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22.05.15

Hurdles on the path to valuing creativity and culture

Following the general election, at DCMS we have both continuity – in the shape of Ed Vaizey and Baroness Neville-Rolfe – and change – John Whittingdale, Tracey Crouch, Baroness Shields. This new ministerial team will undoubtedly be looking for robust economic evidence when developing policy ideas over the next 5 years, however gathering this evidence must overcome some persistent methodological challenges.

Since 2010, not least through vehicles like the Creative Industries Council that have sought improved relations between government and industry, the attention given to measurement of the economic contribution of the creative industries has increased. Nonetheless, a series of unresolved issues remain.

First, DCMS has acknowledged that the industrial classification systems used by the Office for National Statistics (ONS) poorly captures the contribution of some creative industry sectors – such as crafts, music, fashion, computer games. Unfortunately, bothDCMS and ONS are constrained by the fact that this classification system is internationally agreed, and they will continue to be so until the whole system can be updated to reflect changes in industrial structure.

Second, freelancing has become more common, particularly in the creative industries, but key data series maintained by the ONS, such as the Annual Business Survey, focus on businesses above the VAT threshold, which means that the economic contribution of freelancers and micro-businesses risks being understated.

Third, while it is welcome that trade bodies and similar have responded to these kinds of concerns by commissioning their own research into the economic contribution of their sectors, it would really help for these studies to be methodologically consistent and comparable.

Fourth, a range of standard economic techniques exist for capturing the direct economic contribution of the creative industries (i.e. number of people employed, number of businesses, volume of exports and GVA attributable to these businesses) but these direct contributions understate the wider value of these industries. Consider the counterfactual: if these industries did not exist, what would be economically foregone would be more than the jobs and the GVA directly attributable to these industries, it would also be the jobs and GVA enabled by the existence of these industries. It would, for example, not just be the output of design businesses, it would be the additional output of other kinds of businesses enabled by the insights of these designers. These are known as ‘spillover’ impacts.

Research produced by Nesta argues that when measuring the value of culture, we should consider ‘spillovers’ from cultural activity that are not covered by standard valuation methodologies. There are a range of techniques for doing so but these are less well established than the standard valuation methodologies that tend to focus on direct economic contribution.

Addressing all of these four challenges, as far as is possible, would take the new DCMSteam further than their predecessors in making the case effectively for the creative and cultural sectors.