While all jurisdictions that have publicly expressed interest in SIBs recognise a range of common objectives, each has different drivers and emphases. Common objectives across jurisdictions include increasing focus on prevention and early intervention, allowing Governments to only pay for proven services and building a social finance market. But Australia is highlighting the benefits of measurement, while the UK is using SIBs to enable voluntary and community organisations to access Government contracts and in the US SIBs are being promoted as a means of scaling evidence-based programmes.

 

At last November’s Social Finance Forum in Sydney, speakers involved in developing social impact bonds (or social benefit bonds as they call them) highlighted the benefits of “innovation, capacity building and using data to measure and improve service outcomes” (Tomkinson, 2012).

In the UK, however, the benefits of social benefit bonds as currently defined by the Centre for Social Impact Bonds are:

• they allow commissioners to attract private investors to fund early and preventative action on complex and expensive social problems
• they enable new services to be tried without commissioners having to pay if they don’t work
• they can help services to adapt so that they have a greater emphasis on prevention
• they can allow greater flexibility for those providing the services to adapt and change the service according to their experience
• they can help charities and social enterprises bid for and manage ‘payment by results’ (PbR) projects – projects where the government pays the provider of the service for the results achieved

There’s much less emphasis in the UK on SIBs’ measurement of outcomes as a means for Government to become more accountable for its spending and increase the evidence base for its wider programmes. There is a transparency and accountability agenda in both jurisdictions, but SIBs have not been promoted as central to this movement in the UK.

In Australia, there’s much less emphasis on SIBs as a means for social purpose organisations to attract funding, perhaps because of the larger size of some charities in Australia and their history of winning Government contracts.

In the US, there seems to be a focus on the use of SIBs as a way to bring evidence-based programmes to scale. This has not been promoted as a key driver for interest in either the UK or Australia, although all jurisdictions have acknowledged that savings can only be realised when effective programmes are implemented at scale.

McKinsey in the US presents SIBs in their 2012 Report in terms of scaling programmes. “SIBs are structured to get proven solutions to scale with no risk to public budgets—governments pay for the solutions only if they work. But despite this risk shifting, a SIB’s structure involves several actors—each charging a fee or return. As a result, this tool is a more expensive way to scale programmes than if government simply contracted directly with a service provider”

Excerpts from public releases in several jurisdictions are presented below.

The Peterborough SIB was initially promoted with an emphasis on:
• Service reform: “As part of our radical approach to rehabilitation we are considering a range of payment by results schemes like the Social Impact Bond” (MOJ and Social Finance, 2010)
• Collaboration and innovation: “They will enable foundations, social sector organisations and government to work together in new partnerships to define social problems and transform the way many social outcomes are achieved.” (Social Finance, 2009)
• Involvement of voluntary and community sector organisations in delivering public services: “We want to actively involve individuals and voluntary and community organisations” (MOJ and Social Finance, 2010)
• Increased funding for social purpose organisations: “The Social Impact Bond has the potential to unlock an unprecedented flow of finance for social sector organisations” (MOJ, 2010)
• Aligning incentives: “The Social Impact Bond aligns the interests of government, charities, social enterprises and socially motivated investors around a common goal” (MOJ and Social Finance, 2010)
• More effective services: “Reducing reoffending is one of the Government’s highest priorities” (MoJ, 2010)
• Prevention: “The SiB is designed to fund preventative approaches to social issues” (Social Finance, 2010)

The briefing pack for the New York City SIB put forward the following benefits:
• A focus on outcomes: “Investing in outcomes to improve the lives of those in need”
• Efficiency of funding: “Government is able to preserve public resources for successful interventions while still encouraging innovation in a time of fiscal constraints. Savings can be recaptured and reinvested into a permanent funding stream for the programme”
• More effective services: “Accelerate adoption and implementation of promising programmes”
• Accountability and evidence: “Brings added discipline to measuring outcomes for government programmes because there is an upfront agreement on how to measure success”
• Increased funding for social purpose organisations: “Nonprofit providers receive a committed funding stream not subject to budget cuts”
• Social investment: “Can produce financial returns for private investors, who assume the risk while achieving a public good”
• Increased funding for social programmes: “Taps into new funding opportunities”
• Risk transfer: “Taxpayers only pay for interventions that work”

The Essex County Council SIB was released with the following justifications in the press release:
• Service reform: “Social Finance hopes that the Essex Social Impact Bond will catalyse systemic change in public services for vulnerable adolescents”
• More effective services: “new social care model to deliver improved services and support for our most vulnerable young people”
• Sustained funding for service providers: ‘Stable funding from the Social Impact Bond allows us to work with Essex County Council over the longer term to produce real results that will benefit children, families and communities”
• Innovation: “Essex has always strived to be innovative and forward thinking and it is this attitude that has allowed us to explore social investment.”

The Government of New South Wales, Australia, has outlined its interest in SIBs on its website.

“• A focus on outcomes rather than outputs: Under traditional purchaser-provider arrangements, Government payments typically attach to units or blocks of service rather than the outcome the Government is seeking to achieve. In contrast, SBBs provide a direct financial incentive to focus on and improve the outcome in question. This change benefits both the Government and providers: the Government gets better outcomes, while providers are relieved of burdensome reporting to Government about service inputs and outputs, and instead are free to focus on delivering the outcome in a way that best suits their own approach and preferences.
• Additional resources towards early intervention: Releasing Government funds for prevention and early intervention can be difficult when resources are oriented towards acute and crisis services. SBBs allow an expansion of investment in early intervention through the use of upfront private funding. If successful, this reduces later demand for acute services and frees up Government funds, part of which can then be used to repay investors.
• Innovation: Payment for results, rather than delivery of a prescribed service, frees service providers and investors to explore different ways of achieving better results. Providers have the flexibility to change service delivery approaches or experiment with a number of approaches at the same time. Investors have an incentive to work with providers to drive performance; for example, by encouraging providers to abandon approaches that are not achieving results and supporting them to find and implement new approaches.
• Improving the evidence base: SBBs will be more attractive to investors if they are backed by evidence that indicates that the proposed interventions will be successful. Further, the link between payments and results necessitates the robust measurement of outcomes. These features increase locally relevant evidence and data for future policy makers. By improving measurement in these areas, the Government believes that other social policy areas will benefit as well.
• Accountability and transparency: The focus on clear outcomes measurement in SBBs ensures that there is clarity about what NSW Government funding is achieving, and when.”