CBA overview

7/29/2019 CBA overview

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Cost Benefit Analysis overview


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Outline

Background

Overview of methodology

Some examples


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How does CBA support Community Budgets?

CBA can be used to deliver:

Informed decision-making

Cost-effective decision-making

Equitable decision-making


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Background

GM Spatial Pilots Early Years and Better Life

Chances

Phase 1 Community Budgets

Other partnership approaches

Greater use of Payment by Results and novel

investment models Whole Place Community Budgets


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What role can CBA play in decision making?

Economic tool to assess whether interventionsrepresent value for money

Calculates the ratio of benefits to cost

Decision support tool

Benefit cost ratio: 0 1 4..2 3

Not financially

justifiedFinancially justified


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What do we mean by costs and benefits?

Fiscal

Social

Economic

Costs

Benefits

All additional

costs needed to

deliver project

Fiscal Economic Social


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Types of benefits

Fiscal benefitsSavings to the taxpayer e.g. reduced health

service, police or education costs;

Economic benefits

Gains to:

individuals e.g. increased earningsor

the whole economy e.g. increased Gross

Value Added (GVA) due to higher skills levels

Social benefits Gains to society

e.g. improved health andwellbeing or increased community cohesion


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Types of benefits

Example: Fiscal benefits Economic benefits Social benefits

Employment

mentoring for

individuals with

mental health

problems

Reduction in

unemployment

payments as

individuals gain

employment

Increased income of

individuals gaining

employment

Improved

confidence, self

esteem and

reduced isolation of

individual

Initiative to tackle

Antisocial

Behaviour

Reduction in police,

housing and local

authority time spent

responding to

incidents

Increased

patronage of local

businesses

Reduced fear of

crime of residents

Drug treatment

programme

Savings in reactivehealth costs

Emergency hospital

visits, long term

health costs

Reduced outgoings

spent on drugs

Improved health

and life expectancy

of individual


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Charities (and their funders) are most interested in

improvements to peoples lives

For governments as a whole decisions may be needed todetermine the best way to maintain and improve

standards of living

The approach taken for CBA will depend on what decisions

need to be made e.g.

For Greater Manchester: the priority is on making savings

to the public sector the meet the challenge of reducing

budgets

Different approaches/uses of CBA?

Regardless of the focus, we should consider all 3 types of

benefits.

economic focus

fiscal focus

social focus


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Greater Manchester CBA methodology


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The GM CBA model costs

Predicted

efficiency

savings

Payback

period

Costs

Capital

Revenue

In Kind

Benefits

Fiscal

Economic

Social

Cost BenefitAnalysis

Tool

Outcomes

BenefitCost

Ratios


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GM approach to calculating costs

Which

agencies bear

costs?

What types of

costs are

borne?

When are

costs borne?


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GM approach to calculating costs (2)

Proactive Reactive

What we do Consequence of what wedont do

Early intervention Incident/crisis response

Health visit, employment

support, parenting class,

skills training

Arrest, eviction, hospital

visit, benefit payment

COST (DIS)BENEFIT


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The GM CBA model outcomes

Predicted

efficiency

savings

Payback

period

Costs

Capital

Revenue

In Kind

Benefits

Fiscal

Economic

Social

Cost Benefit

Analysis

Tool

Outcomes

BenefitCost

Ratios


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Outcomes included in the GM CBA model

Worklessness

benefit payments

Level 2 skills Mental health

ASB incidentsEviction

Looked after

children

HomelessnessDrug/alcohol

dependencyOffending

A&E visits

Family

well-beingIndividual

well-being

Childrens

well-being

Community

well-being


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Outcomes Framework


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Turning outcomes into benefits

Outcome Fiscal benefit Econ benefit Social benefit

Getting someone into a job 9,176 2,947

Gaining a Level 3 qualification 1,391 1,925

Child taken into care 35,000 7,640

Reduced incident of crime 3,316 3,843 8,553

Reduced Isolation (fulldistance travelled)

2,640


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The GM CBA model analysis

Predicted

efficiency

savings

Payback

period

Costs

Capital

Revenue

In Kind

Benefits

Fiscal

Economic

Social

Cost Benefit

Analysis

Tool

Outcomes

BenefitCost

Ratios


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Running the GM CBA model

Assumptions tested/updated via evaluation Optimism Bias (OB) correction applied to data

Target

populationEngaged Value

How many

potential

beneficiaries?

How many

will we

reach?

How many will

achieve

desired

outcome?

What would

have occurred

anyway?

What is the

value of the

desired

outcome?

DeadweightImpact


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Evidence-based policy data quality issues

Confidence gradeColour

codingData source Age of data

Known Data

error

OB

correction

1Independently

audited cost data

Current Data

(5 years old +-25% +40%


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The GM CBA model outputs

Predicted

efficiency

savings

Payback

period

Costs

Capital

Revenue

In Kind

Benefits

Fiscal

Economic

Social

Cost Benefit

Analysis

Tool

Outcomes

BenefitCost

Ratios


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Example outputs


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Example outputs from GM CBA model

Intervention Fiscal BCR Paybackperiod

Family intervention project 1.4 5 years

Intensive Community Orders 14.5


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Family Intervention Project fiscal value

of outcomes

Increased parental

employment, 27.5%

Reduced ASB, 17.5%Reduced incidences of taking

children into care, 28.6%

Reduced homelessness, 0.5%

Reduced drug dependency,

19.4%

Reduced alcohol dependency,3.7%

Improved mental health, 1.7%

Reduced A&E attendance,

0.1%

Reduced housing evictions,

1.1%


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Family Intervention Project

Local

Authority NHS DWP (AME)Police

Work

Programme

Primes

RSLsCJS (excl

Police)

Proactive Costs

Reactive Cost Saving

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000


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New investment model applying CBA

Ex-anteappraisal

Performancemonitoring

Ex-postevaluation

Forecast savings

Who invests? How

much?What to

decommission?

Track savings Confirm savings

Stop activity?

Continue?Redraft

agreement?

Apportion

Reinvest intosingle pot

Update model


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Any questions?

[email protected]
mailto:[email protected]:[email protected]

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CBA overview

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