Bookmark and ShareEilís Lawlor is the acting head of the Valuing What Matters team at nef.

sroi-guide-coverHardly a week passes without news of looming cuts and fresh evidence of the implications of the recession for public services.

In a recession the temptation to cut back is strong. We have already had some worrying signals from Treasury – the hole in the government’s budget is to be clawed back in part through another £5bn in ‘efficiency savings’. So far these have amounted to stealthy cuts in frontline services under the guise of a leaner state. There is no reason to believe future rounds will be any different.

Yet government’s thin interpretation of efficiency is a false economy. Failing to invest now, when unemployment, crime and poverty are set to rise and an impending environmental crisis requires urgent investment, will only lead to costs of greater magnitude later.

Now more than ever we need to think about public spending less as a ‘carve up’ between competing ends and more as an investment in a better future. This cannot be achieved by penny pinching in the short term but by using the State’s resources to maximise the creation of public value – long-term social, economic and environmental outcomes.

A new approach to investment is needed that puts measuring and valuing what matters most to individuals, communities and societies at the heart of public sector decision-making. Such an approach, targeting positive social, economic and environmental outcomes, will lead to more informed policymaking, help build effective public services and have significant positive implications for the public purse.

nef research across three very different policy areas – economic development, children in care and criminal justice – shows the benefits of this approach. Valuing the improved well-being of children in care – rather than focusing on the unit cost of delivering that care – could help ensure that more appropriate placement decisions are made, improving the life chances of those children and offering a long term social return of £6 for every £1 invested. Savings over 20 years could pay for the entire annual care bill each year.

Women offenders are likely to fare better in life if custodial sentences are eschewed in favour of community penalties that enable mothers to maintain contact with their children. In the short-term money is saved on services for these children. Longer-term there is reduced risk of children becoming offenders and a better chance of the kind of educational attainment and social adjustment that will translate into lower societal costs through the welfare and criminal justice systems. Using Social Return on Investment we found that for every £1 spent on alternatives to prison that reduce reoffending, an additional £14 worth of social value is generated.

Measurement matters because it both reflects and reproduces the priorities of government and institutionalises behaviours. We are about to publish a set of principles for policymakers, that are a distillation of our research findings and can guide policy-makers who want to create better services. The first of these is about measuring outcomes: the positive and negative change in people’s lives, communities or the environment as a result of policy.

Despite rhetoric emphasising the importance of outcomes government still does not adequately measure the effects of its policies on long-term social, economic and environment well-being. Focusing solely on what is timely, tangible and easily quantifiable has not served us well: investment in public services has increased since the foundation of the welfare state, yet the place and circumstances of our birth predict our future health, educational and economic prospects now more than they did then.

Public services face the twin challenge of rising needs and increasingly constrained resources. Experience suggests that direct financial considerations on their own are not very helpful to meeting these challenges. As we lurch from one weak economic indicator to the next, it is easy to miss the opportunities this presents the State. There is too much at stake to get this wrong, not just in terms of social outcomes but also in financial implications for the public purse: ineffective public services cost us all more in the long run. To paraphrase Alistair Darling on banks, the response to the question, can we afford to invest in public services must be can we afford not to?

A version of this article was published in Public Servant Magazine.

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