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Indirect Economic Impacts of
Planning Policies & Decisions
Graham Randles, Managing Director
nef consulting (new economics foundation)
www.pas.gov.uk
Introduction –
nef (new economics foundation)
• Founded in 1986
• Economics think-tank working to promote high
well-being, environmental sustainability and
social justice
• nef consulting uses nef’s methodological tools
to help organisations demonstrate their impact
• Clients include: London Borough of Camden;
Milton Keynes Council; Bridgend County
Borough Council; The Crown Estate
Introduction –
The big picture
Introduction –
The big picture
Introduction –
The policy framework
Introduction –
The challenge for councils: more
Introduction –
The challenge for councils: less
Measurement challenges
Not so new economics
new economics foundation –
Valuing what matters
• nef developed Social Return on Investment
(SROI) in 2003
• Applied to criminal justice, looked-after children,
advice services, equal pay, infrastructure
investments etc since 2004
• 2009 Cabinet Office funded the mainstreaming
of SROI – nef wrote the Guide; nef consulting
is the leading practitioner
• 2010 CLG Valuing the Benefits of Regeneration
John Lewis Partnership (2011) –
Our social & economic contribution
• Average John Lewis shop
contributes £9.1m and
average Waitrose contributes
£1.7m to local economy
• Annual profit-sharing results in
£40-50 million into local
economies
• In Leicester 32% of Partner
wages spent in the city centre
British Land (2012) –
Our Socio-Economic Contributions
Economic value of developments –
British Land
The Crown Estate (2013) –
Our Contribution
The Crown Estate –
Total contribution economics
ECONOMIC
DIRECT
INDIRECT
ENABLED
SOCIAL
ENVIRONMENTAL
The Crown Estate –
Total contribution economics
• Glenlivet Estate
– 23,000 ha.
– 30,000 visitors p.a.
– Spend £1.6m a year
– c.£0.9 m added value
• Ormonde Wind Farm
– 835 people employed
in construction
– 40 operating staff,
two thirds are local
New approaches to measurement
• Social Return On Investment (SROI)
– Well-being economics
– Environmental economics
• Local economic multiplier (LM3)
– Origins in local economic development
– Applications in commissioning, procurement
Social Return On Investment –
An outcomes based approach
• A way of understanding how effectively
money is spent
• It considers investments and triple-bottom-line
benefits (economic, social, environmental)
• SROI = [Net value of benefits]
[Investment]
• Measures change that matters to stakeholders
• Can be used to evaluate or forecast outcomes
Seven principles of SROI
Core concepts
• Value market and non-market outcomes in
common currency
• Additionality
• Net Benefits
• Displacement
• Research, assumptions and proxies
• Transparency
• Consultation
Social Return On Investment –
Other examples of use
• Central Government
– Department of Health
– National Audit Office: VfM
– DFID: VfM
• Business and CSR
• Local authorities
• Third Sector
Example: Public Services
(Social Value) Act 2012
• The authority must consider—
– (a) how what is proposed to be procured might
improve the economic, social and environmental
well-being of the relevant area, and
– (b) how, in conducting the process of
procurement, it might act with a view to securing
that improvement.
• Example – Kirklees Council: considered within
60% quality criteria
Measuring local economic value –
The local context
Measuring the economic value –
What can we measure?
• Worklessness, skills and business
development
• Industrial and commercial property and
infrastructure
• Homes, communities and environment
Measuring the economic value –
in more detail…
• Worklessness, skills and business
development
– Worklessness, skills and training
– Enterprise and business development
Measuring the economic value –
in more detail…
• Industrial and commercial property and
infrastructure
– Industrial and commercial property
– Infrastructure
Measuring the economic value –
in more detail…
• Homes, communities and environment
– Housing growth and improvement
– Community development
– Environmental improvement
– Neighbourhood renewal
LM3 (Local Multiplier 3) –
The local economic multiplier
• Tourists
• Welfare benefit
• Business
investors
• Export earnings
LM3 (Local Multiplier 3) –
The local economic multiplier
• Purpose: to measure the impact of spending
locally
• Can be applied at local (self-defined) and
regional level
– measures how money is spent and re-spent
locally to 3 rounds of spending to determine local
economic impact
– can be applied to local authorities, businesses,
projects, planning
LM3 examples –
Bridgend County Borough Council
• Valuing The Local Economy project
• Housing retrofit - value of re-spending locally
– Local works value: £7,035,082
– Local contractors: £6,538,462 (initial spending)
– Non-local :
£ 496,620
• Average spending within a 50 mile radius:
93%
Indicative economic impacts of
housing development
• Proposed new build of high value residential
homes looking at the impact of:
– Capital investment of £96.0 m (not including land
value)
– Projected annual spending by income band of
occupiers of the completed scheme
SUMMARY
Revenue Source
(for economy)
Capital Expenditure
Band A income £37,500
Band B income £100,000
Band C income £187,000
£m Gross
Income
£m Additional
Impact
Total (£m)
Multiple
per £
96
3
8.9
20.76
119.76
3.59
9.79
20.96
215.76
6.59
18.69
41.72
2.25
2.2
2.1
2.01
Full Time
Equivalent
Jobs
672
21
62
145
LM3 examples –
Norfolk district council
Sea wall (local)
• Round 1
• Round 2
• Round 3
Car park (non-local)
£72,000
£57,600
£24,980
£120,000
£ 20,400
£6,760
Total
£154,580
£147,160
LM3
2.15
1.23
LM3 examples –
Wind farm development - Scotland
For every £1 invested
in civil and electrical
contracts, an
additional 52p was respent in the local
economy through the
supply chain in three
rounds.
Each £1 of investment resulted in 71p of additional
spending in all three rounds in Scotland as a whole.
New approaches to measurement
Guidance available
New approaches to measurement –
Interactive exercise
•
•
•
•
Local economic impacts
Well-being economics
Environmental economics
Illustrated by:
– New jobs
– Spending by new residents
– Well-being value of open spaces
– Congestion costs
– Pollution, health and crime costs