Innovative form of public service commissioning shown to have generated millions in financial savings for the Government

Published

  • New research finds that Social Outcomes Contracts generated £10 in social, economic and fiscal value for every £1 spent by government since first launching ten years ago.
  • This is the first published study of the public value generated by these contracts todate.
  • The research comes at a time when there is increased pressure on government budgets and scrutiny on public spending.

21 June 2022: New research has revealed that an innovative approach to public service delivery saves nearly £3 for every £1 spent by government, reducing the cost of tackling complex social issues like homelessness and unemployment. The report commissioned by social impact investor Big Society Capital found that so-called social outcomes contracts have saved £397 million from government budgets so far as well as generating public benefits ten times greater than the contract value.

Previously known as Social Impact Bonds, these contracts are a form of public service commissioning where upfront socially motivated investor capital is used to pay local delivery organisations to tackle complex social issues, with Government funding only released when successful outcomes are achieved. The report shows that this approach has generated £10 of social, economic and fiscal value for every £1 spent by commissioners; including nearly £3 of fiscal value (cash saved and costs avoided).

The Outcomes For All report draws on independent analysis conducted by ATQ Consultants, and is believed to be the first published study of the value achieved by these contracts in the UK to-date. It launches against a backdrop of increased scrutiny on public spending; with Government borrowing at an all-time high and the cost-of-living rising rapidly, all putting pressure on public service delivery.

Launched to MPs at an event in Parliament on 21 June, the report demonstrates how the UK has become a global leader in this approach; having conducted 90 such projects to support more than 220 social enterprises and charities in delivering personalised care to over 55,000 people.

For example, a number of SOCs were launched to tackle rough sleeping in 2018 by the UK Ministry of Housing Communities and Local Government (now the Department for Levelling Up, Housing and Communities). The largest programme was in Greater Manchester (GM): the GM Homes Partnership. This programme has housed over 90% more people than originally targeted at half the cost of similar interventions funded in other ways and the SOC model has been used to expand homelessness support services for young people across ten local authority areas in Greater Manchester.

Other examples of SOCs in action include West London Zone; a mentoring scheme which is currently working with 732 children in schools to help them achieve their potential and flourish in adulthood. And the Skill Mill: a social enterprise focused on rehabilitating young ex-offenders which since launching in 2013 has worked with almost 200 former offenders and seen a re-offending rate of 9% - compared to 72% for the cohort nationally.

While national and local government is effective in delivering large-scale generalist public services, for difficult areas such as homelessness, which require a multi-agency approach, traditional public service siloes struggle with tailoring long-term support to individual need. The result is that the individual’s problems persist and worsen, leaving public services to firefight crises rather than prevent them.

Through Social Outcomes Contracts, local social sector delivery organisations are provided with working capital, which gives them the flexibility and support to constantly innovate and improve services to ensure they are tailored to individuals’ needs.

Minister for Civil Society and Youth, Nigel Huddleston, said: "I welcome Big Society Capital's 'Outcome for All' report which highlights the important development of Social Impact Bonds, or Social Outcomes Contracts, as a commissioning tool for public services in the last 10 years.

“The Government is proud to have played a key role in this journey by championing innovative outcomes funds, such as the Life Chances Fund, which move the emphasis away from delivering activities and outputs towards delivering the real-world impact we want to achieve."

Rt Hon Theresa Villiers MP said: “The UK is the global leader in outcomes focused public sector commissioning. This report, the first of its kind, highlights the scale the UK has reached over the last decade in funding better outcomes for complex social issues, and it is important that we continue to lead the way in shifting the focus of public sector commissioning to prevention and away from firefighting a crisis response”.

Danny Kruger MP said: “This is exactly the type of solution that is required for the UK to continue Levelling Up - saving £3 for taxpayers from every £1 spent by the Government. We need to build on the momentum I have seen first-hand across the country, leveraging public money through social outcome contracts, bringing in significant private investment and delivering great outcomes for people facing disadvantage."

Aman Johal, Investment Director at Big Society Capital said: “With public budgets tightening, it will be critical for the Government to consider alternative funding solutions to challenges such as the cost-of-living crisis and Levelling Up.

“We are thrilled to have new data which for the first time demonstrates how SOCs can empower local authorities and communities to implement local solutions, bringing together genuine collaboration across stakeholders and much stronger accountability for results compared to traditional contracting mechanisms.

“While the approach is not without challenges, the evidence shows that there is potential for social outcomes contracting to grow and continue to add value to improving public service delivery in the UK. We hope this report will open up meaningful discussions amongst policymakers around the potential and future of SOCs as an approach to enable effective delivery of public services for people.”

Notes to editor

Aman Johal, Investment Director at Big Society Capital is available for interview on request.

The report contains analysis carried out on the Social Outcomes Contracts (SOCs) market by Big Society Capital from its own data (as the largest institutional investor into the UK SOCs market) and data collected from many key stakeholders. We would like to particularly acknowledge Big Issue Invest, Bridges Fund Management and Social Finance. The report also draws on an independent analysis done by ATQ Consultants. We cannot thank both ATQ and our other partners enough for their time and support with this endeavour.

Press contact

Ian Young

iyoung@bigsocietycapital.com

About Big Society Capital

Big Society Capital exists to improve the lives of people in the UK through social impact investing. We unite ideas, expertise and capital to create investment solutions for the UK’s social challenges, supporting organisations that deliver both positive social impact and sustainable financial returns. So far, we have helped channel £2.5 billion* into investments tackling a wide range of problems such as homelessness, mental ill health and childhood obesity. To widen access to social impact investing, we have partnered with Schroders, a global asset and wealth manager, to launch the listed Schroder BSC Social Impact Trust plc. As the portfolio manager, we provide investors with high impact investments that contribute to solutions to social challenges alongside targeting long-term capital growth and income.

Further information about Big Society Capital can be found at www.bigsocietycapital.com

*As at September 2021