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Posts Tagged ‘Social impact bonds’

Spending Review 2015: The Good, the Bad, and the Hanging Question

Friday, November 27th, 2015

As the dust settles on the Spending Review three topics attract my attention:

Social Impact Bonds

First the Chancellor allocated £105 million for new Social Impact Bonds (SIBs) tackling youth unemployment, homelessness and poor mental health. Like many useful ideas the SIB has many parents. Community Links is the oldest. Back in 2006 Community Links supporter Peter Wheeler, then working at Goldman Sachs, was visiting our Alternative to Custody project. We had been contracted by the Home Office to run a 12 month programme. Payment was dependant on 90% of the young people turning up 90% of the time. As Peter noted this metric bore no relationship to whether or not the programme succeeded in reducing re-offending. If it didn’t reduce it there was no benefit for society so we shouldn’t be paid anything, if it did the long term value was far greater than the unit cost and we should be paid more. The payment mechanism needed to recognise the value of prevention rather the cost of deliGeorge Osborne 0480amvery.

Peter told me about the International Finance Facility – a cross sector instrument which had been developed by Goldman Sachs to facilitate child immunisation in developing countries. Cutting a long story short we considered how the mechanism might be adapted for tackling domestic challenges first taking a sketchy outline to the then Chancellor Gordon Brown and subsequently developing it through the Prime Ministers Council on Social Action. Social Finance did all the hard yards brilliantly turning a simple concept into a working model and eventually launching the trail blazing project reducing reoffending in Peterborough. Now there are 31 SIBs in the UK alone and over 50 more worldwide

SIBs don’t, as some more excitable ministers and commentators appear to believe, instantly dispense with the need for public expenditure on issues like homelessness or re-offending. We will only do that when we have successfully dispensed with homelessness and re-offending. They do focus public money on successful interventions, not on process, and so facilitate investment in new developments without risk to the public purse. In our favourite metaphor they can pay for the fence at the top of the cliff without garaging the ambulance at the bottom unless and until people stop falling over the edge.

Some SIB projects won’t work, but failures like the recent Rikers’ Island attempt to reduce re-offending in New York may be deeply disappointing for the participants but actually vindicate the model. A new approach was trialled, it failed, investors lost out but the tax payer didn’t. Public servants are always nervous about risk and particularly averse at the moment when every penny is needed on the front line. I am worried about whether the Cabinet Office will have the capacity to deliver this programme (and also an ambitious expansion of the National Citizen Service) whilst their own budget is cut to the marrow but, that aside, the new money should allow us to keep pushing forward on the prevention agenda at a time when so many other funding streams are drying up or have already disappeared. It is good news in an otherwise gloomy statement and that, sadly, takes me to my second point….

An end to austerity?

Osbornes statement on Wednesday emphatically did not “usher in the end of austerity” as the Daily Telegraph gleefully proclaimed. Even the Chancellor was keen to nail that fiction: “It is not an end to the difficult decisions” he told Radio 4’s Today programme. “There are going to be difficult choices for different government departments. Billions of pounds of savings, billions of pounds of savings in the welfare budget as well. This spending review … takes those difficult decisions in day-to-day spending so we can invest in the long term.”

Lord Porter, the Conservative chairman of the Local Government Association spelt out the scale of those “difficult decisions” for local authority leaders: “Even if councils stopped filling in potholes, maintaining parks, closed all children’s centres, libraries, museums, leisure centres and turned off every street light they will not have saved enough money to plug the financial black hole they face by 2020.”

We know from the PMs correspondence with the leader of Oxfordshire that this will have devastating, potentially life threatening results for Council service users everywhere. In areas like east London where provision has already been cut to the bone and services are already under staffed and under siege the consequences are almost unimaginable.

I can understand the chancellors political choices (and be clear, the bulk of the burden is borne by the poor – that is a political choice) but it is plainly bonkers to argue, as Mr Osborne did, that cutting public health , youth work, even ultimately social care and children’s services allows the nation to “ invest in the long term” . As Luke pointed out on this blog yesterday, underinvestment in these services is as foolish and myopic as underinvestment in roads and railways. We will be paying the price for years to come.

The hanging question

Finally my hanging question: Immediately before the Spending Review statement on Wednesday the PM described the Big Lottery Fund (BLF) as “an absolutely excellent organisation” and the Chancellor did not then talk about raiding it’s coffers as I feared that he might. Mr Osborne did however announce the £300m expansion of the National Citizen Service without explaining where the money is coming from. The Blue Book is also mute on the subject. A policy adjustment for BLF nudged through in the months ahead rather than a wholesale diversion of funds announced in the Spending Review would be an easier path for the Chancellor to take but amount to the same thing. I hope very much that my doubts are misplaced and unworthy. Lots of people, far better placed than me, are reassuring on the subject but I will still sleep a little easier when we know exactly where the £300m will be coming from.