How are you assessing

value for money?

Ross Fraser

Chief Executive

HouseMark

12 March 2013

01968 661179

The times they are a-changing

Welfare reform – impact on revenue

“Preparing for

welfare reform in

2013” SFHA report:

• West of Scotland has

a higher % of tenants

claiming HB compared

to other areas

• Glasgow 63%

• Renfrewshire 64%

• Ayrshire 66%

• national average 58%.

The Scottish Government's

own assessment (Dec 2011)

"60,000 tenants in Scotland face

losing on average £40 per

month, and at least 95,000

suffering more misery as further

reductions take effect in April

2013”

2009 - Audit Scotland highlighted

analysis by the Centre for Public

Policy for Regions (CPPR) - three

possible budget scenarios:

Ranging from a 5% real-term

reduction at best, to an 11%

reduction at worst

2011 – Audit Scotland report states:

"It is now clear that the scale of the

budget reductions facing Scotland

over the next few years is close to

the CPPR's worst case scenario"

Public finances being squeezed

VFM top of agenda for

government & Social Housing

Regulator

• Maintain new supply with

less public £s

• VFM now actively regulated

by Charter outcome 13

• ‘Lever’ to improve

taxpayer’s return on

embedded public £s

• Increased focus on tenant

scrutiny, transparency, risk

management and VFM

Tough operating environment

The challenge for social landlords

• Public subsidy significantly

restrained over the next 5 -10 years

• Private funding limited and by

implication, increasingly rationed

• Establishing the real value of assets

and utilising opportunities to extract

and re-use asset value is a key

aspect of future strategy and

management

• ‘Multi-local’ focus - finding

management and governance

structures which retain the local

strengths of community-based

housing while achieving economies

of scale and increased efficiency

• Adapt to succeed – even more

business skills, commercial acumen

and business techniques required

VFM – not simply about cutting

costs

Social housing providers exist to create social

value.

Value is just as important - if not more so - as the

money in VFM.

Achieving VFM means maximising social value

through effective use of resources.

The challenge is more social value, for less

input

The key to VFM is about knowing

what you: • Should get for your money before you

spend

it (business case)

• Got for your money when looking back

and evaluating success

So we need a way to measure potential or

actual VFM that works for different types of

social value

We can think about this by comparing money

spent on houses and operations (inputs) with

value (outputs + outcomes)

For example…

Money is borrowed to build a

house

Input: cost of house

Output: a house (physical asset)

Outcome: a home,

satisfied tenant,

social value

Social value doesn’t end with the

provision of a home Human assets deliver services to

provide more social value:

• Tenants get the most out

of their home and neighbourhood

• To maintain and improve the home -

enhancing the value of the asset

to existing/future tenants and landlord

• Support and care for those who need it

• Community services enhance well-being

• Knock-on benefits to other local services

and wider society

How do you assess social value Inputs are primarily measured in cash.

Outputs and outcomes (social value)

generally involve various combinations:

• Social and economic benefits to

individuals and communities

• Service quality - consumer benefits

to paying customers

• Environmental benefits

• Financial benefits

• a return (surplus) for reinvestment

• knock on benefits to other local services

and taxpayer

But how do you measure social value

VFM?

…some thoughts

VFM of human assets

Here are two

repairs

contractors.

Both are external

companies. Both

are being

considered by

Gallus Housing

to deliver its day-

to-day repairs

services. • annual contract price £1.3m

• guaranteed employment of

25% local labour

• will undertake tenant

consultation and feedback

= higher cost, but more social

and economic value

Contractor fee £1.3m

Client costs £0.1m

Total input £1.4m

Total output Properties

repaired

• annual contract price £1m

• ‘green’ credentials high

• longer target timescales for non-

urgent repairs

= lower cost, more environmental

value, but poorer standard of

service

Contractor fee £1m

Client costs £0.2m

Total input £1.2m

Total output Properties

repaired

Different types of social value – so which

to choose?

• lower client costs –

staff can do other

things

• local employment

opportunities

• lower overall cost, £££

can be spent on other

things

• more sustainable homes

for the future

Again, it depends on what outcome is being sought…

• Keep costs low so can spend £££

on other services; improving

performance and tenant

satisfaction not high priority –

choose B

• Gallus Housing pursuing ‘green’

objectives - choose B

• Tenants have made it clear quality

of repairs service is top priority and

understand this means less £££ to

spend elsewhere – choose A

• Gallus Housing’ key objective is to

provide local employment

opportunities - choose A

VFM is about local decisions

• Value for money cannot be a

static measurement

• It is about making the best use

of resources available in

different business environments

that gives your organisation and

your tenants the best

outcomes at that time

• The challenge is to

maintain/improve service quality

in a harsh operating

environment

Opportunity for change

…the times they are a-

changin

This is a big opportunity for the sector

• Chance to demonstrate ownership of VFM

• Chance to define value positively, in social business

terms

Any Questions?