Big Lottery Fund backs social impact bond market with £40m fund

Initiative will be a partner to the Cabinet Office's £20m Social Outcomes Fund and use the same application process, says Nat Sloane, chair of the BLF England

Nat Sloane
Nat Sloane

The Big Lottery Fund has today announced a new £40m fund to back the social impact bond market.

A social impact bond is a kind of payment-by-results contract whereby a public body agrees to pay out if an organisation has a positive effect on a problem such as homelessness or reoffending.

The organisation can then use that promise to attract funding from outside investors. Programme funders  pay out and investors make a profit only if the charity’s intervention proves successful.

A statement from the BLF said the Commissioning Better Outcomes fund was being launched as a partner to the Cabinet Office’s £20m Social Outcomes Fund, which was announced last November.

The Social Outcomes Fund is intended to be used in situations where solving a social problem would create savings for several public sector bodies, but where the costs would outweigh the benefits for each of those bodies by themselves. It will supply a pot of money that commissioners in central and local government can use to pay out if delivery is successful.

The Commissioning Better Outcomes fund will primarily help to finance social impact bonds that will ensure voluntary, community and social enterprise organisations have a chance to be involved in service delivery.

A statement from the BLF said that because the two funds have a similar aim they would share an application process, and that the Cabinet Office and the BLF would decide which funding pot each application was most suitable for.

A spokesman for the BLF said it had not set a limit on the amount it would award to each social impact bond, but that it was hoping to fund between 30 and 40 of them. "In terms of what we would fund, it would be the minority of the outcomes payments," he said. "The majority of it would have to come from the commissioner."

As part of the fund, the BLF will also launch a support package to help commissioners develop social impact bonds – the package will include appointing contractors to work with commissioners in developing proposals for funding. The BLF said it would spend up to £3m of the £40m on helping commissioners to purchase the technical support needed to finalise the structure of their social impact bonds.

Nat Sloane, chair of the Big Lottery Fund England, said social impact bonds were a relatively new concept that could seem daunting to the uninitiated. "Commissioning Better Outcomes, the support package that the Big Lottery Fund has unveiled today, and our joined-up approach with the Cabinet Office will bring a significant boost to this area of the social investment market," he said.

Nick Hurd, the Minister for Civil Society, said Britain was leading the world in the development of the social investment market. "Through these two complementary funds, we are working together to create a joined-up application process and making it easier for people and organisations to develop social impact bonds," he said.

The application process opens today and awards will be made on an ongoing basis.

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