Ensuring Value for Money in government programmes and public spending

Ensuring Value for Money (VfM) in government programmes and public spending is a key priority for the new UK government, reflected in the establishment of the new HM Treasury (HMT), Office for Value for Money (OfVfM) and the emphasis on Value for Money in the upcoming UK spending review.

This article highlights the crucial role of evaluation in ensuring VfM in public spending and introduces a new Verian guide to VfM evaluation to further support this. This is aimed at:

• Those commissioning and delivering evaluations in the UK, to ensure that evaluations are effectively designed to deliver evidence on ‘what works’ to deliver impact and VfM.
• Those designing and delivering UK policies and programmes who want to maximise the impact and VFM performance of their programmes through ongoing learning and adaptive management facilitated by effective MEL systems.  

1. Delivering Value for Money (VfM) requires robust impact evaluation evidence

Impact evaluation evidence is needed in order to provide an assessment of value, which is then weighed against the money (i.e. cost). Value should be considered broadly and holistically, and not limited to just those impacts that can be readily monetised.  This is in line with the VFI approach to VFM evaluation: A Guide to Evaluation of Value for Money.

Impact evaluation provides an impartial and robust assessment of whether a government policy is working, and (if so) VfM assessment can determine whether the impact is worth the cost. A comprehensive impact evaluation should also assess how the policy’s impact can be improved, either in its design and/or in delivery. It can therefore also assess maximum potential impact/VfM, which can be benchmarked against the assumptions and objectives set out in the original Business Case and/or economic appraisal. In other words, can the policy achieve or even exceed its original intended VfM. 

2. Immediate priority: How to ensure a VfM focus in the forthcoming Spending Review

The UK Government is currently preparing for an Autumn Spending Review. Within this context, a focus on VfM can enable prioritisation of spending on areas that maximise future public value. Conversely, a VfM focus can also create fiscal space by deprioritising spending on areas where evaluation evidence shows insufficient impact and/or VfM is being delivered.

Government can ensure a focus on VfM by requiring departments to evidence that their proposed policies and programmes are achieving impact and VfM, and will continue to do so going forward. For new or recently set-up programmes, departments should be asked to demonstrate evidence of impact potential, based on early results and previous relevant evaluation evidence (in UK or internationally). This enables an assessment of likely future VfM to be made:

• Policies demonstrating impact (and/or likely impact potential), can be continued and/or expanded.
• Policies showing insufficient evidence of impact and VfM can be deprioritised.
• Alternatively, less effective policies can be maintained, provided they are adapted in line with the latest evaluation recommendations; but this must come alongside a robust evaluation plan to ensure these adaptions do indeed successfully translate into impact.
• Similarly, unproven policies must also be accompanied by a robust evaluation plan. 

A common and systematic approach should be used to assess and rank spending review submissions. This should be based on evidence of actual realised and/or potential future VfM using explicitly defined criteria and performance standards:

• The criteria define the key elements of future-focussed VfM performance to be assessed (e.g. the components of the five-case framework, the NAO/DFID 5Es VFM criteria, etc).
• The performance standards define levels of VfM performance, i.e. ‘what adequate/good/excellent looks like’ for each dimension of performance. 

This framework should have enough flexibility to make appropriate use of the best available evidence in each case, recognising that the nature and extent of the evidence (quantitative and qualitative) will vary. Julian King explores this further in ‘Maximising the future public value of government spending’.

For assessing likely future effectiveness and cost-effectiveness performance, this could involve some element of break-even analysis (supported by a rubric-based framework), with particular attention given to the outcome impacts required for a programme or policy to ‘break even’, in terms of producing more social value than its cost. See Section 7.2. of A Guide to Evaluation of Value for Money (2024).

3. A systematic approach to ensuring a VfM focus across the policy lifecycle

a) At design stage

VfM can be substantially enhanced by bringing in external evaluation scrutiny into programme design/appraisal process as early as possible. A rigorous (formative) evaluation of the policy’s design can ensure design is underpinned by logically sound impact pathways and existing evidence (both UK and international).* This will ensure that all programmes are explicit about how (and to what extent) they will successfully generate future public value. It will also maximise chances of ensuring the policy is successful from the outset, and therefore requires less course-correction (or early termination). This in turn ensures better evidence for VfM assessment and greater VfM in public spending overall, underpinning a “right first time” policy design and delivery culture. 

