Q&A: Do Social Impact Bonds work?

Written by Geoffrey Lyons on 11 September 2018 in Interview
Interview

As the use of social impact bonds in public policy increases, so too are efforts to measure the “SIB effect” across a host of services. Mara Airoldi, director of the Government Outcomes Lab at the Blavatnik School of Government, looks at the current state of play of social impact bonds

GO Lab is based in the Blavatnik School of Government at the University of Oxford

Social impact bonds are a form of investment in which the principal payment is used to address a social problem, like tackling reoffending or homelessness, so that a portion of the savings made to public services can be repaid to investors as interest. Their effectiveness is subject to much debate.

CSW spoke to Mara Airoldi, director of the Government Outcomes Lab at the University of Oxford, to discuss the findings of GO Lab’s recent report on these new outcomes contracts and why they're so controversial. 

Why are Social Impact Bonds (SIBs) unique? Are they more promising than traditional policy tools? 
 
SIBs in the UK have typically been used to tackle entrenched social problems. SIBs aim to bring together different agents to coordinate around the need of individuals. The way in which these agents are working together is quite new. Also, they attract quite a bit of attention and political support that is not common for many policy tools. 
 
The literature and the feedback from practitioners seem to suggest there are at least some glimmers that SIBs are offering a way to improve how we offer public services, especially through improved collaboration, more prevention, and space for innovation. However, evidence is not conclusive, so we need to further evaluate whether they can be used as a tool for public sector reform, or if other approaches are better.
 
What are some of the challenges to scaling SIBs?
 
When we talk about scaling SIBs, we’re not trying to scale a particular policy tool per se, but rather consider the lessons that we want to scale. It might be more SIBs, or it might be improving practices elsewhere in the system where we are using similar mechanisms. We must be cautious about scaling something so new. Only if we find empirical evidence that is positive about SIBs, should we consider scaling up. It takes time to assess and assimilate the results and the lessons that can be learned.
 
Why are they so polarising?  
 
By their nature, I think SIBs lend themselves to different ideological interpretations. SIBs are seen by some as a solution to government failure, and by others as leading inevitably to market failure. Some people say that SIBs allow new players to come in who can bring efficiency and innovation. Others oppose SIBs on the basis that they are an extreme version of a neo-liberal agenda, and that they commodify people and their problems.
 
What were you trying to achieve with your latest evidence report? 
 
As an independent research group, we wanted to draw the debate away from the polarised views and articulate the ways SIBs can actually offer something to public services and how we can collect the evidence and draw lessons. As we are agnostic about SIBs, we don’t have a persuasion – just a lot of curiosity and healthy scepticism.
 
We wanted to question whether SIBs can help to overcome public sector challenges such as siloed budgets, difficulty investing in preventative services, and a risk-averse culture. Rather than asking do they work, we wanted to take a more nuanced approach. What are the mechanisms that can contribute to better social outcomes? The context is so important that it will never be “yes they work” or “no they don’t.” The better questions are “when do SIBs add value?” and “why do they add value?”, if they do. 
 
Also in projects that will not work as expected, there will be a lot of learning. Maybe it’s a lot to ask, but it would be great if we see these situations as a learning opportunity, and we create an atmosphere where we can talk openly of failures. The real failure would be the failure to learn. If there’s an expectation of something to deliver an outcome, we need to create a safe space – where we look at something that was expected to work and figure out why it didn’t. Creating that learning environment is a success.
 
In November of last year, Alina Sellman of the Centre for SIBs told CSW that she and her team were looking for the “SIB effect” in an effort to measure the true value of SIBs. Has there been any progress on this front?
 
Looking at all the evidence on SIBs to date, there is not yet any conclusive evidence that SIBs are better than other commissioning structures at delivering public services. Take the first ever SIB, for example, which looked to reduce reoffending among young men leaving prison in Peterborough. It was a success story. However, the question is whether it was successful because of how it was financed or because of the intervention itself. So, the question of what’s the added value of the SIB mechanism to the delivery of the outcome is something that hasn’t been evaluated to date.
 
To move forward our understanding of the ‘SIB effect’, in our report we articulate three potential routes by which SIBs may improve public services, that is through better collaboration, prevention and opportunities to innovate.
 
We have also tried to define what a SIB is, given that there is so much variation in the way they are designed and organised. We identified four dimensions in which SIB varies: how much of the contract payment is linked to outcomes rather than activities, who provides capital (e.g. at risk capital from own reserves or from social investors as opposed to loans), the social intent of the provider organisation which can be more or less formally assured, and the strength of the performance management. We think these can be the potential ‘active ingredient’ that can help us unpack what SIBs may have to offer.
 
Can you describe GO Lab’s mission and any other projects you’re working on?
 
We want to improve the way government is commissioning public services to see better social outcomes and better use of money. For us, success is seeing efficient and effective delivery of public services that is meeting the needs of citizens. This is a very broad mission but to break it down we work in three ways.
 
1) We’re an independent research institution. The idea is we want to be a trusted, independent base of useable knowledge for public sector commissioners to improve how they deliver public services. 
 
2) We engage in outreach activity. This is about keeping our ear on the ground and trying to understand how commissioners tackle complex social issues, and how our research can support them. We work with local authorities through hosting webinars and events [including a forthcoming webinar, 'Is there any magic dust in social impact bonds?', on 18 September]. We also hold advice surgeries and have a range of online tools and resources. We are keen to bridge the gap between academic research and practical support. 
 
3) We connect people together. We have peer learning events where commissioners can meet each other. We also invite other agencies and create a neutral space for them to share best practice, discuss challenges and ways they have been addressing them. 
 
The remit of the GO Lab is not just to evaluate SIBs as they are one tool among many that may improve the delivery of public services. There is plenty of experimentation going on in the public sector and we want to see what we can learn from this. 
 
Our latest research project, Rallying Together, looks at how local authorities are collaborating with their communities to overcome complex social problems. We want to develop and share an understanding of how local authority managers capture the energy, expertise and resources of those they collaborate with. It also looks at how they do this whilst maintaining accountability for tax payers’ money and delivering services that citizens expect.
Image description
PA
Share this page
Editor's Pick
Promote as primary content
Not Promoted

Share this page

CONTRIBUTIONS FROM READERS

Please login to post a comment or register for a free account.

Contact the author

The contact details for the Civil Service World editorial team are available on our About Us page.