Social Impact Bond at Peterborough prison (UK)
Social impact bonds are contracts between a public authority and investors, which reward the investors if certain social outcomes are achieved. They thus allow investors to team up with voluntary organisations and social enterprises to implement innovations, and then to share in the financial savings that result. If they do not achieve the results, they are not paid.
The UK Ministry of Justice, the Big Lottery Fund and Social Finance launched the world’s first Social Impact Bond (SIB) in September 2010 to finance the One* Service intervention to reduce reoffending by 3,000 short-sentenced male prisoners leaving Peterborough prison.
To put the bond together, Social Finance raised €7.8 million from 17 investors. The specified outcome is that the reoffending rate of prisoners who have served sentences of up to one year should fall by 10% within the first year after release for any cohort, or by 7.5% overall. If this outcome is exceeded, the investors will be paid a proportionate return of up to 13% a year over an eight-year period. This payment, which is made by the Big Lottery Fund on behalf of the Ministry of Justice, is estimated at half the saving made to the public purse.
Work with the prisoners is carried out by a consortium of third sector organisations led by the St Giles Trust, and outcomes are assessed by an independent assessor.
Lessons of social impact bonds
- Social impact bonds are an important innovation in the financing of innovations in social programmes;
- They can enable public authorities to introduce innovations to tackle stubborn social problems, without taking a financial risk;
- They enable specialist organisations, often voluntary organisations and social enterprises, to access new sources of finance;
- By focusing on results, they enable the organisations delivering the service to act flexibly to solve problems;
- Initial results from the world’s first SIB, at Peterborough prison in the UK, are encouraging, and have provoked a lot of interest in the UK and abroad;
- A final assessment of the bond’s success depends on detailed outcomes data becoming available.