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May 31, 2011

Measure what matters

How do we measure our performance as a country? How will we know if Scotland is moving in the right direction? Traditional measurements of progress have focused on what’s happening in different parts of economy – Gross Domestic Product, rates of unemployment and inflation.  All important stuff but does it tell us what we need to know? A new report, commissioned by Carnegie, and drawing on the work of Nobel winning economist Joseph Stiglitz, suggests not

For a copy of the full report –  More than GDP: Measuring What Matters, click here

This report explores the complex issues hidden behind two simple questions: what is Progress and what is Prosperity? It argues that GDP is an insufficient and misleading measure of whether life in Scotland is improving or not. It takes the findings of the 2009 Stiglitz Report,2 which emerged from the Commission set up by President Sarkozy to advise on how better to measure economic performance and social progress. It recommends that the new Scottish Government applies these to creating a performance framework better able to deliver, measure and report on economic performance, quality of life, sustainability and well-being. The report also shows that over-reliance on GDP as a measure makes it difficult for politicians to back policies that are good for society or the environment if they might hamper an increase in GDP.

The Scottish Round Table which created this report was established by the Carnegie UK Trust to look in more detail at how to better measure economic performance and social progress in Scotland. We were concerned to ensure that the strong social structures and healthy environment, necessary to create a flourishing Scotland, were not overlooked as a result of working to measures mainly focused on economic activity. In short, we are  advising that the Scottish Government should measure what matters.

In the short-term, Scotland’s new Government needs to learn from the experience of measuring a wider set of indicators through the National Performance Framework (NPF) and engage with and be guided by the recommendations of the Stiglitz Report to create a new framework with new indicators.

In the medium term – which we see as being across the next parliamentary term – the Scottish Government should work alongside wider civil society to host a much wider debate about the aspirations of Scotland, the relevance of wellbeing as a goal and how we can develop better measures of well-being that resonate with the wider population.

Our two main recommendations for the short and medium term lead us to four key factors in applying the Stiglitz Report to Scotland.

1. When the Scottish Government chooses what it measures, it is by default defining what matters, and what it focuses attention and resources on;
Our Round Table is clear that too much emphasis is currently placed on the importance of GDP as a measure
of progress. It is an important indicator but not one that should predominate. It should simply be one of a small
select number of indicators used to track economic performance and social progress. Through its NPF the previous administration made an attempt to move in this direction. That Framework can be a building block in helping Scotland go beyond GDP; by creating Scotland’s ‘GDP Plus’ dashboard of headline indicators.

2. Whatever the Scottish Government measures, the critical issue is connecting this measurement to the actions that help move Scotland towards its end goal;
While the new Government needs to consider how to improve on any framework or dashboard, more critical is
working to ensure that it is better used in policy making and in clearly aligning work across each part of government. Over the last four years, Scotland’s Government used the NPF to improve how performance was measured. We saw this as a significant development in how government is organised. Certainly others outside of Scotland have much to learn from this recent experience. However, we do not see that in practice our Government used the Framework to its full potential, or that it led to more informed or joined up-decisions.
The Scottish Government made the NPF the responsibility of national and local government. Next, Government
must look more closely into how to build a sense of shared responsibility and partnership in both deciding the
contents of a framework, and then in aligning the work of local government and agencies to ensure effective
partnerships on the ground.

3. To achieve well-being we need to look at how we measure, deliver and hold Government to account;
Over the last four years, Parliamentary accountability has not been based around the Framework. This has meant that, outside of the civil service and Cabinet, few people have understood how to use the Framework to scrutinize Government performance. Government’s chosen method of reporting – Scotland Performs – is thorough but technical, and does not encourage a debate about how better to organise government and develop and deliver better coordinated policies. It is also not very well known outside central government. Scotland Performs should be maintained – it is critical that statistics are easy to access and use and seen as objective – but our preference would be for Government to report annually against any dashboard or framework it sets itself. A critical factor is the need for wider civil society to also hold Government to account. What we choose to measure defines what is important, and what Government focuses its effort on. If we want Government to be more ambitious and focus on delivery of well-being, wider open and public discussion will be crucial.

4. Having reviewed in detail the 12 recommendations of the Stiglitz Report, we are of the firm view that they are relevant and timely and the new Government needs to make their implementation a priority;
Below we set out our 12 recommendations, with advice from our Round Table on how to implement the findings of the Stiglitz Report. If the Scottish Government wants to be better at delivering well-being through having a healthy economy, and by tackling inequalities in our society, then it needs to take the Stiglitz Report seriously and look closely at our findings to see how they can be implemented in Scotland.
While our focus has been on Scotland, our findings are relevant across the UK. The UK’s four governments all
need to better understand how to measure well-being and report on their own performance. Our Round Table was established in Scotland in part because of existing Scottish interest in this topic. We also see that other governments can learn from Scotland’s experience in using performance frameworks. It is vital that the UK’s four governments take lessons from each other in reviewing and applying the Stiglitz Report. We would like to see more cooperation on this vital topic.