The first social impact bond (SIB) was launched in the UK at the end of 2010. Its promoters argued that this revolutionary financial instrument offered the potential to fund social interventions that could address intractable social problems in new and innovative ways and also save taxpayers money. Finally this summer, we are beginning to see some results emerge give us hope that the SIB is delivering on its promise.
One government department that has embraced innovation has been Department for Work and Pensions. Under Iain Duncan Smith who recognised the enormous social and financial cost of youth unemployment, it launched an Innovation Fund to pilot programmes working with young people aged 14 to 19 who were at significant risk of becoming NEET (not in employment, education and training). Two of their pilot programs were funded through SIBs supported by Big Society Capital.
Last week the first two sets of young people supported by these programmes received their GCSE results. Their excellent results outperformed their targets substantially. ThinkForward, based in East London worked with 350 at risk young people across ten schools, offering a programme of intensive coaching by the charity Tomorrow's People, with a target of ensuring that 30% of them achieved five GCSEs A*-C. On GCSE Results Day 55% of the young people were confirmed to have achieved five GCSEs A*-C.
The second programme, New Horizons, working with 500 young people in Merseyside with complex issues, including learning disabilities, youth offending and living in care, saw 24% of its young people achieving five A*-C GCSEs against a target of 5%.
These results follow the announcement earlier this summer, by Justice Secretary Chris Grayling of encouraging reconviction statistics for Peterborough Prison, where charities including St Giles Trust and YMCA have been working with short sentence prisoners before and after their release from prison. Reoffending rates for these offenders are traditionally very high (60% will re-offend within one year of release) and the long-term cost to the public purse and public safety of continued re-offending is enormous.
This is where the first SIB was launched in in 2010 providing funding for work with prisoners and their families, without it costing the Ministry of Justice anything unless it works. If it works, savings to the MoJ will be substantial. Detailed results will not be available until next year but early indications are positive. Official statistics showed a 6% drop in the frequency of reconviction events at Peterborough, against a rise in the national average of 16%.
The premise of the SIBs is revolutionary because for the first time it allows Government to fund innovative programmes that can generate significant cost savings and not have to pay if the programmes fail. SIBs allow charities to provide clear evidence of what works and ultimately to scale successful interventions nationwide. SIBs also allow social investors to support new interventions not just once but multiple times as successful programmes repay capital which is recycled.
The very early evidence indicates that this virtuous circle of successful intervention, government savings and recycling of capital might really be possible. If it is then there is the potential to stimulate funding for a whole range of programmes that could create enormous social benefits in our communities.
However now more than ever it is crucial that Government does not drop the ball. Successful programmes should be expanded and the charities delivering them should get the opportunity to roll them out more broadly. The Ministry of Justice is already extending interventions focused on short-term prisoners nationally, and is keen to ensure that social organisations play a key role in that expansion.
There are now fourteen SIBs in the UK working on some of our most intractable problems; reoffending, youth unemployment, children in care, homelessness, elderly care and adoption. And beyond that there are multiple potential applications across social care, health and education, where social investors stand ready to take the risk on high performing charities successfully delivering innovative early intervention programmes.
In the last Budget, the Government launched a consultation into tax-relief for social investments. It is imperative that George Osborne ensures that this relief includes SIBs, and so helps to usher in a new breed of individual investor into these products.
Every Government department and local authority should be developing a strategy that follows these examples and leverages this new source of capital to allow social organisations to create and deliver new programmes that intervene to address key social issues, and ultimately lead to a more efficient and effective use of Government funding.