Prevention and Transformation

There is an emerging consensus across political positions – supported by professional judgement and public opinion – that as a society we need to act earlier to tackle some of our most deep-rooted problems. Government is understandably reluctant to fund preventative programmes without a guarantee of success, considering what’s at stake in social and financial terms. Social investment – such as Social Impact Bonds – can bring new money to test innovative yet risky preventative programmes and pay only if outcomes are improved. By fostering innovation in preventative programmes we stand the best chance of transforming outcomes and driving positive, lasting change.

In order to succeed, prevention needs to be implemented well and this requires implementation risk to be identified and managed. In my previous post, I provided an overview of three ways in which Government can manage implementation risk. Here, I round off the series of three posts on prevention with a look at the promise of social investment to fund preventative programmes that can transform outcomes.

We looked previously at how variable outcomes and a thin evidence base can lead to significant implementation risk for preventative programmes. This level of risk can make Government unwilling to test such services, particularly at a time where budgets for testing innovation are squeezed. Social investment can transfer implementation risk to social investors and help address two fundamental problems that Government faces:

  • Problem 1: Avoiding paying for failure.
  • Problem 2: Financing innovation when programmes have a limited evidence base.

In order to drive innovation we need to take risks. We can only make progress by trying new things and some of these programmes will fail. Part of what we do at Social Finance is attempt to develop programmes that we think will succeed and take these to investors for their scrutiny (and, hopefully, their money).

The ingenuity of a social investment approach is that it offers Government the chance to finance innovation and only pay if the service is successful. This means we test more preventative programmes and drive progress. Government foots the bill only when programmes improve agreed outcomes such as former prisoners stopping committing crime or people addicted to drugs achieving abstinence.

We believe social investment could play a significant role in helping launch pilots for preventative services. If the pilot is successful then Government will make a decision on whether to roll out the scheme nationally, based on the improved evidence base and information about the resource savings that the programme delivers. A national roll-out could be one in which Government is willing to bear outcomes risk itself (let’s suppose the pilot was incredibly successful and the programme is now “proven” to work) or, alternatively, the programme could be commissioned using PbR, useful if the Government feels service providers are best placed to manage risk themselves.

In our work looking at whether social investment can help address a number of different social issues we see different opportunities to tackle these two problems to a greater or lesser degree. For example, our work with Manchester City Council to support children in residential care moving towards a family or foster care environment concludes that there are clear cashable resource savings for Government. This solves problem one but involves an intervention that is established (but still carries implementation risk) – Multi-Dimensional Treatment Foster Care or “MTFC” – and therefore less innovative than some of the other interventions we’ve studied. Meanwhile our work with the Greater London Authority looking at how to address the needs of entrenched rough sleepers would fund innovative (and untried) interventions with a population about which little is evidenced. Potentially this work could make a significant contribution to the evidence base.

Social investment can be a good way to test innovative programmes that Government would not otherwise investigate. There are also reasons why social investors might be well placed to manage the risk involved in implementing some of these programmes. Social investors bring market rigour to the management of their funds – this means appropriate reporting, an advisory committee of sector specialists and a director who oversees the project implementation.  Alongside improved management rigour, better data collection and analysis enables informed decision making. This allows the money to be spent on what works, rather than what we think works when the programme is set up. The service evolves over time and in response to changing circumstances. Collecting information that links background demographics, interventions received and subsequent outcomes can help providers improve and target services. Combined with the knowledge and experience of the social sector, programmes funded by social investment can be a powerful force for good.

The widespread recognition that more resources need to go towards prevention has not yet been backed by the reallocation of budgets towards early intervention. Social investment can be catalytic. It can provide extra money to test prevention. It can transfer risk away from Government giving others a stake in the project’s success. Finally – and crucially – it can give those best placed to manage implementation risk a greater role giving programmes the best chance of success. This could be transformation we’re looking for.

By Harry Hoare, Analyst at Social Finance

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