Social impact bond launched to help teenagers in care and the homeless
In a potentially major step in public service reform, social investors are to fund two radical schemes covering teenagers in care and homelessness from which they should get a return of 10% a year if the project works.
Social impact bonds are based on the idea that investors are taking a risk with their cash since if the outcomes do not match expectations they will lose their investment.
Britain is seen as an international trailblazer in this form of social impact bonds, of which there are 10 in the UK, including the first set up in Peterborough jail. The proposals have attracted the interest of the White House as well as across Europe.
In a bid to spread the idea through Whitehall, the government announced it had agreed to set aside £20m in a new social outcomes fund to help speed up the deals, and release a further £60m in private sector investment.
The civil society minister, Nick Hurd, justified the taxpayer cash injection on the basis that if the schemes worked, resulting in fewer children in care or left homeless, there would be a wider saving to the taxpayer across more than one government department.
The scheme has been regarded as sufficiently important to involve both the prime minister and the cabinet secretary, Sir Jeremy Heywood.
The five-year children in care social impact bond has been struck between Essex county council and Big Society Capital and Bridges Ventures. It is designed to provide intensive support to 380 adolescents and their families. The investors get a return if the scheme meets a target of diverting around 100 adolescents from entering care.
Essex is the first local authority to commission a social impact bond in children's services.
The success of the social impact bond will be judged by the reduction in the number of days the 11- to 16-year-olds spend in care, as well as by improved school outcomes, wellbeing and reduced reoffending.
Social Finance raised £3.1m from social investors, including Big Society Capital and Bridges Ventures, to fund the bond. If the interventions deliver successful outcomes, the investors might expect returns of 8-12% a year. The investment is entirely at the investors' risk should the intervention not deliver outcomes,. There is no cost to the local authority.
In a separate social impact bond, developed between the mayor of London and leading charities St Mungo's and ThamesReach, support will be given to about 800 rough sleepers who are neither long-term nor new to the streets. Its aims are to reduce rough sleeping, help people get into stable accommodation, get them jobs and manage their health better.
Government data collected in October and November 2011 estimated that £9bn is spent annually on troubled families – an average of £75,000 per family each year. By intervening early to tackle the problems before they spiral out of control, the existing and recently announced social impact bonds hope to improve over 10,000 people's lives as well as save taxpayers money.
Cameron praised the breakthrough saying: "Britain is a world leader in using finance to help grow a bigger, stronger society. We launched the world's first social investment bank – Big Society Capital – and we invented the world's first social impact bond in Peterborough to tackle reoffending.
"I'm delighted that we're taking another lead today in launching the social outcomes fund, which will enable more innovative social impact bonds like the two announced today. By providing new forms of finance to invest in more early intervention programmes we can help the most vulnerable and reduce demands on the state."
Nick Hurd, the minister for civil society, said: "Social impact bonds are opening up serious resources to tackle social problems in new and innovative ways. This is about communities, businesses and charities all working together to change people's lives, whilst at the same time making savings for the taxpayer."
This article was taken from The Guardian – http://www.guardian.co.uk/society/2012/nov/23/social-impact-bond-teenagers-homelessness