Social Impact Bonds: What lessons should we learn from Peterborough?

Just over a month ago we got the first results from the Peterborough Social Impact Bond (SIB) – the flagship for the SIB programme. Since then there has been a lot of analysis about SIBs and its long term prospects; discussion that has generated far more heat than light.

SIBs are just one small part of the social investment landscape, but they could become a permanent fixture in public service delivery. So it is important that we learn the right lessons from the Peterborough SIB.

Three lessons for commissioners and the voluntary sector

1. The voluntary sector can deliver successful outcomes

This was a key part of NCVO’s General Election manifesto on public services, and the results of the Peterborough SIB reinforce this message.

In all the focus on the targets that were set for the bond to deliver a payment, a key message has been lost. The voluntary organisations delivering the SIB were successful in reducing reoffending by 8.4% amongst its first cohort. This is impressive, particularly given the difficulties the state has faced in reducing reoffending over many decades.

Although this didn’t trigger an immediate payment, this result shows that the voluntary sector has a vital role in improving public services. Government departments and local authorities across the country should take note that working with the voluntary sector is essential to developing effective interventions, helping them to save money over the long term.

2. Collaboration can be as effective as competition

The One* Service which delivered the SIB is not just one charity  but a combination of several different charities each bringing their own expertise and experience to crack this social challenge.

St Giles Trust, Sova, Ormiston Families, YMCA and MIND have showed that by working together, they can be more than the sum of their parts and the success they have had together in reducing reoffending should make all commissioners sit up and take notice.

Many of the reforms that have been taken in public service commissioning have been focused on competition driving up quality, but too much competition can sometimes deprive commissioners of the benefits of organisations working collaboratively.

There is also a role for voluntary organisations in scouting out opportunities for collaboration so that we can make the biggest impact possible. Although public service commissioning has become much more competitive, the sector must retain partnership working within its DNA.

Commissioners need to develop delivery models that allow for the development of partnerships to tackle some of the toughest social problems when necessary, particularly between local and national charities where collaboration may produce the most effective outcomes.

3. Funding doesn’t need to be complicated

NCVO has written an excellent paper on the problems with Payment by Results, however, the Peterborough SIB is interesting because it was designed specifically to avoid complicated funding arrangements in order to reduce risks for charities involved.

The organisations delivering services for the Peterborough SIB were given traditional contracts, being paid up-front so that they could be confident in investing in new staff or acquiring new resources. It also avoided problems of cash flow which have dogged PbR providers and ensured that providers would last the full length of the programme.

With all the focus on PbR and other innovative forms of funding, the Peterborough SIB is a useful reminder that traditional contracting arrangements (and dare I say it, grants?) can be effective in delivering outcomes – perhaps even more effective than PbR.

Given the heavy emphasis on PbR in the new Transforming Rehabilitation programme, it will be interesting to see if the PbR payment mechanism is as effective as the Peterborough SIB in generating successful outcomes, although we will need to take into account the significant upfront support given to the Peterborough SIB.

What next for SIBs?

The real test for the Peterborough SIB will be next year when we see the evaluation of the second cohort. Investors will receive a payment if offending is reduced by 7.5% averaged out over both cohorts and this looks likely given the results of the first cohort.

Aside from Peterborough, there are 15 other SIBs currently running in the UK and results will begin trickling out from them over the next couple of years which will further help us evaluate their strengths and weaknesses.

The Deputy Prime Minister has also announced £30m in funding for SIBs to take youth unemployment back in April and this may bring forward further innovations.

NCVO will be continuing to monitor the development of SIBs closely, but it is still early days for this model of service delivery.

What do you think?

As ever, we are keen to know your thoughts about future policy developments. Where do you think SIBs are heading? What changes need to be made to make them more effective?

Want to be part of the debate? Please leave a comment below.

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Andrew was NCVO’s senior policy officer. He covered issues around funding, social investment, tax and the impact of the economy on the voluntary sector. Andrew has left NCVO, but his posts are kept here for reference purposes.

2 Responses to Social Impact Bonds: What lessons should we learn from Peterborough?

  1. Pingback: September 23 2014 | Young Markets

  2. gribblethemunchkin says:

    On point 1.

    Do note that this reduction in reoffending isn’t that impressive as the people receiving the help were previously receiving no help at all. This is essentially the difference between no assistance and 12 months helpfrom professionals. It is not possible to say whether the public sector (such as the probation service) would be able to achieve better results or not.