There is no firm evidence that social impact bonds produce better outcomes than more conventional payment-by-results contracts, academics at Oxford University have concluded.
Social Impact Bonds: The Role of Private Capital in Outcome-Based Commissioning, by Daniel Edmiston and Alex Nicholls, takes a detailed look at the results produced by four social impact bonds chosen because of their varied size and scope.
The paper says that the four schemes examined produced a variety of positive outcomes for service beneficiaries, but it is not clear that the presence of private sector investment in social impact bonds is producing better results than more traditional payment-by-results models.
"Proponents of SIBs suggest that private capital within outcome-based commissioning has the capacity to leverage additional resources for innovative services that will lead to improved social outcomes and future cost savings for the public sector," the paper says.
"In this regard, the introduction of private social investment does present an opportunity to fund welfare services that would otherwise not be commissioned within the current climate of welfare withdrawal and fiscal recalibration in advanced capitalist economies.
"However, there is, at present, very little definitive evidence to suggest that services funded through such a mechanism lead to any relative improvement in social outcomes compared to more conventional payment-by-results commissioning models."
The paper says this is mainly due to the poor availability and standards of evidence currently available and the difficulties in accurately measuring complex social outcomes over time.
"However, where there is evidence available, it is rather mixed," it says. "With this in mind, SIBs present a new set of risks and opportunities in the field of public service reform."
The paper says that private sector investment in SIBs can allow for more flexibility and innovation than more traditional commissioning models, but in the SIBs studied the opposite appeared to the case.
"The presence of private social investment appeared to stifle the flexibility and autonomy of service providers to innovate and deliver services according to their social mission," it says.
It says this is because the private investors, who receive a return on their investment only if certain outcomes are achieved, tended to provide "additional oversight", which produced unintended consequences such as increased performance measurement that took resources away from front-line service provision.
The paper calls for independent work to be carried out to establish the relative role and significance of private capital in outcome-based commissioning.
"Without this and evidenced effects of improved (and sustained) social outcomes, the public sector runs the risk of paying increased transaction costs associated with private social investment without realising the putative benefits offered through the SIB model," it concludes.
The government has taken a keen interest in SIBs and last year set up an £80m fund to provide top-up payments for investors if the schemes they funded were successful.
Rob Wilson, the Minister for Civil Society, said at the time that he thought the SIB market could be worth £1bn by 2020.
There are 32 social impact bonds, the largest a £5m scheme in Peterborough set up to reduce reoffending rates.