‘Social Impact Bonds’ should be used to streamline public spending, says report

A new report authored by Conservative MP Julie Marson and published by free-market think tank the Centre for Policy Studies says the government must control public spending and draw on private sector investment and innovation in the wake of the Covid pandemic.

The report shows how Social Impact Bonds (SIBs), and other “outcomes-based” approaches, could deliver better services for less money.

SIBs are a commissioning tool that enable organisations to take on contracts, but which make funding for services conditional on the project’s results.

SIBs were invented in the UK but have struggled to take off here, despite success in tackling problems of addiction, homelessness, recidivism, such as California’s prison system which cut the probation failure rate by 33% and the London Rough Sleeper SIB which helped cut rough sleeping more than traditional approaches.

One study found only £3bn of the £230bn a year spent by the state on ‘human services’ involves any kind of payment for outcomes, and only £20m is delivered via SIBs.

The report highlights the fact that as of 2016, the Government was spending roughly as much on purchasing goods and services from the private sector (£192 billion) as it was on paying its own staff (£193 billion).

However it said that one study found only £3bn of the £230bn a year spent by the state on ‘human services’, like healthcare, children’s services and rehabilitation, involved any kind of payment for outcomes, and only about £20m of that was delivered through SIBs.

Marson argues that at the Spending Review, Rishi Sunak should ask all departments to evaluate their use of outcomes-based approaches and where they could be employed, as well as make other changes to improve SIBs and put them closer to the centre of government.

Releasing the report, Julie Marson MP said: “We all understand that Covid-19 required a massive response by the UK state. And now we face huge long-term challenges, not least levelling up.

“But as we prepare for the Budget and Spending Review at the end of October, we must bring down borrowing and reduce wasteful spending while continuing to fund new interventions, infrastructure projects and services improvements that will get the whole country back on its feet.

“By shifting focus on to results, with the same level of commitment that Thatcher gave to her programme of privatisation and market-led reform, this Government can succeed where others have failed and lead the machine of government into age of excellence that is driven by results, innovation and performance improvement.”