Early learning and childcare expansion programme: evaluation strategy

6. Assessing the economic costs and benefits

6.1. Introduction

6.1.1. As outlined in Section 2, one of the four main aims of the evaluation strategy is to assess the economic costs and benefits of the expansion of funded ELC.

6.1.2. The purpose of an economic evaluation is to compare the value of the outcomes of a policy to the overall costs of that policy. In the case of the economic evaluation of the expansion of funded ELC, the aim is to compare the outcomes resulting from the expansion from 600 hours to 1,140 hours of funded ELC (i.e. the additional 540 hours) with the costs of providing this, in order to determine the value for money of the programme. This section sets out the plan to undertake the economic expansion of ELC Expansion.

6.2. Outcomes included in the Economic Evaluation

6.2.1. The economic evaluation will focus on the main intended outcomes of the ELC 1140 hours expansion policy. These are:

• Children's development improves and the poverty-related outcomes gap narrows
• Parents' opportunities to take up or sustain work, study or training increase
• Family wellbeing improves

6.2.2. The key intermediate outcomes (set out in Section 1.3) will be important to the main high-level outcomes but, as these are to be covered in the overall evaluation and have a less direct link to economic outcomes, these will not be explicitly covered in the economic evaluation.

6.3. Framework for the economic evaluation

6.3.1. In order to produce a robust and comprehensive economic evaluation, the economic evaluation of ELC expansion will combine two main forms of economic analysis - Cost Benefit Analysis (CBA) and Cost-Consequence Analysis (CCA) - and supplement this with consideration of displacement and distributional effects.

6.3.2. Cost Benefit Analysis (CBA) involves attaching monetary values to the outcomes (or expected outcomes) of a policy intervention and directly comparing these to the costs of that intervention. This works well for scenarios in which it is possible to attach monetary values to outcomes, and it allows analysts to reach a net present value figure (which is particularly useful for comparing potential future interventions). However, while it will be possible to attach monetary values to some of the outcomes of ELC expansion (by establishing the relationship between ELC expansion and development/educational outcomes; linking this to later life outcomes such as employment and use of public services; and attaching a monetary values to changes in these factors), there are some outcomes that it will not be possible/appropriate to attach monetary values to. For this reason, it is proposed that the economic evaluation of ELC expansion should combine the use of CBA with a form of analysis common in health economics – Cost-Consequence Analysis.

6.3.3. Cost-Consequence Analysis (CCA) aims to present a comprehensive summary of all of the different costs and 'consequences' (outcomes) of a policy intervention. But, unlike in CBA where the overall monetary impact of all outcomes are combined and directly compared to overall costs, CCA reports outcomes separately. CCA provides a transparent evaluation and is useful when the outcomes of a policy intervention cannot be expressed in monetary values. Combining CBA and CCA within the economic evaluation will allow all outcomes to be captured and will avoid an disproportionate focus on those outcomes which can be most easily assigned a monetary value.

6.3.4. The economic evaluation will also include a section specifically analysing the distributional impacts of the expansion, looking at outcomes by socio-economic group. This is important to include because it will allow the economic evaluation to account for any displacement effects (where the expansion of funding hours of ELC may be 'crowding out' use of privately funded ELC).

6.4. Delivery of the economic evaluation

6.4.1. Many of the outcomes of the ELC expansion which are most relevant to the economic evaluation are longer term outcomes that will not be possible to consider for a number of years. However, there are elements that can be completed earlier, and careful phasing of the work will be important to ensure that foundations for a robust evaluation are established early. For this reason, the economic evaluation will be split into three distinct phases:

• Phase A: A comprehensive evidence search in order to identify literature and datasets linking ELC expansion to longer-term outcomes
• Phase B: Detailed development of the overall study design - building on the evidence that was found in phase A - and analysis of the baseline
• Phase C: Full economic evaluation considering the effects associated with 1140 hours compared to 600 hours – drawing on the post-implementation results from SSELC alongside other evidence

6.4.2. The economic evaluation will be distinct from the overall evaluation, and will be contracted separately. However, the economic evaluation will, along with the wider evaluation, be overseen by the Monitoring and Evaluation working group mentioned in section 2. The economic evaluation will complement the range of ongoing work to assess and support the sustainability of the ELC sector and to ensure that Fair Work practices are in place throughout the sector. More information on that work is set out in Section 3.2.