A new model of funding is emerging and is gaining considerable traction among the not-for-profit sector, including the youth service. There are many terms associated with this new funding model, including, social investment, social finance, social impact bonds, and infrastructure finance.
Essentially, a commissioner (central government department) will commission and agree targets and outcomes with a private investor, who will then usually ally with other investors and form a Social Impact Bond, provide upfront costs and partner with a service provider (commonly a charity) who will manage the project and lead the intervention. Robust and on-going impact assessments are measured against the originally agreed targets. If targets are met, the commissioner (government) will re-pay the initial investment plus a proportion of the financial saving made as a consequence of the social intervention.
For those that like diagrams, it looks a bit like this:
Reproduced from socialfinance.org.uk
Numerous programmes are already being funded this way, including supporting young people into training and education, providing therapeutic solutions to adolescents at risk of going into care, building social housing, generating renewable energy, supporting the most vulnerable in accessing affordable accommodation, and creating jobs in areas of economic deprivation.
With the youth service increasingly depleted of funds and desperate to attract any money it can, should the sector be wary of this new potential funding stream. Below I have tried to illustrate both sides of the debate around social finance and would welcome other’s thoughts about whether it matter who funds the youth service anyway?
Social investment and social impact bonds means the opportunity is there (and has been taken) for investors to profit from funding social programmes, the domain of which used to belong to the public sector and charities, but with massive cuts, and resources at an all time low, private finance may seem to be the only answer.
The financial formula certainly makes sense, if we can reduce the number of young people not in employment, education and training, or ensure less young people enter the care system, then the long-term impact will be less crime, less drug and alcohol dependency, less violence, and fewer demands on the prison service, saving billions of tax payer money. In addition if we develop the opportunity for more young people to gain long-term employment, be more innovative and entrepreneurial, it will mean better and more connected communities and more money to the exchequer in taxes. If a private company can achieve that massive saving then why shouldn’t they be rewarded financially, and be given the financial incentives to do so in the first place.
My concern however does not so much focus on the practicalities but on the morality of the situation. What kind of genie are we letting out of the bottle? As a nation are we so driven by the accumulation of wealth above all else, so detached and insensitive to the plight of our fellow human beings, that the only way we can possibly come to their aid is if there is a profit at the end of it.
The consequence of the success of these funding structures will also mean that there will be no way to turn back. Governments, both central and local, will no longer claim any responsibility in supporting those most in need, why would they, when private finance can do the job. And who will get to call the shots about which projects are worthy of funding and which are not? Well that’s always been the person holding the purse strings of course, but where it used to be democratically elected officials or morally led grant providers, it’s now going to be big finance, and you can be certain that their decision making process won’t focus on impact for societies sake, but on their return on investment, the bottom line.
While banks and big money are able to rule the markets, housing, retail, entertainment, public services and pretty much everything else, at least the philanthropic, volunteer powered and altruistic world of charities and not-for-profits was there to clear up the mess that a modern capitalist, class-divided society leaves in its wake, managing for the most part to maintain its autonomy and self-determinism. But no more, the vultures are circling already. Not only are there more and more social investment organisations springing up, but even social investment brokers, and something called social investment intermediaries. For these investors finally there is a legitimate way to marketise the voluntary sector, and to think, charities used to do it all for free….the fools.
The reality, whether we like it or not, is that that public money is no longer there for essential services, such as youth clubs, careers advice, sexual health, drug and alcohol awareness, sports and fitness programme, counselling, youth offending teams, and much more. So while others argue about how the youth service and other social and community providers are funded, most frontline workers just want to be able to get on with their job.
It’s fine to continue arguing with the Government and Local Authorities about the impact of under-funding these services, and by all means continue to lobby for a greater commitment to charities and the third sector more broadly, but while you do that youth clubs are closing every week, charities are going under and opportunities for young people are rapidly diminishing. Wherever the money comes from, whether it’s from social enterprise or social investment, it is needed, and it is needed now.
Where grant providers and local authorities have historically been risk averse and extremely cautious with their financial allocation, social investment money is opening up a whole new world of finance to a sorely depleted service, a world of finance with millions to spend, able to establish projects and distribute targeted money extremely quickly and efficiently.
Another massive benefit to this form of investment is that the services they are financing will be forced to carry out robust evaluations and assessment, showing longitudinal and societal impact, something that the youth service has always been pretty poor at in the past. Justifying further investment in the future and providing a much more sustainable model than relying upon project based grants and the whims of the next government.
Traditionally funded projects had minimal demands placed on them to prove outcomes, beyond the most basic quantitative data and anecdotal evidence, which meant potentially millions of pounds could be wasted on initiatives that may very well have little to no societal impact.
It’s very easy to sneer at The Big Society branding, but here are people willing and able to fund some amazing and impact based initiatives which otherwise would never have seen the light of day. If this means a move towards a more marketised approach, well why should that really matter? The most important thing is that a real and significant difference is felt in the lives of the young people and the communities that the service providers are working very hard to impact upon.
Opinions on this complex and controversial issue are encouraged, so please do share your thoughts below.