Assessing the value of public spending through social return accounting

| September 10, 2018

What is the value of a hospital? A longer school day? A faster internet? Social Return Accounting – a cutting-edge new method for calculating the costs and, crucially, the shared benefits of government spending – can put a dollar figure on it.

Social Return Accounting, unveiled in a report released today as part of UNSW’s Grand Challenge on Inequality, is an innovative new framework that uses rigorous, modern social scientific techniques to measure the value of everything from physical infrastructure to social connectedness.

This new, research-backed method was developed by the Grand Challenge’s co-leads, UNSW Professors Richard Holden (Economics) and Rosalind Dixon (Law), with Georgetown-trained economics consultant Alex Rosenberg. Social Return Accounting applies a private-sector, social science-based investment approach to public budgeting.

“Any business justifying a big investment would estimate the project’s future cash flow over time and compare that to the cost, aiming for a threshold rate of return,” Professor Holden says. “What Social Return Accounting does is give policymakers – and taxpayers – real calculations for the shared returns on public investments. It provides an empirical, principled way to compare different policy options and set our priorities.”

Professor Dixon notes that in the UK, social returns are by law part of the debate. Leaders are required to interrogate the social value of any large project before they contract public services.

Social Return Accounting captures positive social benefits that market prices do not. Australian businesses, non-profits and government bodies are increasingly trying to measure a social return on investment (SROI). Their focus tends to stop, however, at the physical capital calculations. Social Return Accounting is more expansive, considering human and social capital, too. It’s also backed by a rigorous method of measuring those benefits.

In case studies, the report’s authors apply Social Return Accounting to real-world policy choices for Australia – including the National Broadband Network. By calculating the NBN’s shared benefits – in wages, ICT skills, telemedical help, patient transfers, social connections and mental health – Social Return Accounting determines that delivering broadband to the home, even at greater cost, has better rate of return (21%) than the cheaper ‘fibre-to-the-node’ option (15.1%).

“Social Return Accounting doesn’t take away important political choices, but it means we can make more informed decisions about how taxpayers’ money is spent, and get real value for Australia,” said former Opposition Leader, Dr John Hewson AM, who launched the report.

Dr Hewson serrves on the external advisory board for UNSW’s Grand Challenge on Inequality, along with Social Ventures Australia CEO Rob Koczkar, Labor MP Dr Andrew Leigh, Centre for Social Impact CEO Professor Kristy Muir, Social Impact Hub Director Jessica Roth and Australian Council Of Social Service CEO Dr Cassandra Goldie. The Grand Challenges are designed to ensure UNSW research has real-world impact on pressing concerns – including such as inequality.

The Grand Challenge on Inequality has previously developed policy reports on the link between inequality and financial distress, and recommended new approaches to this problem through a model of ‘Social Emergency Lending and Social Emergency Saving’.

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