Social impact bonds: speed up or slow down?

Social Impact Bonds are rapidly gathering momentum around the world. But not everybody is a big fan. Going head to head in the first of our series of big debates – in the blue corner, Joanne Hay dances like a butterfly while, in the red corner, Dan Gregory stings like a bee.


Unequivocally, yes, SIBs are a good idea. It’s about time we saw some change in the social sector in terms of accountability, transparency and effectiveness. For so long charities have been complaining that commissioners don’t give innovative approaches the time of day and that it’s difficult to scale good ideas. Now there is a way to do exactly that and it’s an approach that our charity, Teens and Toddlers has taken huge benefit from.

SIBs have numerous advantages over traditional models. Firstly, there’s the security. Our latest SIB has given us three years-worth of investment. For a charity, three years is a long-term investment, and with that comes the advantages of being able to plan, recruit experienced staff and deliver sustainable programmes with guaranteed funding in place.

Secondly, there’s the vigorous monitoring and evaluation. Far from being onerous, we believe it’s imperative that charities actively demonstrate value for money. And of course, the benefits to the charity are that you discover what works effectively, and how the service can be improved. We’ve been evaluating our core programme since 2001 so the organisation already has a commitment to evaluation and data collection – essential for any SIB work. This, together with robust quality assurance to ensure fidelity of our programme, shows investors we understand their needs, to manage their risk in terms of our capability to manage the contract.

SIBs provide a framework for schools and local authorities to try a new programme without fear of failure

Thirdly, there’s the opportunity to scale. A further benefit of longerterm investment is that you can scale quicker and across more areas than operating on piecemeal yearly contracts. For Teens and Toddlers this has opened up funding opportunities with schools and local authorities, and allowed us to be part of local decision making forums to plan for the future.

Fourthly, SIBs provide a framework for schools and local authorities to try a new programme without fear of failure. The risk is carried by the investor, thereby allowing projects the room to breathe, to succeed and to prove themselves. This is particularly important in getting preventative programmes off the ground. Prevention is historically a far harder sell than specialist services, but by focusing payments on outcomes, SIBs are an effective model for implementing new ways of working.

Fifthly and finally, SIBs provide plenty of room for learning. For us, by focusing on outcomes and allowing some flexibility, the SIB model has enabled us to optimise our programme in partnership with schools. One of the ways we’ve been able to do this is through data. Our payment by results contract relies on extensive detailed monitoring information which we also use to demonstrate impact and get new business.

Of course, SIBs won’t be for everyone, but if you have something that works and are ready to scale, they could prove a valuable development opportunity. For Teens and Toddlers they have been a huge success in allowing us to grow faster, while providing us with all the right backing that growth entails. 



You say you love me. That my promises of savings are so seductive. But really, I’m nothing special. There are hundreds like me. SIBs are just one variation on Payment by Results. I’m just this year’s model.

You’re just in love with the idea of me. In practice, I disappoint. I only work when there’s an objective mechanism for agreeing outcomes; when beneficiaries are identifiable and large enough; and when more cash than I cost is saved to just one or a few budget-holders within a reasonable timescale. Really, I’m only sexy in certain, very particular circumstances.

I’m difficult darling. I’m more complex than you realise. All that measurement and monitoring. Randomised Control Trials don’t come cheap.

Baby, you can’t afford me. For investors to stay hot for me, returns to investors from SIBs have to be higher than if the Treasury just borrowed the cash. You don’t really need me.

And it costs a lot more than that to keep me. You pay if I work, you sometimes invest in me too, and you pay for investment readiness, for tax breaks, transaction costs and the Centre for SIBs. But who picks up the pieces if I don’t work? You. And I’ve been hiding something from you, darling. Who pays for costs of winding up services which are no longer needed?

I’m difficult darling. I’m more complex than you realise. All that measurement and monitoring. Randomised Control Trials don’t come cheap. I’ve driven others to cheating and perversity. Remember the gaming, creaming and parking of the Work Programme? You’ll find yourself doing things you rather wouldn’t. There are always unintended consequences, darling.

Why make all those promises now when we don’t know how the world will be down the line? New technology or the economy picking up might generate those savings anyway. And sometimes policy changes too honey – I still can’t talk about Peterborough.

Wait until you hear what others say about me. It will ruin my reputation. They say my investors are no good. They say I’m just like PFI. They say my instrumental mechanistic approach and my addiction to spreadsheets is ruining trust and old fashioned values. They say I focus on the young and those who stand a chance but that I don’t care about the old and the sick. They say I’m just leaching profits out of not-for-profits. They say I’m controlling. They hate the City, darling, and everything it stands for.

If this is going to work, honey, we need your friends to support us. But can departments make long-term commitments beyond conventional spending horizons and across institutional boundaries. The Cabinet Office says I take “unprecedented collaboration”.

Am I even worth it? What if this works between us but then people give less to charity as they think their cash is being used to ensure investors see a return? Look, the Private Finance Initiative was sexy too once. You need to learn from your mistakes. You say you believe in evidence, so what makes you believe in me? Let’s just take this a bit slower, okay?


This article was originally published in Pioneers Post Quarterly, the printed edition of this magazine. To find out more about PPQ, including how to subscribe, click here.

Photo credit: Nav Jagpal