Andrew Cuomo’s endorsement of SIBs/Pay for Success bonds for New York state helps maintain momentum while there is some positive comment from the Social Market Foundation too.
There are clear potential benefits to be had from using SIBs, writes Nigel Keohane of the Social Market Foundation
Charities face gruelling financial pressures. A recent survey by The Guardian found that nearly one in 10 charities think they will not exist in more than five years’ time. And with the local government grant cut by an additional 10 per cent in the latest spending round, contracts with the voluntary sector are likely to become more vulnerable in the years ahead.
It is unsurprising, therefore, that many look expectantly at new initiatives that might offer an alternative source of funding for their work. Social impact bonds are one such alternative funding type. As a form of payment by results, SIBs involve private or philanthropic investors providing the up-front finance for interventions delivered by third sector providers, with the government paying them a return only if and when social outcomes are achieved.
Only a handful of SIBs are under way at present, but the potential benefits of using them are clear. First, they can help to create a more diverse and competitive market of providers than the large scale payment-by-results schemes such as the Work Programme. Second, they offer the possibility of involving specialist third sector organisations in delivery and thereby increasing innovation in service delivery. And, third, they can be used as a way to deliver low-risk, small-scale trials to develop new approaches to service delivery, which could then be rolled out in more conventional ways. Thus, there is hope that they could be put to good use to tackle difficult social challenges such as reducing reoffending, youth unemployment and homelessness.
Albany, NY – Governor Andrew M. Cuomo announced that up to $30 million in funding is available to attract private-sector investment in New York State’s landmark “Pay for Success” program, which is part of the State’s efforts to transform how government does business while serving vulnerable New Yorkers. The State is seeking partners to raise up to $30 million in private investment for innovative social service programs under this initiative.
The Pay for Success initiative will attract private funding for child welfare and early childhood, healthcare, and public safety programs. If performance standards and actual savings targets are met or exceeded, the State will repay investors for program costs as well as to provide a return on investment based on the effectiveness of the program, and the State will also benefit from future savings.