It’s hard to go to a charity conference these days without seeing some reference to social investment bonds. They are presented as an innovative solution to the voluntary sector’s lack of capital (which they are) and many charities struggling for income therefore latch on to them as a potential fundraising opportunity. Why then do we have less than 50 SIBs operating across the whole world?
It certainly isn’t for a lack of investors. Impetus-PEF and Big Society Capital, who invested in our SIB three years ago, are often on the lookout for investible organisations. As a result of BSC’s market building activities, a growing market of other investors, from grant-making trusts wanting to dip their toes in, to more commercial investors and private banks looking to add a social product to their range, are similarly searching for opportunities to invest their capital.
It also isn’t for a lack of good programmes. While many charities need some preparatory support, there is a healthy supply of organisations rolling off of so-called ‘investment readiness’ programmes. You might quibble about whether these programmes could focus more on helping charities refine their delivery model and evidence their impact, rather than just on building their organisational capacity and getting their business plan in shape, but nevertheless a lot of energy has gone into building both their interest and capacity to engage.
The major challenge is really the lack of the commissioning opportunities that provide the outcome payments that enable charities to pay back social investments. Although in the 2015 summer budget, the government set out their intention to expand support for social impact bonds, particularly around youth unemployment, homelessness and mental health, this can’t happen until suitable commissioners come forward to fund services in these areas.
SIBs are perhaps most useful when they can fund early intervention services in areas where there are savings to be made from preventing higher future public expenditure. In the case of youth unemployment, this is reducing the number of young people who go on to be not in education, employment or training and ultimately claiming employment benefits (as well as a range of other costs associated with unemployment).
Yet there is no national framework for youth employability services (or indeed either of the other two priority service areas). Historically much of this work was funded through Connexions Partnerships and later local authorities. However, the reductions in public spending over the last five years, and specifically the reduced funding for local government, means that in many areas theses services have disappeared. Where they still exist they are largely propped up by a combination of European Social Fund grants, small contracts with individual schools or colleges and philanthropy. The DWP’s Youth Engagement Fund, while welcome, has only supported four relatively small programmes around England.
So a prerequisite for more SIBs, in any sector, is developing an established market for services. As much effort needs to go into supporting commissioning as it currently does the investors and deliverers. In the year of a comprehensive spending review there is a role for central government to lead the way.