence-based policy making, and guidance on the processes of consultation and legislation. In the light of the new outcomes focused Programme for Government, the Guide emphasises the need for a more integrated approach and encourages people to work with colleagues in other departments and with stakeholders across the wider public sector as well as those in the private and voluntary sectors.

TEO has also developed a Policy Toolkit which provides a practical overview of the key steps and phases in the policy development process. These and other useful resources are available on TEO's website. This section of NIGEAE should be read in conjunction with the Practical Guide to Policy Making and does not attempt to duplicate TEO's general guidance.

3.1.4 The Practical Guide to Policy Making explicitly recognises the need for policy decisions to be supported by economic analysis including the appraisal of options. The rest of this section briefly describes the key relevant principles of economic analysis in relation to policy making, including the establishment of the rationale for government intervention and the appraisal of policy options.

Rationale for government intervention

3.1.5 A policy, programme or project is sometimes described as a 'government intervention'. In other words, it is a means by which the government intervenes in the economy or society in order to achieve an outcome that is better than would otherwise be the case.

3.1.6 Government intervention is costly, therefore there always needs to be a justification or rationale for it, in terms of:

  • the achievement of economic objectives by addressing inefficiencies in the operation of markets and institutions and
  • the achievement of an equity objective, through for instance, local or regional regeneration

3.1.7 Intervention to achieve economic objectives is justified when markets fail to use resources in the most productive way possible. This may be the case due to the presence of, for example, public goods, externalities, imperfect information or market power. These terms are explained in annex 1 of the Green Book

3.1.8 Intervention to achieve equity objectives may be justified to improve the distribution of costs or benefits among different groups according to their income, gender, ethnic group, age, geographical location or disability.

The principles underlying analysis of these equity, or 'distributional' considerations, are explained in annex 5 of the Green Book (scroll down from annex 1 to appropriate section). However, it should be noted that Northern Ireland has specific policies in this regard, including lifetime opportunities and the statutory equality obligations under Section 75 of the Northern Ireland Act 1998. See section 2.7.24 of NIGEAE for elaboration.

3.1.9 When introducing or reviewing a policy or a programme, it is important to establish clearly the rationale for intervention, and to consider whether that intervention will be cost-effective ie that the benefits will exceed the costs. This should include an analysis of the negative consequences of intervention, as well as the results of not intervening, both of which must be outweighed to justify action. In many cases, the preliminary step will involve research to set out the scope of the issue to be addressed, and the reasons for intervention.

Appraisal of policy options

3.1.10 Consideration of alternative options is an important part of policy making and programme development. It is about identifying the range of possible courses of action, and comparing their relative merits, including the costs, benefits, and risks that are associated with them, in order to inform selection of the best policy or programme.

3.1.11 Having established the rationale for government intervention, the basic steps of appraisal and evaluation in section 2 of NIGEAE generally apply as much to policies and programmes as to projects. For example, it is generally appropriate to:

  • establish the policy need - Identify the specific populations that will be targeted, quantify the extent of the problems or demands to be addressed, show how policy intervention will contribute to strategic aims
  • define the policy objectives - Objectives should initially be stated broadly enough to enable a range of policy options to be identified. They should normally be developed into more specific terms, including measurable targets, to provide a basis for detailed appraisal of the policy options and subsequent measurement of the policy's success
  • identify and describe the policy options - Define a "status quo" or "do minimum" baseline option and a suitably wide range of alternative policy options for consideration
  • detail the costs, benefits, risks and other relevant impacts - Analyse the economic, social and other costs, benefits, and risks associated with each of the policy options. Consider the need for impact assessment eg equality, environmental, health or regulatory impact assessment and consider whether State aid may be present.
  • spell out the funding implications including the priorities for funding - The relative priority of different elements of the proposals, should be stated clearly. This is particularly important when appraising a policy containing numerous separable objectives or costly components. Funding may not be available to undertake everything that departments would like to do, or as soon as they would like to do it. Prioritisation helps to focus on what are the most important things to do first. Presentation of 'wish lists' containing numerous costly proposals without any indication of priority does not aid funding decisions
  • summarise the findings and recommend the preferred policy option - Summarise, for each option, the costs, benefits, risks and other impacts. Compare the relative merits of the options and recommend the preferred one.
  • make arrangements for managing, monitoring and evaluating the policy - Arrangements for these activities need to be built in from the outset

Broadly similar principles apply when appraising programmes.

3.1.12 The principle of proportionate effort should be applied throughout. Policies and programmes can have major cost implications and the effort put into appraisal and evaluation should reflect that.

3.1.13 A policy or programme appraisal or evaluation may result in a new programme or in revisions to an existing programme. The justification for a new or changed programme should be documented in a programme business case covering the steps outlined above, with details tailored to suit the circumstances of the type of activity and spending in view.

3.1.14 Programmes should generally have a documented programme plan, including a project portfolio and a project schedule, which should be maintained and reviewed regularly in the light of changing needs and resources.

  • A project portfolio is a list of the foreseeable projects within a programme, together with basic details for each project including cost estimates
  • A programme schedule shows the intended sequencing of projects, grouping them into tranches over time

These are key tools for assessing strategic programme alternatives. For example, alternative programme scenarios can be modelled by varying the programme schedule to reflect different assumptions about priorities, funding and phasing.

3.1.15 Programmes should be managed according to the latest best practice programme and project management (PPM) guidance. See Section 10 of NIGEAE and DoF's Programme and project management and assurance page for further details.

3.1.16 Specialist advice may be required. Departmental economists can advise on the design and conduct of suitable appraisals of options and can advise on other forms of economic analysis relevant to policy making such as relevant economic research. Advice on the Practical Guide to Policy Making and the Policy Toolkit is available from TEO's Policy Innovation Unit. Advice on programme and project management is available from CPD.  Further information on how to assess whether State aid could be present can be found on the DfE State aid website.

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