*It is now standard practice for every policy to have a comprehensive Theory of Change (TOC), which sets out the overarching policy objectives, the activities or outputs the policy will deliver, and how these will deliver the intended outcomes and impacts. So in practical terms, this is done by evaluators reviewing/critiquing a policy’s underlying design, (and/or TOC by probing into the logic, theory and existing evidence for precisely why and how programme activity A will lead to outcome objective B.

b) In delivery

In line with internationally-accepted good practice, programme delivery should be supported by robust Monitoring, Evaluation and Learning (MEL) systems. An effective programme-level MEL system provides robust evidence and insight to enable adaptive management and course-correction to achieve outcome objectives and maximise VfM.

The MEL system should be internal to the programme delivery function, i.e. separate from any independent evaluation activities (see below). An effective embedded MEL function should systematically track the intended inputs, outputs, outcomes, and any other specific contextual factors critical to success, as per the programme Theory of Change (TOC). It should be aligned and integrated with Benefits Realisation monitoring requirements, but provides an enhanced function.

An effective MEL system provides programme managers with: (i) high-frequency data on whether their projects are on track to deliver their objectives, and (if not) how fix this; and (ii) a systematic evaluation and learning plan, with regular reflection points to ensure monitoring and evaluation data and insights are fed through into ‘in flight’ adjustments to programme implementation, and/or updating the underlying programme design and TOC.  

c) Independent evaluation

Independent evaluation provides a robust, impartial judgement on how well a programme or policy is ‘working’, in terms of achieving its original objectives and intended VfM. This provides accountability to UK taxpayers, as well as learning to improve the programme and inform broader sector-level policy.

In line with international best practice, independent evaluation should provide a holistic assessment of all aspects of performance (e.g. relevance, coherence, efficiency, effectiveness, impact, sustainability, equity). In line with the Magenta Book and Green Book guidance, an evaluation will generally involve process, impact, and economic components. The evaluation will usually provide baseline, interim, and endline assessments. The interim assessments can provide independent scrutiny of ongoing performance assessment delivered by the MEL system (see above). 

Evaluation protocols, design documents and final reports should be published (e.g. on the Evaluation Task Force’s Evaluation Registry), to ensure accountability and maximise learning, ideally accompanied by a management response setting out how the programme will respond to the evaluation findings to improve performance and VfM. 

d) At spending review

Section 2 above outlines the immediate priorities for ensuring a VfM focus in the forthcoming Spending Review. But, going forward there are number of measures that could further embed a VfM focus in the spending review process.

At a sector-level, the departments’ evidence of the impact and VfM of their proposed policies and programmes could be complemented by rapid sector-level evidence reviews, taking a broader perspective on what types of programmes and interventions in each sector are demonstrating impact and VfM, and/or are showing strong impact potential based on early results and previous relevant evaluation evidence (in UK or internationally). There are different options for operationalising these rapid evidence reviews. For example, the reviews could be delivered by the Cabinet Office Evaluation Task Force, expanding on the review role they provided for the 2021 Spending Review. This could be co-delivered and/or supported by the What-Works-Centres, drawing on their existing body of sector-level evidence reviews. It should also draw on all relevant NAO reports. External research agencies could also support this process, to provide additional expertise and capacity.

As set out in Section 2 above, a VfM focus in the bid review process can be ensured by applying a common and systematic approach to assessing and ranking actual realised and/or potential future VfM, based on explicitly defined criteria and performance standards.

4. A new approach to VFM evaluation

Verian Group has published a new guide to Value for Money (VfM) evaluation, in response to the increased focus on effective VfM evaluation.

In this new Guide, we introduce an interdisciplinary approach to VfM, 'Value for Investment', which combines economic insights and evaluation methodology. Our new guide aims to help those tasked with assessing Value for Money to design and deliver robust VfM evaluations that go-beyond cost-benefit analysis. The guide is designed to complement the VfM evaluation training delivered by the Cabinet Office Evaluation Task Force as part of their annual Evaluation Academy. It also aligns with the VfM training we deliver in partnership with The UK Evaluation Society and Oxford Policy Management.

Access the VFM evaluation guide: