The UK government has announced a £20 million Social Outcomes Fund as part of its latest drive to tackle social problems through payment by results. The money will be used to set up more Social Impact Bonds (SIBs), which are three-party contracts involving an investor who funds a project, a provider who carries out the project, and a government commissioner who pays the investor according to the results achieved as agreed in the contract. SIBs are designed to focus on social outcomes (e.g. improved health) rather than inputs (e.g. number of doctors) or outputs (e.g. number of operations).
The announcement came alongside the introduction of two new Social Impact Bonds commissioned by local authorities – one to prevent vulnerable teenagers from going into care and the other to tackle homelessness.
The Social Outcomes Fund was established because in some cases, organizations did not have the money to set up an SIB.
“While ten Social Impact Bonds have been rolled out to date, in some cases organizations have had a shortfall of money, which has prevented them from setting up a social impact bond. In order to push forward this radical agenda the Government is announcing a £20 million top-up fund so that many more Social Impact Bonds can be set up,” said Nick Hurd, Minister for Civil Society.
The fund is intended to help in cases where solving a problem will generate savings for public bodies, but where the costs outweigh the benefits.
“The new Outcomes Fund gives local authorities the chance to find innovative solutions to problems in their area that really deliver, while generating savings across government,” said Housing Minister Mark Prisk.
SIBs allow private investors and philanthropists to invest in a project that addresses a specific social problem and are only paid a financial return if the project is successful. This method of blending financial return and social impact is good for the government, especially in a climate of austerity, because the financial risk is taken by the investor rather than the taxpayer. The Social Outcomes Fund aims to attract at least £60 million from private investment.
Social Enterprise Buzz is a media company dedicated to covering social enterprise news from around the world. We publish a range of stories from startups to entrepreneurship, innovation, and finance, which showcase business making the world a better place. Read more.