Put Your Money Where Your Mouth is.

David Brownsey-Joyce reports on the government’s latest poverty busting scheme.

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The UK Government has announced its intention to tackle 120,000 problem families through ‘Social Impact Bonds’. The idea is simple organisations buy a bond from a Government department the initial cash raised is used to instigate a social project and if successful those organisations that stumped up the initial investment cost will get a nice fat dividend payment.

It sounds so simple and very much in line with our ‘buy now, pay later’ culture, the problem is where to get the initial investment? The Government has made it clear that it wants start-up costs to come from the private and third sectors, the problem is that they are a little strapped for cash at the moment.

We are still in an economic downturn and everyone is watching their bottom line. Charities and local authorities have seen their funding cut dramatically. So who could have the money and the long-term vision to gamble on something that may not even payout for years?

Those who are interested in the idea of ‘Social Impact Bonds’ will be keeping a close eye on the trials going on in the London Boroughs of Hammersmith & Fulham and Westminster, along with Birmingham and Leicestershire to see how finds progress, and whether the local authorities not only get their money back but turn a profit.

The point of the trials is that they are being tailored for their communities and that is the point we don’t need a ‘one size fits all’ solution we need a series of tailored solutions. That we try everything, get rid of what doesn’t work and expand what does. We need to think of these bonds as a long-term investment that will allow us to try ideas we couldn’t before because we didn’t have the resources to tackle a specific issues.

So who should stump up the investment for the bonds? Local authorities are dealing with cuts of around 26% to the finances; charities are finding their grants cut from local authorities by in some cases as much as 50% as well as facing cuts from business, whilst the private sector is still contracting for the most part. Who is left that is cash rich enough to put in the initial investment to get these rolling?

What I expect will happen is that we will have a few large corporations buy ‘Social Impact Bonds’, these will most likely be highly publicised and used mainly as a way of improving their reputation, banking institutions would be ideal candidates to take this road, a few million written off for what they may feel would be a PR stunt would be a worthy investment; certainly it would give organisations the ability to have a real crack at a specific issue in a specific area, and if they succeed then the institution that provided the initial investment gets a bonus they wouldn’t have even expected.

The more successful projects will come from charity coalitions, who pool their resources to tackle specific issues. They will have the background and expertise to not only provide financial backing but also help with actively pursuing an agenda. The problem will be getting multiple charities to agree on what to focus on and it will have to be very specific.

More importantly to those who will need to see a return on their investment to continue the projects will be how you determine success. When you are tackling varying social problems which interlock and create our social problems which do you tackle and how do you measure success? Is school attendance a valid measure? How about the length of time without taking drugs? How many people within a household are unemployed? Are we merely talking about measures that can be quantified?

I thought we had enough of targets when we had a Conservative led Coalition Government created but it seems we aren’t done with the cold truth of numbers yet, the return of the ‘tick-box’ culture.

Given the way success is likely to be measured this would actually lend itself to specific industries, private healthcare for instance, they could sponsor a project aimed at improving children’s health through a ‘Social Impact Bond’ and then plaster the successful results everywhere. There are plenty of others that could follow suit, so if they wish to drive home their message to their customers it’s time they put their money where their products’ mouth is and sponsor social projects.