Apples with apples?

Last week, Chris Grayling announced that the early results from the first Social Impact Bond, at HMP Peterborough, make a ‘compelling case’ for his ‘important reforms’ at the Ministry of Justice.

We are a charitable foundation who invested in the Peterborough SIB because we care primarily about how charities and social enterprises can access capital on a scale that enables a step-change in their capacity to contribute to our society. The tangible benefit of the SIB to us was the rehabilitation of offenders. We invested because we see that charities and social enterprises are best placed to solve certain social problems – such as supporting offenders on the rehabilitation journey – and we saw the SIB as a potential game changer in enabling them to do this on a completely new scale.

If Chris Graylings reforms seek to enable charities and social enterprises to raise capital-at-scale to solve crime-related issues, then we are delighted that he has found ‘ a compelling case’ for reforms to achieve this. That such a compelling case is there to be made we do not doubt, and we would fully support such visionary reforms.

The power of the Peterborough Social Impact Bond, we believe, is that it aligns the interests of the providers (charities and social enterprises seeking to rehabilitate offenders) with investors who shared a desire to see offenders rehabilitated, and government, who want offenders to be rehabilitated. Outsourcing to private sector contractors is something quite different, regardless of whether or not there is a payment-by-results contracting methodology employed. There is no such alignment between a government who seek rehabilitation of offenders and private providers who seek to make surpluses in order to distribute them to their institutional investors – whose (perceived) fiduciary duties exclude the consideration of positive social outcomes from their investments.

We would see that the Minister can only claim that the Peterborough SIB experience has any relevance to current MoJ reforms in so far as they align the interests of investors, society and civil society organisations. There is no compelling case here – no case at all, in fact – for any reforms which are not founded on this core point. Rather it appears that there is a risk of two issues being conflated. On the one hand is payment-by-results, which is no more than a contracting methodology subject to the same tensions as every other contracting methodology where two parties who want different things enter into a contract – in the case of PBR, gaming, creaming, reclassifying results, data manipulation and so on. On the other hand is a social impact bond where aligned stakeholders who share a goal come together to achieve it.

To use the Peterborough example to make a case for a payment-by-results contracting methodology would, we believe, reveal a failure to understand the basic design elements of the SIB which created the conditions for a breakthrough. I hope that the Ministry of Justice do not make this mistake.

  1. Mike Nulty
    31st Jul 2013

    Pardon me not being completely up to date – but what are the “early results” at HMP Peterborough? Thanks

  2. 31st Jul 2013

    This from the Social Market Foundation: “Big hurdles to be overcome if Social Impact Bonds to move from margins of public services, says think tank”
    Here’s a link to the report:

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