Perhaps one of the most frustrating issues with launching new products are wishy washy “on the one hand, on the other” articles such as the one in ‘socialworkingnow.’ The simple truth is government has reached the ultimate limits of funding consumption through conventional debt. States are simply not going to be able to borrow more, hence we need a solution. The only possible solution is to find a new structure to find investors working on a different premise. That is Social Impact Bonds. To deny the wretched state of government finances is to fundamentally misunderstand the world…this is why such discussions are entirely redundant.
The NSW Government is trialling what it describes as the ‘social benefit bond’. This is modelled on a UK version known as the ‘social impact bond, which started in 2010 at a prison in Peterborough. In the US there is also considerable interest in this idea.
In short it is a way of attracting private investment into social enterprises, in the NSW case it is being done in conjunction with UnitingCare Burnside and, more recently, with the Benevolent Society. As the NSW Government said in a release in April 2013 (see here) ’a social benefit bond is intended to create savings for the government while improving social outcomes. Part of these savings will provide repayments to investors commensurate with the outcomes achieved’.
Too good to be true? Yes, depending on what side of the political fence you stand. Advocates point to the benefit of raising money from private investors that may otherwise have not been forthcoming. Investors get a buzz from doing something that is socially worthwhile, and as long as the project is a success then they will also see a return. (One headline writer called this ‘The New Capitalism – Doing good while making a profit’.)
Australia’s first charity The Benevolent Society has welcomed the NSW Government’s commitment to backing Social Benefit Bonds to reduce the number of children entering foster care, but expressed disappointment at overall cuts to spending on prevention and early intervention programs.
The Benevolent Society’s CEO Anne Hollonds said increasing funding for targeted earlier intervention for vulnerable children, young people and families would be an investment in NSW’s economic future.
Clinton clearly articulated her belief in the importance of public-private partnerships as “one of the most important problem-solving tools.” And during her speech, she offered a prime and very specific example: Mr. J. B. Pritzker, a leading member of the world-famous business and philanthropic Pritzker family of Chicago, who had announced at the CGI conference the issuance of “Social Impact Bonds” to finance preschool education programs for at-risk children. Such bonds are a new tool, sometimes called results-based financing, that use private capital to achieve positive social outcomes, generating modest financial returns for private investors while simultaneously generating much greater returns in the form of cost savings for cash-strapped state and local governments.
Pritzker announced at the conference a partnership with the investment bank Goldman Sachs to invest $7 million to fund the expansion of a successful preschool program that reduces the need for special education at Granite School District in Salt Lake City, Utah. Over several years, the new financing will benefit more than 3,500 children and save taxpayers millions of dollars.