Guest post by Lord Michael Bichard, senior fellow, Institute for Government
I have been taking more of an interest recently in Social Investment (social impact bonds for the uninitiated) and chaired a conference in Bristol for local authorities organised by the social enterprise, Social Finance. That 400 people attended suggests that I am not alone in my interest.
There are many reasons why Social Investment might be at least part of the answer to our current problems. It could,of course,open up access to a whole new funding stream using private investment to tackle long standing social problems. But it could also force us to confront some of the fundamental flaws in the traditional public service model which I referred to in my previous column. It demands,for example,a greater focus on measurable outcome if the return on investment is to be reliably assessed; it places a premium on redesigning services around clients and on collaboration between agencies; it emphasises the importance of early intervention and prevention and by it’s nature focuses on value rather than compliance.
Social Investment should not be seen as an overnight panacea and a great deal of careful attention needs to be given to the potential pitfalls as well as the development of a whole new market. We need to learn from the early prototypes such as the Peterborough initiative on reducing reoffending. But the early signs are promising. Social Finance is developing the products and there is real interest from Big Society Capital and The Big Lottery as well as many in the City. A number of Authorities are at various stages of development including Worcestershire and Manchester who are looking at how to reduce the numbers of looked after children by early intervention. The Voluntary Sector,too,is an important player in these developments and needs to build it’s own capacity.
There is always a danger that too much is expected too soon but Social Finance has brought together an impressive range of skills to progress the thinking. So they have people with a deep understanding of social issues combined with expertise in financial modelling, business development and investment structuring and this resource is available on a consultancy basis to local authorities. Could more be done? Well,the Big Lottery Fund are showing interest in supporting an outcomes payment fund which would provide an important additional incentive to possible investors.
The use of unclaimed assets via Big Society Capital could also be critical. I left the conference uplifted by a debate which had been positively looking for new solutions to our funding crisis. But I also left wondering if the fruits of quantitive easing could not be used to better purpose than largely shoring up the depleted reserves of our banks. After all,as Social Finance points out, “now,more than ever,there is a need to harness social investment to make a long term difference to society.” We cannot go on assuming that public monies will be sufficient to resolve our many demographic challenges.
By Lord Michael Bichard, senior fellow, Institute for Government
This post originally appeared in the Local Government Chronicle