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The role of social impact bonds


Action for Children’s mission is to help the most vulnerable children and young people; we are interested in social impact bonds (SIBs) as one mechanism to help achieve this.

So what is the problem that SIB’s are trying to solve?

Given the ever increasing squeeze on resources, preventative services for children and young people are under pressure. Investing in new approaches can be viewed as risky with unproven benefits - particularly when it comes to measuring financial returns. In essence it can mean that vulnerable children are not always getting the help they need when they need it.

SIBs are an innovative way of attracting new investment to improve social outcomes. Through a SIB, private investment is used to pay for services, which are delivered by social sector providers with a proven track record. Financial returns to investors are based on improved social outcomes. If outcomes do not improve, then investors will receive no recompense.

Hence, they can facilitate the up-front funding for services to address some of the perennial social care problems that we face as a society. Because of this, the government is championing the use of SIBs, seeing three key benefits: providing working capital, attracting private investment and supporting greater innovation.

Can SIBs benefit children’s services?

The short answer is yes, but the long answer has a number of caveats.

Firstly they bring in new resources, helping to fund new approaches that shift the financial risk to the investor from the commissioner.

From our point of view a key benefit is the stability they can offer. At a time when capital can not be released so readily, and certainly not for long periods of time, SIBs can bring with them longer contracts, which in turn creates the stable environment that services need to deliver sustained and positive outcomes for children. Ideally contracts will offer the security that a service will exist over multiple years, bringing the assurance that the work started with a child young person will be completed. This is in contrast to the reality of current funding arrangements where some services have barely enough time to be set up before staff need to start applying for funding all over again. Most importantly this has a damaging effect on children and families; many will have just learned to trust their key workers, only to suddenly find themselves with new people to work with, or with no help at all.

SIBs also provide a welcome focus on outcomes.

More controversially they require the approaches they fund, for example Multi Systemic Therapy (MST), to be delivered to fidelity - i.e. delivered in exactly the way it says on the tin. There is a belief that operating in this way might undermine the role of the practitioner. We disagree; you cannot deliver to fidelity without skilled practitioners. Working in this way should help to protect the quality of the provision. In practice we recognise it is hard to do. You need the right referral mechanisms, trained and supported staff, sufficient time and resources. This will represent a culture shift for many organisations. But it should also mean the quality of the provision cannot be chipped away to make savings or arbitrarily reduce waiting lists.

That’s the theory, but it is early days for the implementation of SIBs.

There are many aspects that we still need to get right.

Crucially with the financial incentive and payment by result (PbR) mechanisms, it is important that those delivering services do not forget who they are providing the outcomes for. We must get the payment metrics right from the start. For example, where services are set up to avoid care placements, it would be wrong to set the metrics to only allow a payment when 100% of cases avoid care. From our perspective, if investors received payments when the overall costs of care placements have been reduced we would hold true to our organisational mission - Action for Children believes in restoring family efficacy, keeping families together and children out of care, but we know that for some children entering care will be the best solution.

We are clear that SIBs are not a silver bullet to resolve all social ills and will only be appropriate in particular instances as they designed to enable specific interventions aimed at alleviating specific problems.

SIBs are a part of the puzzle in achieving the ultimate prize in meeting the needs of the most vulnerable children and families in the country. They could go some way to shifting money that is currently tied up (rightly) in meeting acute needs, to instead fund early interventions that provide support when it is first needed to prevent problems from escalating in the first place.

Jacob Tas, executive director operations and deputy chief executive, Action for Children

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Readers' comments (2)

  • As an FD of the council I am really interested in how SIB's can be used to drive down the cost and make systems more efficient around Looked after Children. Obviously outcomes are important.

    People talk around the 'graph of Doom' in adult social care.Only recently people are starting to realise that the area of childrens social care is undefunded to an even greater extent. Not only underunded but almost every council is seiing the costs o and numbers of LACs go up.

    Paul Woods the FD at Newcastle has done some excellent analysi on this major cost pressure.

    John Harrison, LGC LinkedIn Comment.

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  • Social Impact Bonds need to be of sufficient scale to make the cost of establishing the investment mechanism cost effective. If focusing on delivering one specific service product, could this be best achieved by 'clustering' a range of similar requirements from across a broad geographical area?

    David Whelan, LGC LinkedIn Comment.

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