Big Lottery Fund launch £40m social impact bond fund
The Big Lottery Fund has announced a new £40m fund to help develop the Social Impact Bond market in Britain.
The fund, Commissioning Better Outcomes, is allied with the Cabinet Office’s £20m Social Outcomes Fund, which was first launched in November. Both funds aim to develop the Social Impact Bond (SIB) market as a way of tackling deep-seated, expensive social issues in a time of economic austerity.
How SIBs work
SIBs are a payments-by-results contract in which a public body agrees to pay out when an organisation achieves positive results on a social problem. The organisation is then able to use this funding to attract outside investors. Programme funders pay out and investors receive a profit only if the organisation’s social intervention was successful.
Without the capital provided by SIBs, organisations are often left trying to treat rather than prevent problems, but with early investment from private parties effective, preventative action can be taken with the freedom to demonstrate solutions that actually work.
The combined fund will act as a pot of cash for public bodies to top up payments on outcomes met through SIBs. However, Big Lottery Fund say the majority of the outcomes payments must come from the commissioner.
Commissioners will be encouraged to actively engage with the voluntary community and social enterprise sector (VCSE) throughout the process, and to seek support from a wide range of stakeholders.
Where will the money go?
Each fund has a different focus, though there is a single application process as the two funds’ aims are broadly the same. Big Lottery Fund and the Cabinet Office will decide which fund is most appropriate once the application is received.
The Cabinet Office’s Social Outcomes Fund aims to fund SIBs that will lead to innovative approaches in the public services to address deep social issues.
In particular, it is intended for use in situations where solving a social problem would create savings for multiple public sector bodies, but where the costs would outweigh the benefits for each of the bodies alone. The Fund supplies a pot of money which commissioners in central and local government can use to pay out if successful.
Big Lottery Fund's Commissioning Better Outcomes fund will primarily support SIBs with a clear emphasis on the involvement of VCSE sectors, and to fund those most in need. It will also only support SIBs that do not replicate services which a public body has a statutory duty to provide.
Further to these chief aims Big Lottery Fund intends to spend up to £3m on appointing support contractor to work with commissioners following their application, helping develop robust proposals.
This technical support would be used to help applicants identify savings in their proposal, refine and price their outcomes, engage with potential investors, and finalise the structure of their SIB.
The Cabinet Office also provides light-touch support to SIB developers, including a series of online tools such as The Knowledge Box, a modular resource containing the latest thinking on SIBs.
A growing market
Britain currently has more SIBs than the rest of the world put together and the new funds from BIG and the government are set to accelerate the market even further.
The funds are crucial in tackling the problem facing commissioners where costs for an intervention fall in one place but the benefits land elsewhere, which previously halted the use of SIBs.
The new funding offers potential for effective, sustainable progress in deeply complex social areas.
Nat Sloane, Big Lottery Fund's chair, said that though the relatively new SIBs can seem daunting to the uninitiated, their overarching goal is one of “catalysing the social investment market in England, in a way that supports VCSE organisations to grow and become more sustainable in order to better serve those most in need”.