Invest in people, strengthen finances: How a new measure can lead to better policy

When governments in Canada assess spending, they tend to evaluate programs and services by counting costs and not much else. It matters little whether such programs or services provide social protections based on tax benefits for housing or family supports, or direct income transfers. Governments generally view these as simple expenditures – budget items requiring minimization in times of economic restraint.

On the surface, the reason for this is straightforward: Budgets are about revenues and expenditures and the balance between the two. Programs cost money. Questions about value in terms of economic or social returns from government spending on programs or services are never asked because the tools aren’t there to answer them.

What we need is a way for governments to determine the long-term value of public spending. Maytree and Mitacs are supporting an innovative research project being undertaken by Selvia Arshad, a PhD candidate in economics at the University of Calgary as part of INCLUSIECON, a research initiative based at the university’s Department of Economics focused on tax policies and transfer programs led by Drs. Lindsay Tedds and Gillian Petit.

In the following interview, Selvia shares more about her research, and how it could revolutionize the way governments approach evaluating the value of public spending.

Tell us about your research project and the problem it addresses.

Using a framework called the Marginal Value of Public Funds, or MVPF, my research is asking a simple question: For every dollar a government spends, how much value can that public spending produce for people and society at large? It means looking beyond the price tag of social programs and services to understand real outcomes.

If someone asked you to invest your money in something, the first question you’d ask is, “What’s the rate of return?” If they answered “I don’t know,” you’d take a pass on the investment. Not knowing what or if there’s a return just focuses your attention on the simple cost.

For decades, governments have treated social spending in a similar way. We track every dollar going directly into a program or service but have little sense of the exact value that results. My research changes that.

Older metrics used to evaluate public program spending often focus only on the cost. But MVPF treats spending and taxing as related, allowing decision-makers to understand if the social or economic benefit of a project outweighs the cost of the taxes used to pay for it.

Our geopolitical context, particularly our relationship with the U.S., has changed dramatically. Canada is at a political and economic clutch moment. All levels of government are having tough conversations right now about fiscal priorities. How could your research help policymakers navigate this new reality?

Right now, the government is making very tough budget decisions. And there is a common belief that social programs are expenses that should be cut when the economy is facing challenges.

However, some programs can save money in the long run by helping people become or stay employed, avoid financial crises, or rely less on other supports later. Social programs are not just expenses: They’re also investments in people that can improve not only their lives but also our collective or national outcomes.

The problem is that we don’t always have a clear way to compare programs, to determine which ones truly work and which don’t. In other words, what programs have social and economic returns beyond their simple costs in tax dollars.

Governments make billion-dollar decisions without understanding their full impact.

This project helps fill that gap by giving policymakers a clearer way to see which investments make a difference for both people and public finances.

What makes your approach different from how policies are currently evaluated?

Most policy evaluations focus on one piece of the puzzle, such as how much a program costs, how many people use it, or how many people stop using it.

What the MVPF approach does differently is it measures the value of a program such that we can compare across policies using one unified measure.

It combines the benefits people receive with the true cost to government – such as increases in long-term revenue from increased employment or improved child education outcomes.

This makes it possible to compare very different programs side by side and see which ones are delivering the most value for each dollar spent.

So instead of evaluating programs in isolation, we can make more informed choices about where public spending will have the greatest impact.

How will this work support better policy decisions?

It will provide policymakers with another lens they can apply when evaluating which programs deliver the most impact per dollar. That means decisions can be guided more by evidence and by what works, rather than assumptions or short-term pressures.

It also helps highlight something we often miss: Some programs that seem expensive upfront may deliver much greater value over time. On the other side of the coin, we may be spending tax dollars on programs we assume have high social or economic returns but, in reality, don’t return much long-term value.

In that sense, this approach supports smarter, more informed choices about where public dollars can make the most difference.

Is this a tool just for government budget-making? Or could civil society organizations also use it to help advance social and economic wellbeing?

The MVPF framework can help build rigorous, evidence-based arguments for programs that might otherwise be cut because they look expensive on the surface. This isn’t just a lens for policymakers to use. Informed by lived expertise and expert insight, civil society organizations can use MVPF to further advocacy goals beyond a simple moral imperative.

A particular policy, program, or service might genuinely be the right thing to do for people and a great reason to advocate for. But understanding that it’s also the smart thing to do in terms of the returns back to our society is a powerful tool for organizations advocating for change. In that sense this isn’t simply an academic contribution. It has a very real and practical application for urgent policy conversations.

Related

• Marginal Value of Public Funds: Research description
• IRPP: From Cost to Investment: Reframing Social Spending in an Affordability Era