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Ministers warned not to exclude social impact bonds

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A new form of social investment tax relief should be extended to social impact bonds, the government’s own social investment bank has advised.

Treasury plans to give tax breaks to investors in social enterprises and charities will currently exclude a small but growing number of social impact bonds, including those established by Essex CC and the Greater London Authority.

However, Big Society Capital, the social investment bank launched by the prime minister last year, has written to ministers warning that a failure to incentivise would-be funders of social impact bonds could have a significant negative impact on the fledgling market.

Simon Rowell, the bank’s strategy and market development director, told LGC: “Making social impact bonds eligible for the tax relief could open up a whole new class of investor and drive a really big increase in the size and in the variety of social impact bonds.”

There are currently only about 14 social impact bonds in operation, including Essex CC’s project to prevent troubled adolescents being placed in care and the GLA’s programme to reduce homelessness.

Under the social impact bond model, investors fund preventative work and only gain a return if service savings are made.

Manchester City Council is in the process of setting up a bond aimed at reducing the number of children being taken into care while a consortium of adoption agencies are due to set up a bond which will see local authorities fund the return for investors via a £52,000 payment per succesful adoption.

The government’s consultation on the new social investment tax relief is due to close on 6 September.

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