A radical approach to solving complex and costly social problems is receiving funding help from the Cabinet Office.
23 November 2012
A radical approach to solving complex and costly social problems, which will also save the taxpayer millions, has been given a cash injection by the Cabinet Office today.
Two new Social Impact Bonds, which will support teenagers at risk of going into care and help rough sleepers, are being introduced alongside the Social Outcomes Fund. This new £20 million fund will facilitate even more Social Impact Bonds, as part of the latest stage in the Government’s drive to tackle social problems through payment by results.
Social Impact Bonds, the first of which was developed by Social Finance, allow private investors and philanthropists to invest in a project to address a specific social problem; they are then only paid a financial return if the project is successful. This is a way of blending financial return with a social impact and an approach that is good for the government because the financial risk is taken by the investor and not the taxpayer, as payments are only made for success. It’s also good for the voluntary sector, as it opens up many more opportunities for Social Enterprises and charities to deliver public services.
If not tackled early, complex and deep-rooted social problems, such as homelessness and youth unemployment, can lead to long-term dependency on the state and cost the taxpayer millions. For example, government data collected in October and November 2011 estimated that £9 billion 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 will improve over 10,000 people’s lives as well as save taxpayers’ money.
Britain is already leading the world in the development of Social Impact Bonds. But the Government is determined to accelerate the market even further, which is why it is setting up the Social Outcomes Fund and a Centre for Social Impact Bonds based in the Cabinet Office. The Fund helps tackle the problem of costs for an intervention falling in one place, but the benefits land elsewhere, acting as a brake on the use of Social Impact Bonds.
The Prime Minister said:
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.
Launching the fund today, Francis Maude, Minister for the Cabinet Office, said:
We are committed to developing innovative new ways to transform people’s lives and tackle social problems. That’s why we have introduced the Social Outcomes Finance Fund so that more Social Impact Bonds can be set up to improve the lives of the vulnerable.
Initiatives such as Big Society Capital and Social Impact Bonds mean that we are ahead of the rest of the world in the development of our social investment market. It is a major source of growth and support for the important work of charities, volunteers and social enterprises.
Nick Hurd, 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.
While ten Social Impact Bonds have been rolled out to date, in some cases organisations have had a shortfall of money, which has prevented them from setting up a social impact bond. In order to push forward this radical agenda the Government is announcing a £20 million top-up fund so that many more Social Impact Bonds can be set up.
Leader of Essex County Council, Peter Martin, said:
I am proud that Essex has had the vision to progress with a new social care model to deliver improved services and support for our most vulnerable young people. Essex has always strived to be innovative and forward thinking, and it is this attitude that has allowed us to explore social investment. I welcome the launch of the Social Outcome Fund and encourage others to explore the opportunities it could bring.
The Mayor of London, Boris Johnson, said:
I am determined to halt the persistent problem of rough sleeping in London, and while we have made great strides in cutting the number of entrenched rough sleepers there is still much more to do. This complex issue requires innovative solutions, and our social impact bond is a good opportunity to encourage philanthropists and the private sector to help deliver a vital public service.
Care and Support Minister, Norman Lamb, said:
We know that more needs to be done to invest in preventative care. The current system too often only reacts to crises such as a fall; we want to prevent care needs from worsening or even happening in the first place.
Social Impact Bonds could be a great way of funding new schemes which prevent or delay a health or social care need, or the loss of independence. This is why we will be asking local areas who are doing innovative work on social investment to come forward and tell us how they can do this locally.
Housing Minister Mark Prisk said:
The new Outcomes Fund gives local authorities the chance to find innovative solutions to problems in their area that really deliver, while generating savings across government. The Mayor’s pioneering social impact bond for London’s rough sleepers, backed by Government funding, is already leading the way, giving the Capital’s homelessness charities the freedom to try new ideas to help the city’s most frequent rough sleepers - who account for nearly half of all rough sleeping in London. By paying them by results the Government can ensure the best value for money, and we can help find the services that really do transform lives for the better.
The Essex Social Impact Bond is a five-year programme which will provide intensive support to approximately 380 adolescents and their families. The target is to divert around 100 adolescents from entering care. Essex County Council is the first local authority to commission a Social Impact Bond in Children’s Services. The success of the Social Impact Bond will be measured by the reduction in the number of days the adolescents spend in care, as well as by improved school outcomes, wellbeing and reduced reoffending. Social Finance raised £3.1 million from social investors, including Big Society Capital and Bridges Ventures, to fund the Social Impact Bond. If the interventions deliver successful outcomes, the investors might expect returns in the range of 8-12% pa. The investment is entirely at the investors risk; should the intervention not deliver outcomes, the local authority does not pay.
Adolescents are the single largest age group among looked-after children in the UK. They often enter care because of multiple and complex behaviour problems, triggered at adolescence, which lead to aggression, antisocial behaviour, parental loss of control, family breakdown and ultimately an inability or lack of desire to continue living with the birth family.
