Big Lottery Fund has published two new reports looking at the development and early lessons from two very different and notable Social Impact Bonds (SIBs).
Both SIBs are part of the Commissioning Better Outcomes (CBO) fund, set up by the Big Lottery Fund, using money raised by National Lottery players. The programme aims to grow the SIB market and explore the role of Voluntary, Community and Social Enterprise (VCSE) organisations in advancing a focus on early action outcomes through SIBs.
These two SIBs mentioned were driven forward by the VCSE organisations who originally came up with the interventions. Both these SIBs have been inventive (innovative) in the way that they have designed the SIB relationships and mechanics. They are part of a growing picture of a market of SIBs that are very diverse in approach, challenging notions of what a ‘conventional’ SIB may be set up to do – or even if there is one such thing as a ‘conventional’ SIB.
The HCT SIB clearly sets out to deliver commissioners the savings that can be cashed from reducing private transport provision contracts, by moving young people with Special Educational Needs into greater independence through use of public transport. In that sense, it goes straight to the heart of the ‘conventional’ cashable savings purpose of a SIB. But its key areas of inventiveness are perhaps threefold in the way that it sought to make the SIB all the more affordable.
Firstly, it kept the working capital to be used to a minimum. To do this, HCT used very detailed intervention and impact modelling to identify how a small amount of capital could be used to produce enough savings with one cohort that could be recycled back into the scheme to support the next. The modelling is no small feat (and not just because it involves Local Authorities being ready and able to provide and engage with the data); many specialist transport options carry several clients and may work on block contracts, and so generating savings by decommissioning a specialist transport contract is by no means as simple as waiting for one client to move into independent travel (with the latter being the basis nonetheless on which outcomes payments are made). The rigour of the analysis and case for the financial proposition however is what has helped to bring the investors and commissioners on board, together with the capital remaining patient for the whole of the SIB scheme to aid the flexibility to respond to the reality of life never being quite as models predict.
Secondly, the SIB requires a minimum flow of referrals to get things off the ground. Since in the travel training case it would need to be the Local Authority (LA) commissioners’ responsibility to refer the service users into the SIB, HCT and their investors came up with a way of ensuring that LAs would be assured to fulfil this role, by enshrining it in contract. Getting referral pathways working (whether through the commissioner or other parties) is increasingly acknowledged as a key make-or-break point in SIBs. We are increasingly seeing SIB contracts which secure assurances around this, whether through specific contractual responsibility tie-ins or by specifying that some of the payments commissioners make early on are for initial activities (outputs, not outcomes) with the referred individuals.
Thirdly, HCT also sought to use the same SIB to work across a number of Local Authorities, helping to reduce the overheads of the SIB. They have succeeded in this to some promising extent, and this may also help to build the credentials for future HCT travel training SIBs.
The West London Zone SIB is inventive in the number of partners it works through and the ways they are involved.
Taking a collective impact approach, it has enabled (currently) 25 VCSE partners in the area to work cohesively around the children supported. West London Zone acts like an intermediary for these delivery partners, and in many senses could have been considered as a ‘conventional’ Special Purpose Vehicle in the way that it manages the SIB’s evidence base, finances and enables its delivery partners to participate without carrying any of the risk associated with the loan - except that WLZ also does some of the delivery itself through link workers which it directly manages.
Most SIBs are commissioned by public bodies; however in this SIB, several schools in the target area are involved as co-commissioners too, who, rather than being in it for the cashable savings, are keen to see the impact on young people’s attendance at school, progression in attainment and improvement in wellbeing.
Interestingly, local philanthropists have also become involved, through intermediary funding bodies and as direct benefactors. The way that WLZ has deployed their money highlights a range of ways in which grant can be used for knock-on effect in SIBs, including:
The in-depth reviews of these SIBs provide important insights into the story of ‘how’ and ‘why’ individual SIBs evolve as they do. They are a useful tool for readers who want to understand how they might replicate or learn from the ingredients that different SIBs have been composed with. And they are a useful way for the ‘just very curious’ reader to understand what SIBs are like, practically speaking.
These individual reports get into the nitty gritty of the SIBs stories they tell, providing key illuminations. Our annual Commissioning Better Outcomes (CBO) evaluation update report, due in the Autumn, will also put a different perspective on these stories by looking across all of the SIBs that are part of the CBO fund. It will explore the bigger picture of how these SIBs are shaping the market, and help those active in it or considering the pros and cons of SIBs, to take well informed steps towards delivering better outcomes.
Over the lifetime of the CBO SIBs, our evaluators, Ecorys (supported by ATQ), are following the journey of 10 SIBs, providing reports (including the 2 just published) at 3 key points in their lifetime. You can also read about the early experiences of 3 more of them - the Ways to Wellness, Reconnections and, Mental Health and Employment Partnerships SIBs which were published in 2015-16 - plus the growing library of CBO reports, here.
If these stories and reports resonate with experiences you have or questions you are asking, please do let us know and tell us why they matter to you too.
The Big Lottery Fund is the largest funder of community activity in the UK. It uses money raised by National Lottery players to help communities achieve their ambitions. From small, local projects to UK-wide initiatives, its funding brings people together to make a difference to their health, wellbeing and environment. Since June 2004 it has awarded £9 billion to projects that improve the lives of millions of people.