Social Return on Investment
Breakthrough Britain: Social Return on Investment
Current Situation
Over the past few decades there has been a steady rise in public expenditure as the State has attempted to pick up the pieces of social breakdown. Billions of pounds have been spent in public services such as welfare to work, education, social services and health. A plethora of programmes and pilots have been funded aimed at improving people’s outcomes yet the real value of these programmes is relatively unknown. Very little analysis is undertaken before committing taxpayers’ money to fund these initiatives and often programmes are funded without carrying out even a simple cost-benefit analysis to see if the programme is the best value for money. Such assessments are industry standard in the private sector so why are they absent when it comes to such investment decisions by government?
The current economic situation requires new and innovative ways to make sure we get the most from our finances; innovation in the development of new policy and also in the way that decision makers determine the most effective way to fund programmes. The Centre for Social Justice (CSJ) believes that public expenditure decisions should be directly linked to social outcomes whilst demonstrating value for money. Funding should be targeted at programmes which tackle social breakdown most effectively. However, we also believe that the true return on investment comes from early intervention, removing the need for more complex and expensive interventions later on in life. In other words investing in someone early, transforming their life so that they require less support later on.
Such an approach to expenditure could lead to the creation of a new official spending watchdog charged with evaluating new and existing programmes to assess the social and financial return on taxpayers’ investment. Programmes which do not deliver such a return on investment would not be funded. The new Social Return on Investment watchdog would be modelled on the existing National Audit Office, but, critically, would scrutinise spending programmes before they were implemented.
A new economic model
International research has shown that such an approach to investment is not only possible but highly effective, ensuring that only programmes which are cost-effective in delivering desired outcomes are funded. For example, the Nurse Family Partnership model in the USA has shown tangible returns on investment for the taxpayer. By funding a programme that intervenes in a young child’s life costing around $10,000 the resultant saving later on through reduced involvement of the state is around $30,000. This ‘benefit’ to the State is determined by the child being more likely to pass exams at school, to graduate from high school, be less prone to addictive behaviour and less likely to enter the criminal justice system. All of which have a resultant cost to the State. Ultimately this equates to a $20,000 saving or in simple terms, with an Atlantic translation, for every pound invested a £2 return is gained.
Lives not numbers
Funding programmes with an evidence-base is not only financially responsible, but is the way in which lives will actually be transformed. It is important to fully understand that this is not about numbers. True savings come through radically improved lives; addicts previously parked on methadone now free from their addiction; looked after children who suffer some of the worst predicted life outcomes given a better chance in life; offenders rehabilitated so that they receive the support needed to prevent them from re-entering our justice system with the subsequent high cost of yet more detention; and families and parents supported to stem the increasing impact of family breakdown on our children and in our society. Better life outcomes will inevitably lead to reduced costs. Life outcomes are the drivers for change with the consequence of such investment decisions being reduced costs over time.
The Programme
The Centre for Social Justice will develop a new methodology that will determine a social return on investment for funding programmes that transform lives and begins the process of rebuilding our society. We will make recommendations on how such a process can be embodied within central government making such spending decisions, yet being mindful that local commissioners also require this tool to inform their decisions within local government. Such decision making is a responsibility for every level of government playing their part in transforming the lives of others.
February 2010
