There are a range of areas where timely appropriate interventions can, as well as improving people’s lives, result in massive longer-term savings for the public purse. The key challenge is freeing up sufficient money to be able to invest upfront in preventative initiatives, particularly in such unprecedented financial circumstances.
We need to be innovative in our efforts. Seeking to unlock cash from private and charitable sectors is important. One area the DUP is keen to explore is that of social impact bonds. These are outcomes-based contracts where external investment is used to frontload funding for interventions by proven providers, and the state then pays on the basis of results for significant improvement in social outcomes for a defined population.
They also represent a reallocation of risk. The state only has to pay for effective services, the third party investor bears all the risk, and the investors and services have an incentive to be as effective as possible as a greater impact may mean a larger repayment. Social impact bonds provide a relatively safe investment opportunity for financial investors and regular citizens to invest in the future of their society.
The Regent Park Revitalisation Project, a community housing scheme in Toronto, Canada was substantially financed by bonds sold to provincial governments, pension funds and institutional investors. In England, investors have funded intensive interventions by a third sector organisation to reduce reoffending rates amongst males leaving Peterborough prison who served sentences of less than twelve months.
The investors will receive no return from the Ministry of Justice unless the re-offending rate reduces by at least 7.5%.
Social Finance, the social investment bank, has forecast that a £50m bond could fund sufficient rehabilitation work to cut the current 60% reoffending rate in Great Britain for short sentence male prisoners by 20%.The savings this would achieve would allow four prisons to be closed within five years at a saving of £62m in running costs.
Clearly the global economic crisis has led to finances being restricted across the charitable and private sectors as well as the public sector.
However there remains interest from private banking networks, with clients keen to invest directly in social progress. Northern Ireland is an ideal size for many interventions and our history means we are an attractive location for philanthropists particularly from the United States.
Social impact bonds lend themselves to areas such as crime, children in or on the margins of care, substance addiction, school truancy and exclusion, youth employment, public health and reducing unnecessary hospital admissions. They offer an opportunity to tackle some of our most intractable social problems.
DUP Ministers would seek to:
- Develop a strategy for engaging investors and putting in place social impact bonds
- Institute a team within the Department of Finance and Personnel
- Require Departments to come forward with proposed areas where social impact bonds can be pursued