It is fantastic to be here today at the Social Investment and Public Services Conference. First of all – a big thank you to David and all of the team at Social Finance for putting together what promises to be a really engaging day. They have long been in the vanguard of the social investment movement and played a crucial role in developing a number of the 25 Social Impact Bonds that are now up and running across the UK.
I want to talk about 3 things today:
first, why government cares about social investment – to the extent that we placed it at the heart of the agenda for the G8
second, why outcomes-based investment is so important
third, what we are doing to support the growth of this radical approach to helping more social organisations become more sustainable
Why government cares about social investment
We all know that government, whether central or local, doesn’t have all the answers. We need new thinking, new ideas and new ways of addressing them.
And that is where charities and social enterprises can help. These are expert organisations, they are on the frontline and so see what works well and less well, and they are nimble enough to try new ideas.
That is why my office, the Office for Civil Society, works to support charities and social enterprises in every way we can. We want to unlock more opportunities for charities and social enterprises to deliver public services and win government contracts.
A problem that charities and social enterprises often face is that they don’t have the money required to deliver government contracts. That is where social investment comes in.
Social investment is money that is invested into projects in order to generate a social impact. It enables people to put their money towards something that they really care about and get it back if the project goes well. It provides a new source of funding to address difficult social issues such as homelessness.
Social investment can provide charities and social enterprises with the money they need to help vulnerable people improve their lives.
Government is committed to supporting charities and social enterprises to access the finance that they need to do more. And we are working with partners in the sector to grow the social investment market, developing a range of new financing options to support organisations wanting to innovate and develop their business.
Why outcomes-based investment is so important
Bernard has given you an excellent introduction to Social Impact Bonds and a lot has been written about them, but I believe what should really matter to all of us is:
that they put the best outcomes for people at the heart of the service that is being delivered
that they put evidence at the heart of building better services for the public
that the investment creates the space to innovate and develop better solutions to the social problems that we face
that perhaps most importantly – we have a model that rewards successful innovation, but where the taxpayer only pays for services that actually work
And this is not just the ‘next big thing’ coming down the line – this is happening now. We have more Social Impact Bonds here in the UK than in the rest of the world put together. I’m proud of that.
Just to give a few examples:
in Essex and Manchester we have programmes focused on supporting children in care
in London we have a coalition of organisations working to reduce homelessness
and in Newcastle we have a Clinical Commissioning Group working hand-in-hand with the local voluntary sector to help people manage their long-term health conditions
Government support for Social Impact Bonds
As we all know, social problems do not neatly fit into the budget silos that government – indeed any big organisation – has developed.
For example, an intervention that helps to move children from residential care into an adoptive family is likely to generate savings for the local authority in the short-term, but it also yields longer-term benefits to the exchequer in terms of the long-term prospects for these children.
Often, though, no one party benefits enough from that programme to get the whole thing off the ground. So collectively the opportunity is lost – and it’s the service user, some of the most vulnerable people in our society, who bear the brunt of that. I think that is fundamentally wrong.
So to get around that collective action problem, we created a top-up fund – the Social Outcomes Fund – that would help to support projects that saved the taxpayer money and improved people’s lives.
Alongside the Big Lottery Fund’s £40 million Commissioning Better Outcomes Fund, we have made £20 million available to support the development of new and innovative solutions to some of the most difficult problems that our society faces. I’m pleased to say that the Social Outcomes Fund has committed over £10 million to Social Impact Bonds already.
Importantly, we have also put in place the infrastructure needed to support the development of new Social Impact Bonds. This includes:
bespoke support from the Centre for Social Impact Bonds, including free legal templates for setting up Social Impact Bonds
the publication of a database on unit costs of services to governments, so that providers can let us know when they can deliver a preventative service for less
the development of a network of What Works Centres that are starting to build a range of evidence about the types of intervention that are most likely to yield positive results
making Social Impact Bonds eligible for the new social investment tax relief, to attract a new set of investors and expertise to support these important projects
Supporting a sustainable civil society
Finally, Social Impact Bonds are part of a bigger picture – one in which we, as government, want to unlock more opportunities for charities and social enterprises to deliver public services, opening up public money and contracts for the sector.
We’re taking forward initiatives like the Social Value Act and supporting campaigns such as ‘Buy Social’ which are both focused on growing demand for goods and services from charities and social enterprises.
We have recently seen Croydon Council embracing this approach by embedding clear social value commitments into their £150 million contract for housing repairs. This translates into more apprenticeships, mentoring support for local SMEs and volunteering opportunities for staff.
At the same time we recognise the importance of building a sustainable market of providers who can meet this growing demand.
This is why we have developed a broad range of financing options to help social organisations, whatever their stage of growth.
We’ve provided the investment and expertise that new enterprises need to turn great ideas into real businesses through the Social Incubator Fund.
We’ve supported capacity building in the sector, with our Investment Readiness Programme drawing in over £25 of investment for every £1 of government grant.
We’ve backed Big Society Capital with £400 million from dormant bank accounts to create the world’s first social investment bank, which has already invested in over 100 frontline ventures.
And we will be providing an extra £140 million to help the sector develop and help individual organisations to implement the strategy that is right for them.
Part of this will through our upcoming Local Sustainability Fund, which will help charities and social enterprises articulate their core offer, reduce running costs if needed and explore different ways of diversifying their income.
This is alongside the £60 million endowment for a new social investment foundation called Access – a sister organisation to Big Society Capital – which will help more social ventures access the social investment market.
Taken together, you can see how we have the most developed social investment market in the world. And we need to be using it.
To sum up, government faces many issues that it isn’t best placed to solve.
But there are brilliant charities and social enterprises who do have the knowledge and skills to help the most vulnerable people in our society.
Social investment has a key role to play in enabling them to turn people’s lives around.
By working together across government and across sectors I believe we can confront complex issues – whether it is chronic health conditions or youth unemployment.
I would encourage all of you to go away today and think very carefully about how social investment could help you to unlock the resources and ideas needed to address the challenges that you face.