Mike Brogan, chief executive at procurement consortium Procure Plus, answers CM’s questions on a new funding idea to help deliver ‘social value’ projects.
What exactly is a Social Impact Bond?
A Social Impact Bond (SIB) is a means of reimbursing the work of organisations that choose to help individuals that are currently, and likely to continue to be, a cost to public finances.
If a social enterprise or private provider is in the business of improving social outcomes, be it for ex-offenders, looked after children, or long term unemployed for example, it may now access funding supplied by Government which recognises the financial saving generated for the country’s economy.
This intervention work, as it’s termed, will ultimately provide those that are intervening with a proportion of public finances that is calculated via a payment by results reward system which covers their initial investment plus a percentage of the perceived saving. [For instance, a local authority could pay a charity for reducing homelessness and then be reimbursed by the government out of the savings made, or it could issue a bond to a construction consortium to deliver jobs or work placements.]
Through the work they do, organisations can save the Government money, so to support them in these efforts, the government now offers a SIB that provides financial reward for actual savings generated through this work.
North west procurement consortium Procure Plus has issued a £1m social bond to finance social enterprises to provide jobs, training and qualifications. For more details, see Inside Housing’s article here
There is a risk that investors may not make their money back or receive any additional payment from the commissioner if it is deemed that no genuine social improvements have been made and generated public finance savings.
However, it is likely that this possibility of financial loss will ensure that only investors who are absolutely committed to driving regeneration in their local community are motivated to participate.
What kind of social outcomes could the initiative fund?
There are a whole host of possible social outcomes that may be achieved as a result of the SIB scheme which could ultimately reduce the volume of individuals relying on the taxes paid by others and enable them to contribute instead.
A few of these outcomes include finding adoptive parents, helping people into long-term careers, improvement of health, and reduction in reoffending levels. An organisation must first identify a need within its local community then devise a strategy which can innovatively facilitate change while drilling in to the available SIB funding. A key benefit of the SIB scheme is that it allows flexibility in the method used to deliver social outcomes. Provided a need can be proven, as well as a robust concept to negate it, the opportunities for support are vast and will be rewarded once financial savings are proven.
Are Social Impact Bonds working, or is the idea still unproven?
The Social Impact Bonds initiative is still very much in its infancy but we are already seeing positive signs where it has been successfully piloted. Regardless of SIB success to date, all political parties are in favour of the model as a solution to the many problems facing British society and we can therefore assume it will remain regardless of the General Election 2015 result.
Should construction companies be discussing Social Impact Bonds with potential users and beneficiaries?
There are many organisations that operate at a grassroots level which could extend their impact and reach much further if they were to utilise SIBs – they might even be able to achieve a completely different range of outcomes they didn’t think possible. If potential users are prepared to invest the time and energy in understanding SIB in order to deliver on the possible interventions set out, then this is absolutely a discussion which needs to be had.
Isn’t it all a bit over-complicated?
Implementing any sort of scheme, such as SIB, that has been designed to support those furthest from the labour market and most socially marginalised will always be challenging. There is no denying that a reasonable volume of resource is required to set the wheels in full motion and begin yielding the benefits but it will undoubtedly be rewarded in due course. There are also lots of support groups available to organisations that are at any stage of the journey, whether they have only an idea or a complete plan of action, which can streamline the process of implementation easily.
