Building the tools for public services to secure better outcomes: Collaboration, Prevention, Innovation

Public debate around social impact bonds (SIBs) ranges from extraordinary expectations to passionate opposition and such a polarised debate can risk poor policy making. The GO Lab takes an agnostic stance and this report seeks to move beyond ideological debate to provide a constructive response based on robust academic evidence.

Key findings

Firstly, SIBs may overcome perennial challenges in the public sector through collaboration, prevention and innovation. Challenges in the public sector include fragmentation of public services, short term focus and difficulty creating change. SIBs may encourage collaboration as Local Authorities and service providers can work together and ‘wrap around’ citizens to meet their needs. They may encourage earlier intervention to prevent a crisis which saves money in the longer term. They may also encourage innovation as risk is transferred to the investor so there is room to try new interventions. 

Secondly, there are four dimensions to a SIB that might unlock collaboration, prevention and innovation. 

1. The nature and amount of payment by results - were payments made squarely for outcomes or was some payment made for inputs or activities? 
   
2. The nature of the working capital – was this investment tied to achievement of outcomes or would it be repaid no matter the performance? 
   
3. The social intent of the provider organisation – was the service delivered by a charity, or a company without explicit social values? 
   
4. The performance management approach – how hands on were the stakeholders? A core objective of the GO Lab is to understand how these factors interact in different circumstances to produce different results.

Thirdly, we need more transparency across the sector and lessons learned from pilots need to be published whether they were successful or failed. Many SIBs currently look at whether the intervention achieved results, but few look at whether it was due to the SIB approach itself. Looking at existing evidence, it seems that SIBs might alleviate perennial public service challenges, but we’re not seizing the opportunity to learn from where they work well and where they don’t.