International Perspectives on Social Impact Bonds: The views of German, British, and Swiss Providers of Labour Market Programmes
30 Jan 2020, 10:04 a.m.
Employment and training
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This piece is written by Debra Hevenstone and Lukas Christian Hobi from Bern University of Applied Science, and Alec Fraser from Kings College London. It compares the SIB experience across three different countries, and shares three things that providers want looking forward. You can see the original piece in German here.
The shift to outcomes-based commissioning (OBC) and the development of Social Impact Bonds (SIBs) has been a significant social policy development over the past decade. Whilst the UK remains the global leader in SIBs, they have also spread to the US and the rest of Europe.
As part of an international collaborative research partnership funded by the Swiss Network for International Studies (SNIS), in September 2019 we brought together provider organisations delivering SIB-financed Active Labour Market Programs (ALMPs) to talk about their motivation for, and experience of, working with a SIB. The three providers were all charities with experience delivering ALMPs under diverse funding streams.
Here we present a comparison, from the oft-ignored provider perspective, of how English, German, and Swiss programs experienced working with SIBs.
While there are significant differences, there is a surprisingly clear and consistent message about what providers want.
SIB experiences compared
In all three countries, providers were not attracted to the SIB financing model per se. Rather SIB funding was attractive in that it offered longer-term grant blocks at a higher per-client rate. All providers heard about the SIB grants early, giving them a head start in competing for a relatively complex funding mechanism.
Although the political motivation for a SIB was dramatically different across countries, the political experience was similar. In the UK, SIBs are aligned with the austerity measures of the past decade, while in Switzerland and Germany private funders were attracted the novelty of the SIB idea.
Irrespective of the original motivation, in all cases, the government emerged as the dominant powerful actor. Because of their differing motivations, the three countries dealt with the financial flows differently: pushing full costs into the future, paying in installments, or freezing current social expenditures to cover future payouts. This choice, in turn, impacted political support.
All three providers felt that the SIBs brought them into contact with very smart people in investment who knew little about social services. Some experienced this positively, noting that it forced them to engage in an important internal dialogue looking at their service choices.
Others felt that the investors’ questions were at best naïve and at worst led to uninformed pressure on daily operations. Perhaps related, was the fact that investors had a very different level of potential gains from the SIBs, lowest in Switzerland and highest in the UK.
Providers’ experiences with, and management responses to, their front-line staff were diverse. In the UK, the provider felt that staff who began working under a SIB contract were more outcome focused from the get-go, a difference they felt would endure and impact all programming.
In contrast, providers from Germany and Switzerland felt that front-line staff held the same basic professionalism and approach unaffected by the SIB financing element, though the SIB staff could do more with clients because of the more generous funding compared to their non-SIB colleagues working with similar service users.
Finally, the three cases were similar with respect to how they experienced data collection, evaluation, and payment. None of the providers received technical or data support from investors or government; there were no impact evaluations; and providers did not benefit from analyses of their programming.
With respect to payouts, in all cases payout criteria were adjusted over the course of the SIB and investors made a return. One critical difference was that in the UK payments were based on the estimated social value of outcomes, while in Germany and Switzerland they were based on past outcomes from similar programs.
At the end of the two-day workshop we asked providers to describe their “ideal” contract. It was notable that none of the providers described a contractual model containing a SIB element.
However, all providers wanted three things:
First, they all wanted longer-term stable funding, with interim milestones and the chance to renew or extend successful programming.
Second, they wanted the flexibility and professional trust that would allow them to develop effective, individually tailored solutions to help their clients.
Third, all felt that their clients needed holistic interventions that spanned the goals of multiple granting government agencies—and that intra-government coordination could offer better and more efficient solutions.
With decades of experience, these organizations have professional knowledge and experience that can certainly help inform policy design. Governments would be well-advised to consider these provider experiences and perspectives when designing contracts