It’s not all about economic benefits
Reflections on the new wellbeing guidance for appraisal
Adriana Moreno-Pelayo
Since day one, as the Towns Fund Delivery Partner we have emphasised to Towns that proposed investments should be underpinned by a detailed analysis of local needs, not only from an economic perspective but from a wider social angle, including health, environment and wellbeing aspects.
In a previous blog we outlined how Towns can use Health Impact Assessments to link their H&W projects to the needs of their Town’s population and assess the impact of them.
On 26 July 2021, the Wellbeing Guidance for Appraisal (supplementary Green Book guidance) was published. The new guidance strengthens this point further with new advice and recommendations on how to include wellbeing considerations into the business case process.
Overall, the guidance states that wellbeing is an important consideration throughout the policymaking and business case process, from: setting objectives and developing a long list of investment options to shortlisting investments and monitoring and evaluation. The guidance outlines a number of examples of how wellbeing can be accounted for through the appraisal process.
Consideration of Different, Existing Approaches
There are many different approaches which have been proposed for incorporating wellbeing more completely into relevant economic analysis for decision-making – as outlined here. Some approaches propose making wellbeing the “common currency” in the economic analysis whilst others propose that wellbeing cannot be quantified nor monetised - and decisions should be weighed up on a case-by-case basis.
It is important to note that the Green Book highlights that quantified benefits and non-quantified benefits are both valid ways of incorporating H&W into a Business Case.
Approaches to Quantifying wellbeing
As an economist, I was particularly interested in what new recommendations this guidance would offer on monetisation of wellbeing benefits. After reviewing the document, my observations are as follows:
Monetising wellbeing impacts - Wellbeing impacts can be incorporated as monetised values, where these values are considered robust enough. Values where there is less confidence, may be more appropriate to include as a sensitivity
Measuring wellbeing - This is the first step in monetising wellbeing impacts and can be done through both objective and subjective measures. The guidance includes an annex (Annex 5) with a long list of wellbeing data sources which can be used in the analysis.
Deciding on the most appropriate method to monetise wellbeing - Methods available for monetising or valuing impacts (page 61 of the guidance) include stated preference, revealed preference and the wellbeing valuation approach, where high quality subjective wellbeing data can also be used to value outcomes.
Avoid double counting - Analysts assessing impacts should use a clear logic to avoid double counting across monetised impacts.
Consider the timing of the wellbeing impacts - It is important to consider when wellbeing benefits and costs will occur. The impact on wellbeing may be short-lived for very short-term interventions. Changes in wellbeing which occur in future years should be discounted using the Green Book ‘health’ discount rate which starts at 1.5% (years 0-30) and declines gradually thereafter (this is different from economic benefits which typically have a higher discount rate).
Alternative ways to illustrate wellbeing impacts - Where it is not possible to monetise all impacts, it is possible to use Social Cost-Benefit Analysis (CBA) with description of non-monetised wellbeing benefits.
It is also important to remember that the built environment can influence health and wellbeing in a number of ways by impacting directly or indirectly on health determinants and therefore not all benefits can be clear quantified to be monetised.
Ensuring that a rand a range of wellbeing dimensions are assessed is vital. The H&W projects should be targeting a key demographic with a particular H&W need which the project will address.
Towns can also work with their Public Health team to tap into metrics already being measured (health outcomes – obesity, diabetes, healthy life expectancy / health determinants – access to healthy assets, levels of physical activity).
What does this mean for Towns?
At a basic level, the guidance mostly reinforces the message that local needs in relation to wellbeing should be considered in developing policy objectives and making investment decisions, as opposed to creating new requirements.
For Towns working on developing projects further as well as their Business Cases, this provides:
A reminder that wellbeing is a key consideration in the Green Book and should be considered when developing projects further taking into consideration the needs of local people.
Towns should consider which approach best matches their needs, capabilities and capacity to undertake monetisation of H&W benefits.
Towns could consider monetising wellbeing benefits and adding those as part of sensitivity testing if benefits are not as robust as conventional benefits to demonstrate additional positive impacts
For Business Cases where it might be difficult to monetise conventional benefits, towns could explore the possibility of monetising wellbeing benefits, if robust evidence on expected wellbeing changes can be obtained.