The Mayor of London Social Impact Bond, developed in partnership with the Mayor of London and leading charities St Mungo’s and Thames Reach will provide support for around 800 rough sleepers who are neither long-term rough sleepers nor new to the streets. The aim is to reduce rough sleeping, help people get into stable accommodation, get them jobs and manage their health better.
In parallel, the Department of Health will be asking people in local areas who are doing work to develop Social Impact Bonds in social care prevention, to register an interest in becoming one of a small number of trailblazer sites.
Notes to editors
The Social Outcomes Fund is an innovative new top-up fund that will create many more social impact bonds that make a difference to people’s lives. It will attract new money by bringing in investment to help finance early, preventative programmes on some of the most complex and expensive social problems. The fund will be used to provide a ‘top-up’ contribution to PbR (Payments by Results) or SIB (Social Impact Bonds) contracts that are designed to deal with complex and expensive social issues. It will catalyse innovative new projects in areas where the wider benefits mean that a SIB is value for money, but where no single commissioner can justify making all of the outcomes payments. The Fund encourages active engagement from the Voluntary Community and Social Enterprise (VCSE) sector to enable service redesign and will accept expressions of interest by any interested party such as a commissioner, service provider, intermediary or investor. It operates only in England, with funding available to government departments, local councils and other commissioning bodies, like police forces or the clinical commissioning groups. The Fund will only top up a minority proportion of outcomes payments, and the average across the Fund is expected to be 20% of the total outcomes payments. The aim of the Fund is to support 10 - 20 new PbR/SIB contracts. It aims to leverage at least £60m of social investment.
Communities and Local Government is funding the GLA to administer the Mayor of London’s rough-sleeping SIB (up to £5 million over 2012-15). The SIB is intended to improve the outcomes for the target cohort of rough sleepers, who frequently return to the streets. The GLA has worked closely with CLG and Social Finance to develop the SIB and has commissioned Thames Reach and St Mungo’s to deliver the service. The payment by results approach has allowed the providers flexibility to innovate. In particular, by not issuing a service specification and instead focusing on outcomes, providers have been able to develop approaches that respond to the needs of service users. The cohort has been split equally between the providers, who will work with these individuals to achieve outcomes under the contract until October 2015.
The London Homelessness SIB, commissioned by GLA with funding provided by DCLG, began operations on 1st November 2012 and will run for 3 years. St Mungos and Thames Reach will provide the new service, which will work with 831 rough sleepers who between them accounted for almost half of all rough sleeping in London over the past year. The services will initially be paid for by social investment, with government only paying for the outcomes which are achieved, including a reduction in the numbers sleeping rough on London’s streets, long term moves into settled accommodation, reduced A&E admissions, and more individuals in employment.
Essex County Council has awarded a contract to Social Finance to deliver a Social Impact Bond to provide therapeutic support and improve outcomes for adolescents at risk of going into care. Essex County Council is the first local authority to commission a Social Impact Bond in Children’s Services. Social Finance has raised a total commitment of £3.1m to fund interventions for 11-16 year olds at the edge of care or custody, so that the young people can safely remain at home with their families. The investment is provided at risk by social investors, such as cornerstone investors Big Society Capital and Bridges Ventures, whose financial return is aligned to the positive social impact of delivering a better future for vulnerable adolescents. The Essex Social Impact Bond will fund a five-year programme which will provide intensive support to approximately 380 adolescents and their families. The target is to divert around 100 adolescents from entering care by providing support to young people in their homes. The success of the Social Impact Bond will be measured by the reduction in days spent in care by the adolescents, as well as improved school outcomes, wellbeing and reduced reoffending. If the interventions deliver successful outcomes, the investors might expect returns in the range of 8-12% pa. The investment is entirely at the investors risk; should the intervention not deliver the pre-agreed outcomes, the local authority does not pay. The Social Impact Bond will be funding Multi-Systemic Therapy (MST), which delivers family therapy in the home by highly qualified therapists. It focuses on improving parenting and rebuilding positive relationships so that families can manage future crisis situations, delivering long term and sustained impact. It is an evidence-based programme with 30 years international track record and will be provided by Action for Children, a leading children’s charity that supports the needs of the most vulnerable children and families in the UK. The charity has a track record in developing and delivering early intervention programmes.
The Department of Health will be asking people in local areas who are doing work to develop Social Impact Bonds in social care prevention, to register an interest in becoming one of a small number of trailblazer sites. This will enable us to learn from their work and test the effectiveness of this type of funding for schemes which prevent or delay a health or social care need worsening. This could include, for example, projects providing aids and adaptations or that prevent falls. It is hoped that funding preventative care can increase the quality of life for people whilst at the same time providing financial savings to the public purse, which can be put back into frontline care.
Social Finance (www.socialfinance.org.uk) is an FSA regulated non-profit organisation established in 2007 to develop an effective social investment market in the UK. Social Finance supports social organisations to raise and deploy capital; works with government to deliver social change; and develops social investment markets and opportunities. With support from the Big Lottery Fund, Social Finance developed the Social Impact Bond model and launched the first programme in Peterborough in 2010 to reduce reoffending. It now manages four Social Impact Bonds.