Another day, another payment by results (PbR) story in the media… At least, that’s how it feels at the moment. After doing a blog post only a week ago about CAF’s recently-published report on using social investment to support charities delivering PbR contracts, and the fact that this appeared to reflect an upsurge of interest in this topic,yesterday saw David Cameron giving a major speech on rehabilitation in the criminal justice system in which he placed PbR at the centre of government policy.
The timeliness of our report was confirmed by the fact that quotes we put out in response to Cameron’s speech were picked up by the BBC (here) and the Guardian (here). We were reiterating the point that PbR has the potential to be a positive thing for charities, but the problems with the way that it is being implemented (as detailed in our report) mean that charities are in danger of being squeezed out by large private sector providers.
This is exciting: rather than writing about interesting reports or research by other people (which is my usual MO on this blog) I find myself able to write a blog post about a report of my own! CAF has just launched a paper entitled “Funding Good Outcomes: Using social investment to support payment by results”, which I wrote (based very largely, I should point out, on conversations with our excellent social investment team, CAF Venturesome, about their experience in the social investment market).
The report argues that payment-by-results (PbR) is a good idea in theory but poor implementation looks likely to lead to it failing in practice, as charities and social enterprises will not be able to play the sort of role as service providers that the Government clearly wants them to play.
NCVO released a survey yesterday showing that 7 out of 10 charities that are sub-contracting in the Work Programme thought their contracts were at risk of failure. This demonstrates the level of concern not-for-profits* have about the way PbR is being implemented. Of course, as well as the broader issues with PbR that are exemplified by the Work Programme, there are specific problems stemming from the prime contractor/subcontractor model which are not inherent to all PbR approaches. However, since it looks likely that the Work Programme will provide a template for many future PbR initiatives there is definitely cause for alarm.
The government recently kept us all on tenterhooks (or at least that very small number of us who get excited about voluntary sector policy), waiting for their “Giving White Paper: One Year On” update. As I outlined in my previous post, apart from the very welcome news of an additional £40m there was nothing particularly new or eye-catching in this document, so the build up was perhaps a bit unfortunate. It came as something of a surprise to find out only a week later that, with no fanfare at all, the Cabinet Office also released a progress report on their social investment strategy. Indeed, so low key was this launch that I only heard about it via Twitter (despite spending a reasonable amount of my time on social investment policy).
This document is quite a lot more interesting than the giving paper progress report. Not only does it give a useful brief overview of what has happened over the last year in terms of social investment policy (which to be fair is quite a lot), it also gives a clear indication of where the government’s priorities lie in this area over the next few years. There is also a very useful round-up of all the investments made by Big Society Capital so far. I thought I would take a brief look at the key points in the document, and whether there are any outstanding questions or areas of concern. (And just to declare an interest: CAF Venturesome gets two mentions in the report in terms of investments made. Firstly the CAF Social Impact Fund, and secondly the deal with Oxford City Council to guarantee a loan to Arts @ The Old Fire Station).
I have been thinking for a little while about doing a blog post on the new Public Services (Social Value) Act, and when I came across an article on the topic by former NAVCA CEO Kevin Curley it finally spurred me to action. Curley discusses some of the potential issues with the Bill and the way it will be implemented, and many of his thoughts echo ones I have been mulling over myself.
The Act sets out a new requirement that “public authorities to have regard to economic, social and environmental well-being in connection with public services contracts; and for connected purposes.” This has been well received by many in the civil society sector, who have been arguing for a long time that charities and social enterprises have been at a disadvantage when competing for public service contracts because they are unable to make the most of all the benefits they can offer. It is hoped that this bill could improve the situation.
Given this, it is quite tricky to look at the Act critically right now. No-one really wants to be negative, as it is an admirable achievement by Chris White MP and all those who worked with him to have managed to get a Private Members Bill on a topic like this all the way through Parliament and into legislation. And that should definitely be celebrated. However, the bulk of the work really begins now: ensuring the law is implemented in a in such a way that it actually achieves what it is supposed to, and is not distorted or watered down. It is important, therefore, to be aware of some of the issues.
A recent analysis in Third Sector magazine asked: “can social impact bonds help to create a better society?” One of the interesting things about this piece was that it raised some concerns about whether the ambition of getting mainstream investment in these kinds of products was realistic in the short to medium term. This is a question I want to pick up on here.
In broad terms, a Social Impact Bond (SIB) is a mechanism that allows investment to be raised based on a commitment from the government to pay if a set of outcomes is achieved, in order to fund interventions designed to deliver those outcomes. The attraction of the SIB idea is at least threefold:
- it offers the public sector a way of overcoming its aversion to funding risk
- it offers CSOs a means of raising the working capital they need in order to take on end-loaded payment by results contracts
- it offers a product that can potentially deliver both financial and social returns to socially-motivated investor
If we assume that the SIB model becomes established, we can consider whether each of these will still true and relevant in the future, which can give us some clues about the long-term prospects of the SIB.