Funding the BIg Society

Last Friday the Children England north east regional group had a very interesting seminar about 'Social Impact Bonds' given by Chris Ford of Newcastle University.

This is an idea dreamed up by the New Labour government, Jack Straw wrote a paper about it last year. It was in the news recently with the first pilot in the Midlands to keep young offenders out of prison once they have been released. The idea is to get private money into public services. As far as I understand it, it works like this:

The Government contracts with a 'Delivery Organisation' to address a social problem (such as getting young people into training or employment); the Delivery Organisation and government agree very precise, measurable outcomes (e.g. X number of young people each in continuous training or jobs for at least 24 months); the Delivery Organisation works out how to do this perhaps by sub-contracting to other organisations (including the voluntary sector); and the Delivery Organisation also raises the money from charitable trusts, philanthropists and other lenders. The work starts, obviously with rigorous reporting and monitoring. At the end of the contract, if the Delivery Organisation has delivered the desired outcomes then the Government pays a dividend to the funders.

It looks as though everyone benefits. The young people (beneficiaries) get effective help; the Delivery Organisation (not government) carries the risk of getting the work done; it and the sub-contractors get paid for their work; the government gets things done without having to put the money up front; and instead of just giving money away, the investors may get a return on their investment which they can put towards more good works.

Government says it can pay a dividend from the savings it will have made from services it would have had to pay for if the young people not been in productive training or employment.

Here in the North East apparently Northumberland and Sunderland Local Authorities are working with the Young Foundation (who helped develop this model) to see whether local government could commission services in the same way. I might trust central government to pay on results; given the perilous state of their finances trusting local government to pay up is a different matter.