An upbeat start in Australia then a bit of a backlash brewing amongst some who clearly still believe, rather touchingly, in (Canadian) government efficiency and a magic money tree, as I gear up for my annual future of finance symposium, Young Markets, look forward to seeing some SIB News readers in Warsaw tomorrow…
Profits In Public Services: Louise Sylvan On Social Impact Bonds
Stephen Easton – The Mandarin
New ways to invest taxpayer’s money that keep the focus on outcomes can break down government silos and bring innovative approaches to bear on the “wicked problems” years of traditional funding have failed to solve.
That’s the good news about social impact bonds and public service commissioning, says former Australian National Preventive Health Agency CEO Louise Sylvan, who will be exploring how and why governments are looking at new ways to invest in service delivery at next week’s Power to Persuade Symposium in Canberra.
New Study On Social Impact Bond Details The Flaws
NUPGE
A new study on Social Impact Bonds provides a detailed analysis of why this new form of privatization should worry anyone who supports public services.
The study is called Alternative to Private Finance of the Welfare State: A global analysis of Social Impact Bond, Pay-for-Success & Development Impact Bond Projects(link is external), by Dexter Whitfield of the Australian Workplace Innovation and Social Research Centre at the University of Adelaide and European Services Strategy Unit. This study and analysis of projects around the world confirm what the National Union of Public and General Employees (NUPGE) and others have been arguing for some time — Social Impact Bonds are nothing more than a buy-now-pay-later scheme to privatize public services.
As the report put it, “Social impact bond projects are a venture capital model applied to the provision of social services, health, education and other public services.”
Social Impact Bonds cost more
Contrary to what proponents like to claim, Social Impact Bonds do not provide additional resources for public services. They are a loan from investors who want to be repaid at market rates.
Social Impact Bonds come with higher transaction costs due to the consultants, accountants, lawyers and evaluators needed to set up and administer contracts. Then there are the subsidies. Britain alone has spent over $1 billion on tax breaks, grants, subsidies and guarantees for Social Impact Bond and Social Enterprise projects.
No Innovation
The study debunks the claim that Social Impact Bonds will encourage innovation. Instead, investors will want to use proven methods to increase the likelihood they will make a profit. The only innovation is a new way for investors to profit at the public expense.
Social Impact Bonds increase inequality
The report points to several ways Social Impact Bonds increase inequality. They “exploit the most vulnerable, poorest and others dependent on public services and the welfare state” so investors can make a profit. And while individual Social Impact Bond projects may do some good, they don’t address the causes in the way that quality public services can.
There is an alternative
The report argues that there are much more effective solutions for the problems Social Impact Bonds claim to address. Public services and community organizations have a far better track record than privatized services when it comes to innovation and meeting the needs of the most vulnerable. The report also points out that when businesses are pushing for more spending, governments have been quick to respond.
Instead of wasting resources coming up with new privatization schemes, the report argues it’s time to recognize the ability of public services to address needs like early intervention or prevention.