Alina Sellman, head of the Centre for Social Impact Bonds, tells Geoffrey Lyons about the outcomes-focused contracts and why critics ought to give them a chance
In July, a press release jubilantly announced that a few dozen investors would be remunerated roughly 3% interest per annum on top of their principal investment. With trillions of financial transactions occurring daily, it’s rare something so prosaic merits public recognition. But this was different. The Peterborough Social Impact Bond (SIB), launched in 2010 by Social Finance, was the first outcomes contract of its kind. As the press release indicated, it worked.
The guidelines were simple: money invested would go towards rehabilitating HMP Peterborough’s short-term offenders. If reoffending was reduced by more than 7.5% (the “social impact”), investors would get a chunk of the savings (the 3% interest), and nothing would be lost from the public purse (the icing on the cake).
A SIB craze followed Peterborough, which took Alina Sellman 3,000 miles away from her London home to Boston, where she helped lay the foundations for Harvard University’s SIB Lab. “We focused on setting up SIBs and embedding members of staff in state and local governments to carry them out,” she says. “There weren’t even 10 members of staff at the SIB Lab when I came back to the UK in 2013. Now it has grown into a 40- or 50-strong team.”
Sellman is now head of the Centre for Social Impact Bonds based in the Department for Digital, Culture, Media and Sport. Civil Service World meets her in a plush conference room in 1 Horse Guards Road where lavish décor, including a mantelpiece bust of William Pitt the Younger, provides an unlikely backdrop for such a modern topic of discussion. She begins with the fundamentals.
“A SIB is basically an outcomes contract,” she says. “What makes it different is that the organisation that provides the service is really focused on their social mission, and they get the upfront funding from a social investor rather than government. SIBs are interesting because government can define really clearly what the long-term outcomes are.”
“Long-term” is the operative word. SIBs have a longer time horizon than many policy initiatives, which Sellman believes has three advantages. Most importantly, more time allows for more to be measured. “In shorter programmes you’re sometimes limited to only measuring outputs, whereas when it’s longer you can genuinely see if outcomes are being achieved.” She adds that it’s the difference between measuring whether someone lands a job, and whether they manage to stay in that job for a year.
SIBs weren’t thought up in an era of austerity, but obviously austerity is the context that people are working in
Secondly, more time means more room for improvement. “A longer term focus means that you can genuinely improve as you go,” Sellman says. “If you set up a short-term project, you specify the guidelines at the beginning, you deliver it, and then you hopefully see what happened at the end. With the longer term programme, you’re afforded the opportunity to actually improve as you go along.”
Finally, more time means better collaboration. Sellman says that a SIB only succeeds when there are solid partnerships between those who are working on it. “Having a long-term commitment can help to make those partnerships stronger,” she says.
For what it’s worth
Enthusiasm for SIBs has caught fire across the globe, from California to Seoul, and Finland to Auckland. In Washington, the DC Water and Sewer Authority is using SIBs as a template for the first ever Environmental Impact Bond. Even the Vatican is earmarking capital to SIBs – Pope Francis recently called them a “precious and primordial unity between profit and solidarity”.
But not everyone is a fan. Last year the Lords Select Committee on Charities heard scathing testimony on how SIBs are overrated and overcomplicated. Peter Holbrook, chief executive of Social Enterprise UK, told the committee that there is “hyperbole around social impact bonds, which have got a disproportionate amount of resources”.
Andrew O’Brien, head of policy and engagement for membership body Charity Finance Group, also counts himself a sceptic. “There’s absolutely no evidence that the SIB itself has delivered any benefits,” he tells CSW. “It’s the services that deliver benefits, and the stronger valuation and target setting is good, but you don’t need a SIB for these things.”
Stronger valuation and target setting, which result from investors being closely involved in a project’s progression (it’s their money after all), are the sorts of things that are often lumped into the term “market discipline”. O’Brien’s argument is that this discipline can be imposed without a SIB. If he’s right, it follows that SIBs have no inherent value.
Sellman isn’t fazed. “All of the emerging evidence from the 34 SIBs that have been launched in the UK so far is that having a social investor involved and having an outcomes-focused contract is driving better outcomes for the people receiving the service and driving efficiency with the delivery of that service,” she says. “I think it’s a really interesting question [whether SIBs have inherent value]. It’s one that I don’t think there is a definitive answer to yet.”
Sellman’s team is trying to find that answer. A lot of work is being done, she says, to produce quantitative research on the value of SIBs – what she calls the “SIB effect”. “It’s a term we use within the team,” she adds with a laugh. To this end, the Centre for Social Impact Bonds has partnered with Oxford University’s Blavatnik School of Government to create the Government Outcomes Lab (GO Lab), which, according to its website, is committed to providing data on “what works and what doesn’t”.
As GO Lab endeavours to establish a solid evidence base, Sellman is confident that SIBs will prove their worth. “The evidence that’s coming out is indicating that there is something different happening within these partnerships that make them more effective than other forms of delivery,” she says.
The government is certainly putting a lot of faith in this model. According to the 2015 Spending Review, £105m was planned to be invested in SIBs over the parliament. “It’s a big jump,” Sellman says, referring to the increase in funding since the previous Spending Review. “That’s why our work at the moment is really focused on taking SIBs to that next level of scale.”
The Centre for Social Impact Bonds is comprised of a “reasonably small” team of six, explains Sellman, whose primary focus is to make SIBs more mainstream. It manages two large funds – the Social Outcomes Fund, which operates only in England, and the Life Chances Fund, which operates across the UK but only for local schemes – and works with central government departments to launch and coordinate SIBs.
“We’re doing a lot to make SIBs easier for people,” she says. “We even have a template contract that people can just take off our website and use themselves.”
While SIBs are not the solution to every single problem, they have a really important role to play in shifting how we view social policy
Part of the allure of SIBs as a policy option is its twofold buffer to the government’s bottom line. Firstly, upfront funding is provided by investors rather than taxpayers, leaving the public ledger untouched. Secondly, the return on investment is contingent on a project’s success. So either a project succeeds, in which case the investors and government both win, or it fails, in which case only the investors are at a loss. With this in mind, perhaps the government is wagering SIBs will be a kind of nostrum in the age of austerity.
“It’s an interesting point that comes up quite a lot,” Sellman says. “The first SIB was developed under the Brown administration. It wasn’t a concept that was thought up in an era of austerity,” she says. “But obviously austerity is the context that people are working in.”
While that may be true, Sellman hopes SIBs will be seen for more than just the savings they deliver. “SIBs have been talked about as being a way to cut cost or create cashable savings, but really they’re about improving the outcomes for the people that are receiving the service,” she says.
These people include not just prisoners, but also socially isolated older people (Worcestershire, 2015), students with special needs (Lambeth, 2017), children up for adoption (UK-wide, 2013), and a host of other, mostly vulnerable, members of society. At the end of October, Tracey Crouch, the minister for sport and civil society, announced the launch of 10 new SIBs to combat drug and alcohol dependency. Sellman adds that the Department for Communities and Local Government is about to launch some SIBs in rough sleeping, and the Department for Education is working on SIBs to support care leavers. “And we ourselves have done quite a lot of work with other departments to take SIBs to a larger scale,” she says.
While Sellman acknowledges that some remain sceptical about SIBs, she’s convinced that this surge in activity won’t be in vain. “We’ve got grand plans for the future,” she says. “And while SIBs are not the solution to every single problem, they have a really important role to play in shifting how we view social policy.”