Subsidy and measurement in social investment

Following David Floyd’s blog series for Access last year, Gen Maitland Hudson continues with the theme of subsidy in our latest guest blog, considering subsidy and measurement in social investment

There’s a fine double example of subsidy in Andrew Adonis’ resignation letter  that livened up the week between Christmas and New Year.

The former chair of the National Infrastructure Commission expressed his vigorous opposition to the “indefensible decision to bail out the Stagecoach/Virgin East Coast rail franchise”. He contrasts that bail out with the takeover of the same line under his own leadership of the Department of Transport, which created a public operator.

Both the bail out and the nationalisation of the East Coast mainline are examples of subsidy. They are good examples for social investment because they neatly sum up the two opposing ends of a spectrum of cash injections. The bail out is at the far end of subsidising the private market (“it benefits only the billionaire owners of these companies and their shareholders” in Adonis’ words), and the public operator is the other end, where the service is run by central government and there is minimal opportunity for private gain.

It’s worth keeping that spectrum in mind when considering the effectiveness of subsidy in the social economy, because failure to do so creates confusion and antagonism. This is often the case when a question of policy muddles fact and value, the consequences of a policy with the theory and political reasoning behind it. Bad versions of ‘evidence-driven’ argument do this quite often, and it can quickly lead to dialogues of the deaf (and bad measurement).

An example of how this can play out is the incarceration of women. There is good evidence that demonstrates that locking up women has quite bad consequences. You could still, entirely rationally, make an egalitarian argument for doing it anyway. The first argues from the effects of policy, the second argues from what is – perceived by some people – as right. These are different bases for decision-making, and both are important, but they need to be distinguished.

This matters for measurement because the aims of a programme – of subsidy or anything else – should determine what makes a good measure, and not the other way about. To determine the right kinds of measure of social investment subsidy, we need a clear sense of what it is intended to achieve.

The ‘key questions’ in the Flip Finance slides highlight some of the tension in social investment programme aims. Should ‘success’ be measured by the creation of a “sustainable market for social investment”, or by “social enterprise involvement in health and social care” (or something else)?

The first of these looks more like the private bail out, and the second like the public operator. Both are matters of value, or policy, rather than consequences (certainly in the absence of data that demonstrates either).

There’s a line often cited on measurement, that ‘what gets measured, gets done’. This isn’t quite right, not least because so many measures are poor, the data collected using them unreliable, and the resistance to acting on information deep-rooted.

It’s not so much that measurement ensures anything much is done in social programmes (though it would be nice if it did occasionally), more that the act of measuring sets up what is understood about a concept, an approach, or an intervention. The power of measurement is often descriptive. It’s not that we act on the data, more that we use measures to help us define what is important. The increasing salience of feedback is a good example of this. Regardless of the value of the feedback gathered, or how well anyone ‘closes the loop’, collection signals that user views are being taken seriously. That in itself is an interesting shift, but it isn’t necessarily, or even at all, yet, a point about data.  

That there is no consistent measure of subsidy in the social economy, and amongst social lenders, points to a lack of consistency in conceptualising what it is intended to achieve. Are we talking about a Stagecoach / Virgin East Coast injection of subsidy, of the kind that is supposed to shore up, develop or even reward competitive business and the ‘professionalization’ – insert the definition of your choice – of social sector organisations, or are we talking about more goods and services of a reasonable quality, delivered at a reasonable cost outside competitive markets?

There may be very little consensus on that question, and it is likely to come back to haunt any measurement approach. 

Take one useful measure that might give a meaningful account of how subsidy operates within and through the social economy. We – might – want to draw on one of the most well understood and commonly used measures to take stock of activity within an economy at the national level: GDP. We – might – want to do that because one of the things we – might – want to know about the investment that goes into the social economy is how productive it is, and the extent to which it is ‘paid forward’.

A good, though not prize-winning, argument has already been made for calculating GDP at a local level. A similar argument could be made for calculating how investment is recycled through the social economy, not, or not only, as a percentage of overall GDP, but as a measure of movement within that economy itself. This is an argument that can now be made given that the first social investment funds are being paid back and reused. A future measure might start taking account of the ratio of recyclable funds to overall investment, for instance, the amount of investment that stays within the social economy, and the proportion of the overall economy that is demonstrably social.   

Even if it took a little while to collect the data, and for the calculations to be worked through, thinking of social investment in this way might help to stimulate a more dynamic understanding of its role in the social economy as a whole.

We might worry a little less about the kind of measure that tries to show that good has been done once, as if a static outcome measure was ever more than arbitrary, and start focusing instead on how investment can flow to more than one project. That is, we’d concentrate on the role played by the money invested, and understanding that role, rather than long chains of complex impact built up from individual experience which are best assessed in other ways (and are always about more than money).

Subsidy could then be understood as a stimulant for the flow of investment.

That is not to call for a false benchmark against the private sector, or to suggest that velocity should be the most important metric we have, or that recycling is even a simple concept, but it is to suggest that investment – a scarce resource in the social economy – should be recycled as much and as often as possible. It is also to say that we ought to try and take account of whether, and when, it is.


Image credit: Sonny Abesamis