Nick Clegg, the Deputy Prime Minister, wants to see "social investment move from the margins to the mainstream".
Speaking yesterday at the launch of a report on early intervention in children’s services by the Labour MP Graham Allen, Clegg said the coalition was "expanding its thinking" on social investment.
He said the government would next month launch a paper outlining its strategy for social investment. He called on the City to use its expertise to develop the social finance market.
"We are gladly building here on work undertaken by the previous government," he said. "But we are determined to go further and faster, in terms of creating a genuine movement for social investment."
He said the government was interested in promoting new forms of social investment in areas such as children’s early years, work with repeat offenders and intervening with problem families.
"The challenge is to find creative ways to bridge the gap between the initial investment and the long-term returns," he said.
"In the City of London we have one of the most innovative financial services centres in the world. Social investment is an area where the expertise of the financial services industry could be usefully deployed."
Later this year, Allen will launch a second report on the funding of early intervention with children.
One of the main proposals for funding early intervention programmes is through investment by charitable foundations and philanthropists in social impact bonds, where the government pays out according to charities’ results, but with the risk taken by third-party investors.
A pilot of the social impact bond is currently being run to reduce re-offending among prisoners at Peterborough Prison.