The problem is that data on marginal costs is harder to access, whereas unit
costs are more routinely calculated.
Remember also that the department investing is not necessarily the one that
makes the final saving. It is quite common for central government to benefit
from cost savings that result from a local government initiative (eg prison
savings from a reduction in crime) and vice versa. Even within an organisation
it is possible that the cost saving would not be made by the department funding
the activity but by another. Separating out stakeholders is necessary to avoid
confusion and help communication.
Choosing credible financial proxies
It is important when communicating social value to understand that some
proxies are more credible than others for different stakeholders. The most
credible proxies have been used before (by third party sources with existing
credibility), or are at least based on research undertaken by your organisation.
Other proxies are market comparisons (what it would cost to achieve the same
outcome) or working assumptions that will need to be related to proposed future
Stag
improvements. These latter two may be necessary but are usually less credible.
Stag
e When we get to sensitivity analysis you will have the opportunity to test e
the overall impact that the proxies have on your analysis. If you are having
difficulties choosing between two proxies, make a note of them and later test
what difference using either of them would make.
Top Tip: Proxies and double counting
It is possible to have the same financial proxy for different indicators without double
counting. For example, if an activity improves the relationship between family
members the same proxy (for example, the proportion of family income spent on
children) may be applicable for both parents and children because it represents the
value to each of them of the intervention. The total value is therefore the sum of these.
The worked example – financial proxies
Look at the Impact Map for Wheels-to-Meals on page 103: the blue section shows
you how the column for financial proxies has been completed.
For example, for the outcome of ‘fewer hospital admissions’, desk research showed
that this was not accounted for as a single figure. A hospital admission and stay was
built up of a number of interventions from admission through to continuing care.
Furthermore, costs varied for different patient groups, so the proxies chosen by
Wheels-to-Meals were specific to older people. The source of these was the NHS
cost book.
These proxies are examples of indirect cost savings. The change would not by itself
result in a smaller budget or reduced spend for nearby hospitals in following years
as there would be many more people in need of these services. Also, seven fewer
A guide to Social Return on Investment 1
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