I recently attended a good meeting on Social Impact Bonds organised by Richard Worsley and the Tomorrow Project. SIBs are a means of raising private finance for interventions on social issues; investors are paid according to whether specified outcomes, such as reducing ex-prisoner reoffending rates, are achieved. (They are therefore not really bonds, since there is no guaranteed return to the investors, but the term seems to have stuck.)
The main speakers were Geoff Mulgan and Gavin Poole. Geoff has recently moved from the Young Fondation to be Chief Executive at NESTA, and it will be interesting to see what he does with that organisation. He had an impressively realistic attitude to SIBs, not overclaiming for them but arguing that in the current context of public finances, they are an option to be considered. He had some very powerful points about previous efforts to introduce new public/private financial mixes. In particular, the scandal of PFIs remains untold, despite an internal analysis which showed that 60% of PFIs were bad deals and a further 10% uncertain – the result being that billions of pounds continue to pour our of public coffers to no good effect. A classic case of a short-term arrangement with verybad long-term effects.
As a Longviewer, I was of course interested in the long-term perspective on SIBs. They focus, necessarily, on short-term and measurable results. there is no scope for assessing longer-term consequences, good or bad. But this is not necessarily a fundamental flaw, provided the right measures are chosen.
What it does raise, for me, is the tension between innovation and precision of measurement. We all want robust measures, and Geoff reminded us that the meeting was taking place in the premises of the Royal Statistical Society, so we should avoid heresies of statistical looseness. But for SIBs, it seems to me, there will have to be some measure of dependence on trust and respect amongst the stakeholders, rather than an abstract reliance on contractual requirements. Keep those lawyers away!
Relatedly, Gavin made an interesting point about pilots. We tend (I have myself) to argue for pilots as part of evidence-based policy-making. But the simple linear approach of pilot-evaluate-revise-rollout will not always be appropriate. For one thing it will absorb time, and also possibly the energies which are badly needed for innovation. What is important is that pilots are part of building a robust knowledge base, where lessons of all kinds are learnt, stored and made accessible. This is a continuing process.
For those who want to read more about SIBs, Michael Moynagh of the Tomorrow Project has written a useful introduction, Investing for Public Good.