More clarity needed on use of social impact bonds, report says

An overview of SIBs and payment-by-results contracts also questions whether an investment market exists for the products

The report
The report

The government and local authorities should be clearer as to why and how they plan to use social impact bonds and payment-by-results contracts as a mainstream approach to funding public services, a new report has suggested.

The report, an overview of SIBs and the market for commissioners and policymakers, which was produced by David Floyd, managing director of Social Spider CIC, for the Centre for Public Impact, recommends that policymakers understand why they are subsidising SIBs and how to measure whether a subsidy has been a success.

The report says that subsidy recipients should also be required to publish their results in a way that increases understanding of social interventions, their effectiveness and whether they should be expanded or replicated elsewhere.

The report questions whether there is an investment market for SIBs, noting that if significant levels of commercial investment were needed for SIBs, "it is not clear that a market is developing that would be able to provide it".

The report says: "If governments do see SIBs as a method for transferring risk, it is not yet clear that there are enough investors out there to transfer that risk to, while offering politically acceptable levels of return. The significant subsidies provided for most existing SIBs have not drawn in significant investment beyond philanthropists and government-backed funds."

There are also a number of recommendations for commissioners, such as putting more time and resources into understanding alternatives to SIBs before deciding how to fund a particular intervention.

The report says commissioners also need to decide what they want SIBs or PbR contracts to achieve and must have plans to develop a strategy further once it is launched.

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