Culture and Heritage Capital

Like other forms of capital, culture and heritage capital stocks give rise to a flow of services. These flows can be projected over the asset's life to give the asset value. In classical economics, the value equates to or revolves around market prices (Mazzucato, 2019). However, heritage is not fully traded in markets, so market prices do not reflect all the services that the historic environment provides. Market prices are not good indicators of the value of heritage. Alternative approaches to valuing heritage are required.

A “culture and heritage capital approach” aims to create publicly available statistics and guidance that will allow for improved articulation of the value of the culture and heritage sectors in decision making. The benefits of this approach are that it will allow decision-makers to:

• monitor and evaluate losses and gains in culture and heritage over time
• assess the value of future services provided by an asset
• identify priority areas for investment and inform resourcing and management decisions
• highlight links with economic activity and pressures on culture and heritage assets
• provide a common framework to bring together scientific, economic, and social evidence and analysis for a particular subject or place
• significantly reduce the risk of the value of culture and heritage (whether monetised or not) being ignored in decision-making
• enable a more comprehensive cost-benefit analysis and risk assessment
• facilitate a more innovative approach to identifying policy solutions
• understand the links between different types of capital (DCMS, 2021).

To support the development of the culture and heritage capital approach, Historic England commissioned research from Simetrica Jacobs and Nesta. The research establishes the economic value of local heritage sites using a contingent valuation method and tests whether values can be transferred between sites. More specifically it:

• quantifies how local residents value the preservation of local heritage sites.
• develops a local bank of heritage values that can be useful for public and private decision making.
• sets the first steps for the creation of a culture and heritage capital account.
• tests the robustness of transferring values from one heritage site to a comparable one for business cases and for private and public decision making.

The research confirms that people value their local heritage and are willing to pay to maintain local heritage in good condition.

The valuation of the benefits and costs of heritage plays an important role in spending decisions and directly inputs into Social Cost Benefit Analysis (SCBA), which is the approach set out by the HM Treasury Green Book.