Social and economic statement of impacts: guidance for applicants

4. Analytical principles

This guidance is intended to support applicants in presenting robust, transparent and proportionate assessments of the economic and social impacts across a range of different project types and study areas.

Applicants should align their approach to the SESI with the principles set out in HM Treasury’s Green Book^[2]. In particular, applicants should consider the Green Book’s emphasis on the use of baselines and counterfactuals to estimate impact, proportionality and transparency in the treatment of uncertainty and assumptions.

To ensure a consistent and transparent approach across applications, the SESI assesses impacts using a defined set of core economic and social themes. These themes are informed by the socio-economic impacts identified in Glasson (2017)^[3]. Each theme has been selected based on its relevance across a range of application types; alignment with policy expectations under NMP GEN 2, GEN 3 and GEN 19; established use in previous assessments; ready availability of reliable data and evidence; and the materiality of impacts.

The analytical principles set out below should be applied to every SESI, while recognising the analysis should be proportionate to the scale, duration and likely significance of the project’s impacts:

• unlike an Environmental Impact Assessment (EIA), the SESI does not classify impacts using significance matrices. Impacts should instead be assessed following the HM Treasury’s Green Book guidance in terms of net change relative to the counterfactual and the distribution of impacts across sectors, groups, regions or other levels of assessment
• the level of detail and analysis presented in the SESI should be proportionate to the likely magnitude, geographic extent and distribution of economic and social impacts. Smaller projects, or those with limited impacts, are not expected to undertake the same level of analysis as projects with large, long-lasting or highly concentrated effects on particular communities or sectors
• applicants should establish a clear baseline describing current socio-economic conditions for each relevant theme. A counterfactual should then be estimated from the baseline, describing how these conditions would be expected to evolve in the absence of the project. The impacts from the project should be assessed relative to the counterfactual. This provides Scottish Ministers with the information to understand the additional economic and social impacts attributable to the project
• the SESI should identify and assess both positive and negative economic and social impacts. Applicants should clearly state which groups, sectors, or communities are affected and how impacts may differ across locations or population groups. Where impacts are concentrated locally, applicants should present analysis at an appropriately disaggregated level, while also providing an overview of impacts for Scotland as a whole
• in assessing impacts, applicants should consider established appraisal concepts. These are particularly important when estimating economic impacts but may also be relevant when considering social outcomes. Further information can be found in the HM Treasury’s Green Book. The concepts are:
  • additionality – the additional benefit accrued as a result of a project that would have otherwise not have materialised
  • displacement – the shifting of economic activity from one area to another, with limited to no net benefit to Scotland as a whole
  • deadweight – the overall loss to Scotland as a result of the project distorting the efficiency of a particular market and
  • leakage – the monetary or social benefits accruing from a project that may leak out of the community or study area(s)
• impacts should be quantified were possible and supported by evidence. Where impacts cannot be quantified, applicants should provide a clearly reasoned qualitative assessment, with transparent justification
• the core themes set out in Section 6 represent the minimum set of impacts that should be considered. However, depending on the characteristics of the project and the sensitivity of affected communities or sectors, applicants may determine that additional analysis is required to provide Scottish Ministers with sufficient evidence to assess an application
• applicants should use the best available evidence, drawing on project-level data, publicly available statistics and relevant secondary sources. Where data are limited, expert judgement may be used, provided it is clearly explained and supported by evidence or rationale. All key assumptions should be clearly stated and justified. This is vital to satisfy GEN 19 (“sound evidence”)
• applicants should consider whether the available secondary data and evidence are sufficient to assess the likely economic and social impacts of the project. In some circumstances, reliance on secondary evidence and desk-based analysis may not provide Scottish Ministers with enough information to assess the impacts. This may be the case when: impacts are expected to be large in scale or duration; impacts are likely to be highly localised or concentrated on specific communities or sectors; there is substantial uncertainty around the magnitude or distribution of impacts; or there is limited existing evidence relevant to the specific context of the project. In these cases, applicants may wish to gather primary evidence, through stakeholder engagement, social research, or data collection, to strengthen the assessment and help address the evidence gaps. Further guidance on stakeholder engagement, social research methods, ethics and general data protection regulation (GDPR) is provided in Annex C
• applicants should explicitly consider uncertainty, particularly where impacts are forecast over long time periods or where future socio-economic conditions are expected to change. Techniques such as scenario switching and/or sensitivity analysis can help illustrate the range of possible outcomes and their sensitivities to key assumptions. Further guidance is available in the HM Treasury’s Green Book and Aqua Book^[4]
• suitable expertise should be used to design and conduct the assessment. Relevant expertise would include social research and economist training, qualifications and experience