The cost-effectiveness evaluation of Sure Start Local Programmes (SSLPs) is integrated with the implementation, impact and local context components of the National Evaluation of Sure Start (NESS) (see Chapters Two, Five and Eight). This chapter discusses the underlying principles of economic evaluation of social interventions, and briefly considers the difference between cost-effectiveness evaluation and cost-benefit analysis. It goes on to describe the relationship between the NESS cost-effectiveness work and related aspects of the evaluation. Included are discussions about which costs should be taken into account in addition to the expenditure of SSLPs themselves and how they might be measured, an overview of the expenditure of SSLPs, as well as factors related to expenditure levels. The chapter concludes by highlighting issues that will need to be considered once the longitudinal impact data become available.
What is economic evaluation?
Resources are almost always scarce and there are generally a number of alternative ways in which scarce resources can be used. If money is spent on one particular activity it cannot be spent on another. This is called the opportunity cost by economists because the use of resources in one way represents a missed opportunity to use them another way. Moreover, this alternative use of resources might produce better returns on investment or, in the case of social interventions like SSLPs, outcomes for children, families and communities. Within a market environment, prices act as a mechanism for allocating resources between competing uses, but in the absence of markets, alternative mechanisms need to be applied to ensure that resources for social interventions are allocated to the uses that derive the greatest benefits to society taken as a whole.
Economic evaluations of social interventions address three questions: (1) How much did a particular intervention cost? (2) What did that use of resources actually achieve? (3) Did the benefits from that use of resources exceed the costs? When the answer to the third question is ‘yes’, a fourth question is posed by those responsible for allocating resources: (4) Would an alternative use of the resources have achieved either a larger number or a higher quality of outcomes?
The systematic recording and comparing of the costs of an intervention with the outcomes achieved provides a valuable analytical framework to guide decision making by those who are responsible for allocating resources, at both a local and a national level (HM Treasury, 2003).