Project Appraisal
Guidance Note (PAGN)
54. MAFF's Project Appraisal Guidance Note (PAGN)
sets out the procedure which operating authorities must follow
for flood and coastal defence project proposals to be eligible
for Government grant-in-aid. In essence, projects are judged by
MAFF on a cost- benefit basis, setting the degree of economic
and environmental benefits which will be derived from the introduction
of defence works against the financial costs. Providing benefits
outweigh these costs, the project will be considered by MAFF for
grant-in-aid funding.
55. An explicit feature of PAGN is that all proposals
must consider the financial consequences of "doing nothing"
at the relevant site, with those of installing defence works;
this is intended by the Ministry not only to act as a benchmark
for comparison with the project proposal, but also to act as a
spur to operating authorities to adopt more creative approaches
to flood and coastal defence - for example, through managed realignment
of the coastline. However, some witnesses felt that authorities
regarded the 'do nothing' option as little more than "a tiresome
ritual"[67].
56. PAGN was reviewed by the Ministry recently, following
criticism that the appraisal procedure did not provide sufficient
guidance on how environmental criteria might be assessed. MAFF
consulted with a range of groups, including English Nature and
the Royal Society for the Protection of Birds, as part of this
review process[68]. However,
from evidence we received it is apparent that among operating
authorities there are still considerable problems with the evaluation
of both environmental and social costs and benefits attached to
projects, particularly in assigning specific monetary values to
elements considered under these headings[69].
The Institution of Civil Engineers called for the introduction
of "a robust and acceptable methodology for evaluating social
and environmental benefits" to ensure these aspects could
be adequately valued in future[70].
57. Concerns were also expressed that loopholes in
PAGN allow proposals for provision of flood defence of agricultural
land to be justified relatively easily - for example, by using
the highest available crop subsidy payment to calculate the 'benefit'
accruing from farm land, and, where farm land abuts urban areas,
including the enhanced asset value to raise the calculated net
benefit[71].
58. We were also informed of PAGN's shortcomings
in evaluating urban development in flood plain areas. According
to Ernst and Young, "a pernicious cycle" may be triggered
whereby flood defences are installed to mitigate the flood risk
to housing or mobile homes, thereby increasing the value of the
defended properties and, on this basis, enabling more extensive
defensive works to be justified at a later date. Property owners
benefit from the resulting substantial unearned transfer of capital
from the taxpayer and a "long term, escalating" liability
is placed on the responsible operating authority, the Environment
Agency[72].
59. We are mindful that the approach embodied in
PAGN does not adequately match the Government's overall strategic
aim of encouraging the provision of sustainable flood and coastal
defence measures. Indeed, it would appear that projects which
may be highly sustainable could be excluded from the appraisal
procedure altogether, simply because there are not adequate methodologies
in place to assess the range of environmental and social benefits
they might bring.
60. As a matter of priority, MAFF must develop
methodologies addressing social and environmental criteria for
inclusion in PAGN. Operating authorities should also be required
to identify the best practicable environmental option from among
the range of choices submitted to MAFF, and such options should
be given increased weighting by the Ministry in the project approval
process. PAGN should provide greater encouragement for projects
with multiple functions - for example, defensive, social and environmental
- than at present; only by doing so can MAFF's multiple goals
for sustainability be realised. There must also be far more transparency
in the process by which MAFF's decisions under PAGN are
reached, and the Ministry should review ways of simplifying and
speeding up the whole process of project appraisal.
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