Four authorities to trial social impact bonds

Four local authority areas are to trial social impact bonds, ministers have announced.

The monies raised by the bonds will be used to fund intensive interventions for families with multiple problems. If families are taken out of deprivation and long-term dependence on the state, the government will repay the investment with a “decent” return. If not, the government will not pay.

The trials will take place in Hammersmith & Fulham, Westminster, Birmingham and Leicestershire. Ministers said up to £40m could be raised for the projects.

According to the Cabinet Office, the public services bill for the 46,000 most deprived families is more than £4bn a year, or almost £100,000 per family.

The government added that Big Society Capital – previously known as the Big Society Bank – would have around £600m to invest in social finance products such as social impact bonds.

Ministers said they hoped that philanthropists and investors would be attracted by the scheme, and that in time social ISAs and pension funds would be available to “everyday savers”.

The four trials follow a social impact bond pilot to tackle reoffending in Peterborough Prison launched by the Ministry of Justice last September.

Liverpool and Essex are also looking to trial an initiative using social impact bonds to support vulnerable adolescents and their families with the objective of preventing care entry.

Nick Hurd, Minister for Civil Society, said: “We must not be afraid to do things differently to end the pointless cycle of crime and deprivation which wrecks communities and drains state services. Social impact bonds could open serious resources to tackle social problems in new and innovative ways.

"We want a stronger sense of responsibility across our society and to give people working on the frontline the power and resource they need to do their jobs properly. Social impact bonds could be one of many Big Society innovations that will build the new partnerships between the state, communities, businesses and charities and focus resources where they are needed. The four local authorities that will pioneer this work are taking a bold and exciting step.”

Children’s Minister Tim Loughton said: “Family intervention demonstrates that the lives of children and young people can be turned around when their families, who often have many complex problems, are targeted intensively.

“This is also a more efficient way for local authorities to work, as evidence shows that fewer children are taken into care or excluded from school. Using social impact bonds will raise additional money to be directed at helping more families.”