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Getting the measure of social value

Julian Cox, Matt Bowen and Oliver Kempton reveal how a new model combining existing methodologies could make it easier for organisations to measure social value

In the April edition of New Start, there was a focus on the Public Services (Social Value) Act 2012 and how this could be put into practice. In Greater Manchester, partners have been using cost-benefit analysis to shape how they think about public services and how they might be restructured to save costs and improve outcomes.

We carried out research into how these methodologies can be extended to take full account of social value and have recently published a New Economy working paper entitled Social Value: Understanding the Wider Value of Public Policy Interventions. We hope that through this work we have developed a robust, but proportionate approach to including social value in our decision making.

It was evident from our research and the launch session we held for the paper that there is a real appetite to understand social value from all sectors, particularly as the landscape of public sector spending has changed dramatically in the last few years. Commissioners and providers have faced a series of simultaneous challenges including:

• Substantially reduced public sector budgets. As a result of the financial downturn and the government’s response to budget deficit, local authority and other public sector agencies are contending with budget cuts of over 20%

• A drive for localisation of spending decisions

• An increased interest in the role that the private and third sector can play in the delivery of services.

In light of this, there is a real desire to have tools and methodologies to assist with decision making and to prioritise where to focus expenditure. We believe, and our research corroborated this, that in order to make more informed decisions it is essential to include social value in these processes.

Apart from the legislative requirements of the Social Value Act, there is clear importance in taking social value into account, as it increases our ability to inform a more ‘genuine’ picture of impact. For Greater Manchester, this builds on the existing cost-benefit analysis methodologies, which give an understanding of the fiscal savings to government agencies and the economic benefits of new ways of delivering public services.

Importantly, we believe that there is a duty to evaluate and consider social value because, by not doing so, social outcomes are effectively valued at zero.

Although the reasons for measuring it seem self-evident, there has been limited uptake of social value methodologies to date. This is for a number of reasons, but in particular our research suggested that these have been around the difficulty in measuring and valuing ‘intangible’ outcomes, and the perception that using social value tools are too resource intensive. Therefore, we set out to derive an approach that builds on previous research and practice, but attempts to overcome some of these barriers.

The key attributes of the approach that we wanted to develop were practicality of implementation, strength of evidence based on financial proxies and importantly, comparability across different programmes. This last factor is important as decision makers not only need to understand which approaches provide value, but also which approach provides the best value.

Through research workshops held with commissioners and practitioners, we decided the best way of meeting these needs was to develop an approach based around a common outcomes framework. This would allow us to have a consistent set of measures and, while not picking up the full range of outcomes that could be influenced by a programme, include the majority of outcomes relevant to initiatives such as the community budget programmes. In these programmes, partner agencies are redesigning services in order to focus on early intervention, reduce dependency and save money.

There are a number of outcomes frameworks available, but the one we chose to best fit the needs of stakeholders for the community budget pilots was the National Accounts of Wellbeing framework, developed by the New Economics Foundation (see below).

The model shows three levels of wellbeing components. At the top, wellbeing is divided into personal and social wellbeing. Each of these is further divided into a number of components, and personal wellbeing is further divided into sub-components.

To value the individual domains of wellbeing we drew on an approach from health-care economics, and by equating wellbeing with mental health, we have applied a valuation to the individual domains above based on the value of a quality adjusted life year. This is a standard metric used by the National Institute of Health and Clinical Excellence to assess drugs and other healthcare interventions to assess value for money. In addition to these wellbeing outcomes, other specific outcomes were valued using published national research. Full details of the valuation methodology can be found in the working paper.

Having an outcomes framework provides a common basis for evaluating different programmes. A key part of the design of the approach was to integrate it with the existing Greater Manchester cost-benefit analysis methodology, which has been developed over the last two years in conjunction with HM Treasury and analysts from nine other central government departments.

This existing platform is used to understand the financial value for money and payback period of new interventions. For example, does spending money on an early intervention programme save money in the future through reduced unemployment, offending or health issues? If so, to who do these benefits fall and can we think about pooling or aligning funding to invest more in these up front preventative services?

The social outcomes identified through this research will now be added to the framework and will sit alongside both the fiscal and economic outcomes. By measuring the distance travelled for these outcomes using existing tools and techniques like the European Social Survey or Outcomes Stars, analysts will be able to get the full picture of value created by programmes.

Thereafter, Greater Manchester partnerships will be able to understand the fiscal savings to government agencies, the economic benefits to individuals and the social value created.

The tools and techniques for analysing social value are still in their infancy. Our proposed approach builds on existing methodologies and while we are under no illusions that what we have developed is perfect, we believe that it is a useful step forward to provide a robust, but proportionate approach which can be implemented with a limited increase in evaluation resources. As such we hope this will lead to a greater take-up of the use of social valuation tools.

Partners in Greater Manchester will be using the tools as they develop and evaluate the new delivery models which are being designed as part of the Whole Place community budget programme. Over time, this will build up the evidence base and enable more accurate valuation and confidence in the outputs of the modelling.

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