Spend less, create more social value

David Cameron delivered a speech today which has been reported as being another relaunch of his 'Big Society' policy. Towards the end of his speech, though, he mentioned something which might have a fundamental effect on public services in the UK. He said:

We are revising the Green Book – the basis on which the Government assesses the costs and benefits of different policies – to fully take account of their social impact. We are developing a new test for all policies – that they should demonstrate not just how they help reduce public spending and cut regulation and bureaucracy – but how they create social value too.

Nothing was said about how social value would be assessed but the previous government's Cabinet Office was involved in the production of a paper on social return on investment which identified several ways that monetary values can be estimated for intangible costs and benefits. I assume that whatever method is recommended in the new Green Book (which perhaps will be a Blue Book) it will result in social value being estimated in money terms. 

If we assume that public bodies only wish to spend public money on projects or services that they believe will generate some intangible social value then an evaluation process that includes the social value is likely to indicate that more projects are worth while than an evaluation process that focuses only on the cash payments and subsequent income and/or cash savings. Such a situation would be a problem for the government, though, because it wants to keep public spending down. It does not want its own departments, local authorities, police forces, hospitals, etc putting forward proposals for all sorts of schemes that would create lots of social value but require lots of investments.

Hence, I think, Cameron's comment about projects reducing public spending. What the government wants, it seems, is to invest in projects which both save money and create social value. Such projects are difficult to find. We have seen over the last few weeks as the impact on budget cuts take effect that spending less money on public services means that less social value is produced. Indeed, it is exactly what one would expect because it is the reverse of the situation where a government minister is under pressure to tackle a social problem they say they will deal with it by announcing some additional spending. 

Cameron suggested that the review of the Green Book might be 'quietly radical'. It remains to be seen whether it is radical in the sense of resulting in more and better investment by the government or radical in the sense of cutting back on public investment.