Introducing the Culture and Heritage Capital Framework

Economic valuation is a powerful tool used to support traditional investment decisions, including public spending decisions. Economic techniques are used to value the benefits of different investment options against costs, and in theory, where the benefits are found to outweigh the costs – that investment is said to provide value for money.

Heritage is undervalued within our current economic system because conventional valuation techniques rely heavily on assumptions about the close links between the value of goods or services and their market price. But for some goods and services, market prices, even if they do exist, are not a good or true indicator of value. For example, take the time spent on activities such as childcare and transport; these activities are critical to the quality of our lives but because they are not traded, they are not measured by key economic metrics (ONS, 2019). Because heritage is not fully traded in markets; market prices do not reflect its value and so there is a tendency to undervalue and underinvest in heritage.

Whilst heritage is not fully traded in markets there is a growing body of evidence to show that heritage matters to people. Members of the public overwhelmingly want to secure the future of heritage (YouGov poll for Historic England, 2018); investing in local heritage is seen as a good use of public money (NLHF, 2015); people across the UK care about the protection and conservation of heritage sites; heritage is a source of national and local pride (DCMS, 2017) and UK citizens engage more with heritage compared to the European average (Eurobarometer, 2017). Also, in the wake of the Covid-19 pandemic, large numbers of people, particularly elderly people turned to virtual tours of cultural or historic sites to help them cope during the first lockdown (ONS, May 2020). A market price does not fully reflect the value of heritage.

Current economic valuation methods and metrics are not wrong – they are just incomplete and only tell one part of the story. They capture the value of goods and services traded in markets but say nothing about non-market or near market activities. However, change is underway. It is more widely accepted that economics as a science needs to better consider the value of all things that matter to people,  capturing the value of non-market transactions, and addressing human wellbeing - not just wealth.

Recently, we have seen the emergence of economic approaches and policies that firmly place people and their wellbeing at the centre. For example, in New Zealand the government has broken traditions of national budget making based on classical economic models and metrics, to focus on one that is based on wellbeing. Jacinda Ardern, the prime minister, said that she wanted their wellbeing budget to be “the foundation for a different approach for government decision-making altogether”.

The Organisation for Economic Co-operation and Development (OECD) recently launched their Centre on Well-being, Inclusion, Sustainability and Equal Opportunity (WISE) arguing that “now more than ever, policy makers need to prioritise what matters in people’s lives” (OECD, 2020). Similarly in the UK, the Treasury’s recently revised Green Book (the UK government’s guidance on appraisal and evaluation) states that appraisals will include “all significant costs and benefits that affect the welfare and wellbeing of the population, not just market effects” (HM Treasury, 2020).

It is within this context that the Department for Culture, Media and Sport (DCMS), alongside partners including Historic England, the Arts Council and leading economic and heritage academics are launching ‘Valuing Culture and Heritage Capital: A framework towards informing decision making’.

Historic England is also publishing new valuation evidence from Simetrica and NESTA which shows people’s willingness to pay to preserve heritage assets (in this case historic high streets and civic buildings) that are in good condition.

Using the new framework, the objective is to develop holistic, standardised and universally accepted methods and evidence aligned with HM Treasury guidance that better measures, understands and articulates the value of heritage assets and the flow of services they deliver, which in turn benefit society.

We need to capture the value of heritage beyond market transactions to support better decision making and to prioritise people’s wellbeing.