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Better Valuation, Better Decision Making

Better Valuation, Better Decision Making. Adala L eeson Head of Socio-Economic Analysis and Evaluation. www.heritagecounts.org.uk. Heritage and the economics of uniqueness.

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Better Valuation, Better Decision Making

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  1. Better Valuation, Better Decision Making Adala Leeson Head of Socio-Economic Analysis and Evaluation

  2. www.heritagecounts.org.uk

  3. Heritage and the economics of uniqueness • Over the long term, places with strong, distinctive identities are more likely to prosper than places without them. Every place must identify its strongest, most distinctive features and develop them or run the risk of being all things to all persons and nothing special to any.” Robert Merton Solow, Economist and Nobel Laureate • Licciardi, G. Amirtahmasebi, R. (eds), 2012, The Economics of Uniqueness. Washington: The World Bank

  4. Introducing the concept of cultural heritage capital www.heritagecounts.org.uk

  5. How do we value? Willingness to pay • Economic value measured by most someone is willing to give up in other goods and services in order to obtain a good or service • i.e. “willingness to pay”.

  6. How do we value? Willingness to pay Some goods and services have value but they are not easily measured by conventional economic metrics

  7. How do we value? Willingness to pay

  8. Why does valuation matter? • Economics is a study of how to allocate limited resources - it relies heavily on valuation. • “…it becomes more straightforward to make the case for beneficial but costly policy, if it can be demonstrated that those benefits are not only substantial but consistent with Green Book guidance” Giles Atkinson, Ben Groom, Nicholas Hanley and Susana Mourato (April 2018)

  9. Improving how we value heritage Currently heritage is not valued systematically or even at all. Alternative approaches are needed The government is now investing in the “Beyond GDP initiative” developing new economic indicators

  10. Improving how we value heritage

  11. Best practice:Towards a cultural heritage capital approach • The natural capital approach: A framework and applied approach The natural capital approach intends to identify the total economic value of natural capital in order to secure the “stock” of natural capital and thus provide a sustainable “flow” of benefits

  12. Best practice:Towards a cultural heritage capital approach The NCA [Natural capital account] is not about putting a price on nature, it is not intended to sell or trade nature. Rather, such economic valuation furthers the goal of systemically incorporating the value of nature into the decisions and actions [of a company]. Global Nature Fund (March 2018)

  13. Best practice:Towards a cultural heritage capital approach • The innovation of the natural capital approach is not in the valuation methods. It is about: • the framework it provides and • the application of the valuation evidence to real world examples using natural capital accounts.

  14. Best practice:Towards a cultural heritage capital approach Natural capital accounting “is just one tool among many in the formation of policy but a very powerful one in ensuring that we think of our responsibility to future generations to hand on a country, and a planet, in a better state than we found it…” Secretary of State Michael Gove, 2018

  15. Example: ONS, January 2018, UK natural capital: Ecosystem service accounts, 1997 to 2015 • It is notable that in the UK natural capital account, cultural services account for as much as 40% of the total asset values. These are argubly the service “flows” most relevant to built heritage.

  16. Example • An Economic appraisal framework • UK Airport Expansion • Heritage impacts have been considered (as part of place) but monetary values have not been assigned to them.

  17. Example The heritage impact assessment: SIGNIFICANTLY ADVERSE With the promoter’s mitigations the final impact: ADVERSE “Apart from the measures to mitigate individual designated heritage assets we anticipate a need to compensate the potential loss of the entirety of Longford conservation area (and all heritage assets within it), and approximately 50% of Harmondsworth conservation area.”

  18. Example Longford Conservation Area “…we anticipate a need to compensate the potential loss of the entirety of Longford conservation area (and all heritage assets within it)…”

  19. Example Harmondsworth Conservation Area “… Apart from the measures to mitigate individual designated heritage assets we anticipate a need to compensate … approximately 50% of Harmondsworth conservation area …”

  20. Example • “Our choice at Heathrow is in favour of the Northwest Runway proposal by the airport operator.” Airports commission • “Against the objective of maximising economic benefits and supporting the competitiveness of the UK economy the Heathrow Airport Northwest Runway option performs most strongly, generating £69.1 billion of benefits, • compared to £58.7 billion from the Extended Northern Runway scheme and • £60.1 billion from the Gatwick Second Runway.”

  21. Towards a cultural heritage capital approach Challenges • The evidence base for heritage is thin in relative terms. • Cost and takes time. • Requires a long term, sustained commitment. • Technical skills are required to produce and apply such evidence. • Where the heritage valuation evidence does exist it is rarely used. • There are still considerable gaps in the valuation techniques • For some academics and stakeholders ‘reducing’ heritage to monetary values is problematic. This debate challenges the fundamentals of the natural capital approach - valuation.

  22. Towards a cultural heritage capital approach Mitigations • Robust research and a stronger evidence base over the long term • A shift towards Green Book compliant valuation. • More engagement with academia and innovators • Need to support and invest in news skills and capacity building • A difficult balance must be struck between our current strengths and future needs. • Our response must be proportionate • We need to collaborate more and better • There are opportunity costs to not taking action • it is well known that there are still lots of evidence gaps in the Natural Capital work but they are still making progress.

  23. “What we measure determines what we do”J. Stiglitz, Nobel prize winner, Economics Conclusion It is difficult to capture the value of heritage but it is imperative to do so when making decisions about how to allocate finite resources. Only then will we “do the right thing” for our generation and future generations to come.

  24. Thank you

  25. Why does valuation matter?

  26. Why does valuation matter?Example • The assessment of Heathrow Airport Northwest Runway scheme identified potential direct heritage impacts on: • 21 designated assets within the scheme land takecomprising • two conservation areas, • two ancient monuments and • 17 Grade II listed buildings; • and a further 54 designated heritage assets could be affected within 300m of the scheme area, • and 166 more 300m to 2km from the site of the scheme.

  27. Grave of explorer Matthew Flinders unearthed near London station Remains of the first explorer to circumnavigate Australia rediscovered after 200 years by HS2 dig 

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