Council to Offer Social Impact Bonds

New way to help deprived families - and make a possible profit

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Nick Hurd

Office for Civil Society

Hammersmith and Fulham Council

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Hammersmith and Fulham is taking part in a trial of Social Impact Bonds, a new government scheme which will allow private investors to fund intensive help for deprived families.

The borough will be one of four across the country offering these bonds, which allow people to invest in social projects and make a profit if the projects are successful.

The bonds will fund intensive help for families blighted by anti-social behaviour, crime, addiction and poor education.

If the help proves successful and families are taken out of deprivation and long term dependence on the state, the taxpayer will repay the investors with a decent return.

The move was announced by Nick Hurd, Minister for Civil Society and it is estimated up to £40million could be raised by four Social Impact Bond pilots launched in H&F, Westminster, Birmingham and Leicestershire.

It is estimated that the public service bill for the 46,000 most deprived families is over £4billion a year, almost £100,000 per family.

Often these families suffer from multiple problems such as addiction, abuse and a lack of education. Services currently tend to focus on a single problem of a single person.

Treating problems in isolation increases the risk of relapse and creates a costly cycle of managed deprivation. Breaking this cycle will mean fewer wasted lives, less damage to communities and better value for taxpayers.

Nick Hurd, Minister for Civil Society, says: "We must not be afraid to do things differently to end the pointless cycle of crime and deprivation which wrecks communities and drains state services. Social Impact Bonds could open serious resources to tackle social problems in new and innovative ways.

" We want to restore a stronger sense of responsibility across our society and to give people working on the frontline the power and resource they need to do their jobs properly. Social Impact Bonds could be one of many Big Society innovations that will build new partnerships between the state, communities, businesses and charities and focus resources where they are needed. The four local authorities that will pioneer this work are taking a bold and exciting step."

Stephen Greenhalgh, Leader of H&F Council, says: "The social impact bond is a really exciting idea that is in tune with Hammersmith & Fulham Council's belief in the hand up rather than the hand out. We need real innovation if we are to address the entrenched culture of entitlement and dependency amongst our most chaotic and troubled families."

The Government has committed to support the growth of what it calls the Social Investment Market.

Already, Big Society Capital (formerly Big Society Bank) has been launched and will have around £600million to invest in social finance products like Social Impact Bonds and attract more private investment into the market.

In time it is hoped that other products like social ISAs and pension funds will be available to everyday savers.

Today’s announcement supports the Prime Minister’s ambition, set out in December 2010, to try and turn around every troubled family in the country by the end of the parliament.

The Social Impact Bond model was advocated by Graham Allen MP in a report commissioned by the Prime Minister to look into early years intervention.

It found that investing in early intervention can generate massive savings in reducing crime, underachievement, teenage pregnancy and alcohol and drug misuse. He recommended the use of Social Impact Bonds to finance and deliver interventions, alongside other solutions. In this pilot the underlying investment contract will be designed to encourage early intervention by measuring reductions in social problems from a baseline.

Social Impact Bond pilots are expected to be funding intensive interventions from spring 2012.

September 9, 2011