G8 Social Impact Investment Conference

Speech by Rt Hon Iain Duncan Smith at G8 Social Impact Investment Conference.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Iain Duncan Smith

G8 Social Impact Investment Conference speech


Last week I visited a community project in Newham, an East London borough, not far from here.

There I met a group of teenage boys, all of whom, because of a tough home life, behavioural problems, or learning difficulties, had been identified as vulnerable.

Normally their progression would be from the front of the class to the back of the class… and eventually, because of their poor behaviour, they would be excluded from school.

From there, it is a slippery slope to worklessness, and in extreme cases, gangs and crime.

Yet in Newham, something had changed for some of these children.

As the result of an innovative mentoring programme and thanks to some social investment, outcomes are now more positive.

Top and bottom

Yet across the UK, and the G8, too many vulnerable individuals still face a bleak future.

This is something we must end, for the spiral into disadvantage is not only a drain on public funds and a drag on economic growth…

… it’s also a tragic waste of potential.

Cut adrift from the labour market, all too often, those at the bottom of society come to feel they have no productive role to play.

Meanwhile, at the top, we find some of our most successful and well rewarded professionals productively involved in wealth creation.

The result is we are left with a society increasingly torn, as the gap between the top and bottom grows ever wider.

Social investment

The question for all of us in the G8 is how we go about bringing these two ends back together – building a more cohesive society, and benefiting our economy at the same time.

I believe the answer lies in social investment…

… a hugely exciting opportunity to use the skills of one group, to unleash the potential of the other.

Historically, it has been left to governments to pick up the pieces of social breakdown – meeting that responsibility through the welfare, health, criminal justice systems, and so on…

… or, to philanthropists, using charitable donations to make a difference, but without expecting anything in return.

For the rest – the ‘profit maximisers’ – investing money has too often meant putting it into commercial ventures and having to forget about the social consequences.

Social investment is about unlocking a new approach, saying to investors across the world:

‘You can use that money to have a positive impact on society, AND you can make a return.’

Social outcomes

The key, I believe, lies in identifying that any meaningful, positive improvement in a social problem comes with a value attached.

Take the boys in Newham – for whom every record of attendance, every qualification gained, every job entry, is valuable…

… both in terms of a social return, as these teenagers develop into participating members of society…

… and a financial return, as government pays out less in costly social services.

By putting a monetary value on each social outcome, government can then pay, not for the process of tackling the problem, but for results at the other end.

In the UK, that is what we are doing with the Work Programme, the largest payment by results employment programme this country has ever seen…

… paying providers for the outcomes they achieve in getting the hardest to help into work and keeping them there.

Because we are paying by results, the government pay for what works, reducing the risk to the taxpayer…

… AND the money follows the outcome, so providers are only rewarded for the positive life change we want to see.

New funding streams

Social investment develops this model further still – opening up a whole new funding stream.

Having monetised the outcome, by underwriting the return, government then allows investors to buy into a social bond…

… in turn, drawing in money from social enterprises and charities…

… as well as high-net individuals and those in the private sector, who would never previously have thought they could be part of the solution for change.

The effect this investment can have is dramatic.

Imagine you create a social bond in a particular deprived neighbourhood – be it in London, New York, Berlin or Moscow.

Investors buy into it and as with any investment, will want to see it flourish.

Because they are risking their money – money that could otherwise be reaping a return elsewhere – those investors will want to see that social programme succeed, bringing a whole new discipline and rigour to how it is delivered.

This is the fidelity guarantee – ensuring what you pay for is delivered, nothing more, nothing less.

Or to use a British term, that ‘it does what it says on the tin’.

But what’s more the same investors will want to take an interest in that community where they would otherwise be totally detached.

In doing so, these wealth creators could have a powerful influence on the communities themselves…

… a human interface between two different worlds, bringing success to the doorstep of failure.

Innovation Fund

The UK government is a global leader in putting this idea into practice.

We now have 13 social impact bonds now up and running, 10 of which are financed by my Department’s £30 million Innovation Fund…

… testing cutting-edge projects to improve the employment prospects of our most disadvantaged 14-24 year olds.

Under the Innovation Fund, each social investment partnership has freedom to determine how their own approach – meaning we are seeing a real variety of delivery models…

… some that challenge the status quo… others harnessing inspirational leadership… and many tailored to the needs of local young people.

In less than a year, over 6000 young people have been helped and over 1800 positive outcomes achieved…

… so we’re already seeing these programmes develop a meaningful track record.

With more time and a greater evidence base, the intention is that they could be rolled out on a national basis.

Growing the market

But as well as showcasing what can be achieved through social investment, I believe it is also government’s job to help grow the social investment market…

… establishing the right fiscal and regulatory infrastructure for the market to flourish.

Crucial to doing so is an understanding of what works – so that money can flow to those interventions that get results.

That is why in the UK, the government is supporting a number of organisations to develop our evidence base…

… including launching an independent body – the Early Intervention Foundation – to rigorously assess what works, determining value for money…

… and to advise local commissioners, providers and potential investors on the best evidence-based programmes.

Through these steps already taken, and those still to come – notably our aim to introduce a tax relief on social investment, with a consultation launched today…

… I believe we can harness the full potential of the social investment market – by some estimates, worth as much as £1 billion in Britain by 2016.


Representatives from G8 are here today because this opportunity is greater than Britain alone.

We want to see a step-change, encouraging and enabling a dynamic social investment market across the globe.

I believe Newham is a microcosm of what could be achieved right across the UK and even the G8 – savvy investors in partnership with an inspirational voluntary organisation, working tirelessly to achieve social justice.

To make this a reality, all of us here…

… whether representatives of government, business, the financial, voluntary or social enterprise sectors…

… have a role to play…

… applying our knowledge and resources where they can have the most impact.

In doing so… from Paris to Tokyo, Toronto to Rome… we can make a transformative difference.

What we now need is all nations to work together, with a meaningful G8 commitment to this agenda.

Driving success, securing a return and changing lives.

Let bring Wall Street and the City, to the inner city and poorer streets.

Published 6 June 2013