Kenneth Clarke (right), then justice secretary, with an inmate at Peterborough prison, Cambridgeshire, shortly before the launch of the social impact bonds pilot scheme in 2010. Photograph: Chris Radburn/Press Association
The UK's first social impact bond (Sib) lost its footing last week. Hailed as the future of funding social change, through unlocking private investment in social outcomes, Sibs have received plenty of attention in the last few years.
But despite its success so far, the £5m Peterborough Sib, which is designed to reduce reoffending among short-sentence male prisoners, is now hanging in the balance as the government brings in its Transforming Rehabilitation programme. Under these reforms, due early next year, private contractors will run rehabilitation services in 21 parts of the UK, including Peterborough.
Meanwhile, the Cabinet Office on Wednesday launched a new £30m package to back social impact bonds to help disadvantaged young people get into education, work or training. So, what's the future for Sibs?
Charlotte Ravenscroft, head of policy and research, National Council for Voluntary Organisations
Since the first one was launched, the SIB has been much heralded for its potential to unlock investment for services that the government would not otherwise have funded.
For some charities, the model offers real promise. The aspiration being that services being supported could be mainstreamed in the longer term. But the premature culmination of the Peterborough Sib reminds us that it's still early days. One immediate lesson is that a Sib may be sensitive to policy shifts. Regardless of whether the policy change itself is positive, this sort of uncertainty could limit the appetite of potential Sib investors.
Other lessons include the importance of defining the outcomes correctly, pricing those outcomes appropriately, and considering whether the (typically high) development costs of establishing a Sib are justified by its transformative potential.
The £30m announced on Wednesday to support new Sibs is welcome, but charities will do well to scrutinise the details before deciding whether it is for them.
News this week of the changes to the Peterborough social impact bond have taken people by surprise. When Social Finance first designed the Peterborough pilot, our aim was to demonstrate that more should be done to rehabilitate short sentence offenders. The Sib is a means to affect social change, so those interested in the model will see the new statutory requirement to work with this group as a success for the programme and model.
The challenge for the Ministry of Justice and the companies bidding in Transforming Rehabilitation is to design rehabilitation programmes that are effective and tailored to individual needs. This has been a key lesson from Peterborough: that you need interventions that are properly resourced, with long-term commitment to their success. Then you need the flexibility to change as you learn more about the needs of the offenders and the opportunities to make an impact.
The £30m new funding is a significant further step in changing the funding structure of social programmes where innovation, flexibility and rigour are needed. Sibs are a key part of the future.
To read more about the Peterborough Social Impact Bond - follow Toby's blog.
David Derbyshire, director of practice improvement, Action for Children
Despite the cancellation of the Peterborough Prison Sib, this type of social investment is going to keep growing in children's services as it provides a source of additional funding when public spending is constrained. Alongside the financial opportunity, there are equally important benefits in promoting more long-term, consistent work with children and families and encouraging early intervention.
Action for Children already works with local authorities, Social Finance and other organisations in Social Impact Bonds. One project is to help children in Essex who are on the verge of going into care or custody to stay safely at home, and we are preparing to launch another that will offer therapeutic fostering placements in Manchester.
The savings made here can further be invested into early intervention work and this aspect is attractive to commissioners and providers.
Dan Gregory, independent adviser on social enterprise policy and practice
Social impact bonds were once the future; in fact, they were the future even just a few weeks ago. The prime minister, Sir Ronald Cohen and Goldman Sachs's chief economist have said they could revolutionise public finances, enable innovation and deliver returns to investors. So, despite similarities to private finance initiatives, concerns about payment by results (PbR) and warnings that they wouldn't be a panacea, "Watch Peterborough" we were told - and prepare for the future.
Under the new social investment tax relief, while many legitimate social enterprises (in their thousands) weren't included as qualifying investments, many Sibs were.
Is Chris Grayling ahead of us in ignoring the hype? If a pilot Sib is successful then shouldn't it always lead into a wider programme of PbR? And, if it's not successful, then shouldn't it be pulled? If this is right, won't
Sibs only ever occupy a tiny niche as occasional PbR pilots?
Abigail Rotheroe, consultant, New Philanthropy Capital
Events have finally overtaken the Peterborough Sib. This is not unexpected, but it is important. Although much has been discussed about risk transfer in Sibs, which lie with investors rather than the commissioner, this has never been strictly true. It is the government and the taxpayer who ultimately picks up the tab for the costs of failure to society as a whole. And, although the Peterborough Sib was meeting targets and getting better over time, the broader policy imperative to improve outcomes for offenders rightly took precedence.
But this doesn't mean it's all over for Sibs. True, cohort-based systems don't work when you change the baseline, but there are other options. The innovation fund, for example, pays for one or more outcomes per participant, which can be linked to improved employability. This avoids the Peterborough cohort problem, but still leaves Sib providers vulnerable to wholesale policy shifts.
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