Two social impact bonds worth a combined total of almost £1m, which will finance four charities’ payment-by-results youth homelessness projects, will be the first SIBs to benefit from the new social investment tax relief.
SITR allows investors who put money into social organisations to claim back part of their investments against their tax bills. The rate was set at 30 per cent by the Chancellor George Osborne in his Budget last year, and its scope was widened in Osborne’s Autumn Statement.
The Ambition East Midlands SIB will finance work with 340 young people by a newly formed partnership of three local charities: the Leicester YMCA – which operates as The Y – P3 and YMCA Derbyshire. The Aspire Gloucestershire SIB is a partnership between CCP and P3, and will work with 150 young people in Gloucestershire.
The combined value of the two SIBs, announced today, is £910,000, of which slightly more than 15 per cent was provided by individuals who will benefit from SITR.
The bonds will pay 7 per cent returns every year for three years. But for those benefiting from SITRs, the return plus tax benefit will be equivalent to 19.3 per cent a year, according to a Cabinet Office statement.
The SIBs were arranged by Triodos Bank Corporate Finance.
The majority of institutional investment came from the social investors Big Issue Invest, CAF Venturesome and the Key Fund, and all individual investors were either Triodos investors, supporters of the charity or clients of the Bristol-based financial planning firm Paradigm Norton.
Rob Wilson, the Minister for Civil Society, said in a statement: "SITR enables individuals to invest in the transformation of their communities and creates opportunities for individuals to use their money to change lives as well as generate a return. I’m delighted that Triodos has led the way with these first two social impact bonds and look forward to seeing SITR unlocking more opportunities for individuals to invest for good."
The two consortia were awarded the payment-by-results agreements by the Department for Communities and Local Government and the Cabinet Office as part of the government’s Fair Chance Fund, which was launched by Nick Clegg last year.
Aspire Gloucestershire has also benefited from money from the government-backed Investment and Contract Readiness Fund.