UK government announces £500m social outcomes fund to support vulnerable children
The Better Futures Fund is the result of months of consultations over a new social impact investing vehicle announced by the government last autumn, and aims to support 200,000 children over 10 years.
The UK government today announced a £500m social outcomes fund dedicated to supporting vulnerable children and their families, claiming it is the world’s largest fund of its kind.
The Better Futures Fund will invest in social outcomes partnerships dedicated to improving the lives of children and young people. Specific projects are yet to be defined, but the government suggests that they could focus on by boosting school attendance, reducing re-offending and providing safe homes for families.
It will be delivered by the Department for Culture, Media and Sport, will run for 10 years and aims to support up to 200,000 children.
Chancellor Rachel Reeves said: “I got into politics to help children facing the toughest challenges. This fund will give hundreds of thousands of children, young people and their families a better chance. For too long, these children have been overlooked.”
This fund will give hundreds of thousands of children, young people and their families a better chance
In social outcomes partnerships or contracts (also known as social impact bonds), social investors pay for social enterprises or charities to deliver a service commissioned by public authorities; if pre-agreed social outcomes are achieved, the government then repays the investors, with interest. The Better Futures Fund will provide the dedicated funding to pay back investors when outcomes are met.
The fund is the result of months of consultations about a new “social impact investing vehicle”, first announced in the government’s budget last autumn, with a panel of representatives from the impact investing sector, called the Social Impact Investment Advisory Group.
- Read more: Budget 2024: UK Government will create social impact investment vehicle to deliver its missions
Dame Elizabeth Corley (pictured), chair of the group, said: “The UK’s impact economy mobilises hundreds of billions of pounds to address our most pressing societal challenges.
“Today’s announcement signals the government's recognition of this thriving sector and its intent to unlock transformative change through innovative partnerships.”
Stephen Muers, CEO of Better Society Capital and member of the Social Impact Investment Advisory Group, said he was pleased with the amount of money committed and the fund was a “vote of confidence in the social impact investment market”.
Culture secretary Lisa Nandy said the fund represented “a major step in partnering with the impact economy, which has long played an important role in strengthening communities and driving inclusive growth”.
She added: “We're bringing together government, local authorities, charities, social enterprises and philanthropists to create a powerful alliance that will transform the lives of vulnerable children and young people.”
A welcome move, but doubts remain
The UK pioneered what were then more commonly known as social impact bonds with the introduction of the Peterborough social impact bond in 2010 which aimed to reduce reoffending. Data published in 2017 showed that it reduced reoffending by 9% and investors were repaid in full with a 3% return.
According to the Government Outcomes Lab, a research unit at the Blavatnik School of Government, there are currently 320 impact bonds worldwide, which raised US$861m.
Better Society Capital has advocated for the expansion of social outcomes partnerships for several years, including with the previous government. “It really does feel like an achievement of many years of work,” Muers said. “The evidence has built up over the years: more of these things have happened, there has been more research and more evidence showing they work… it has been a long journey, but we’re pleased with where we have got to.”
- Read more: What’s an outcomes fund?
Social outcomes contracts have faced criticism over the years. In a 2021 report, then Conservative MP Gareth Davies argued they were complex to set up and returns were difficult to assess, and as a result did not appeal to investors.
Jovan Owusu-Nepaul, head of public affairs at Social Enterprise UK, welcomed the announcement, pointing out it was an important opportunity for social enterprises. “The scale and nature of this ambition is significant if we are to get our economy back on track and have an economic model that begins to work for people and communities… For social enterprises and charities, this type of long-term investment can offer a valuable platform to expand their work and embed their impact.”
He was however cautious, noting that social outcomes partnerships had in the past “often failed to match the lofty expectations placed upon them a decade ago”.
Social enterprises that serve [children and families] cannot be an experiment for financial engineering
He also pointed out that many details were as yet unclear, adding: “While we support the principle of a decade-long, outcomes-based investment in children and families, we remain cautious until further information about the structure and governance of the funding. Social enterprises that serve them cannot be an experiment for financial engineering. The focus must remain on the people, not the vehicle.
“This fund has the potential to make a difference. Let’s ensure it delivers for those who need it most, and where social enterprises deliver true impact within our economy.”
Focus on youth
Young people benefited from the Chances Social Outcomes Partnership, funded via the UK government's Life Chances Fund. Picture: Sport England.
Former prime minister Gordon Brown in May 2024 called for the creation of a £1bn children’s social impact bond to help ensure that the UK’s “blighted generation, the children of austerity” have a better future.
When the government announced last autumn that it would develop a new impact investing vehicle, the focus was not stated. Muers explained that the aim to support children and young people emerged during the consultation. Muers highlighted that past examples showed social outcomes contracts were working well for young people, while chief secretary to the Treasury, Darren Jones, who initiated the creation of the fund, was keen to support children and young people due to his own experience growing up in a disadvantaged community. Jones said partnering with impact capital to tackle child poverty was “a personal priority for me coming into government”.
The Better Futures Fund will build on the work of the previous government’s £70m Life Chances Fund, which worked with 98 service providers to deliver 29 projects covering a range of social issues including employment, educational engagement and housing. It operated between 2017 and 2025.
The new fund will not be a simple expansion of the Life Chances Fund, Muers (pictured) suggested. First, due to its sheer size – adjusted for inflation, it is about 4.5 times bigger than the first one, according to Muers. Also, the broader context is different, he added – for example regarding devolution and the growing involvement of city-regions.
Muers also hoped the fund’s design would embed learnings from previous experiences that had been shared by the members of the Social Impact Investment Advisory Group, for example the need for flexibility at a local level to adapt to particular circumstances.
“There are always challenges implementing something when you scale it up a lot, and it needs to be done in a measured way, not rushed,” said Muers. In particular, projects involving many different bodies and organisations didn’t “happen overnight”, he added.
Existing projects given the chance to scale up under the new Better Futures Fund could be achieved quickly, anticipated Muers, while innovations or projects in new locations would take longer to build.
Social investor Big Issue Invest was among the delivery partners of the earlier Life Chances Fund. Lars Hagelmann, chief operating officer, welcomed the announcement. “We are acutely aware of the need for funding,” he added, “as one of the innovations we funded was Big Picture Learning, which helped deliver 700 outcomes through intervention.”
He said the social investor would “welcome any learnings taken into the Better Futures Fund, which overcome previous funding restrictions to enable better targeted innovation and efficient delivery of the outcomes sought.”
Top image: Chancellor Rachel Reeves announced the Better Futures Fund on Monday during a school visit in Wigan – here pictured with culture secretary Lisa Nandy (left) and some of the schoolchildren. Picture by Simon Walker / HM Treasury
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