At Big Society Capital, we have always spoken about our ‘trilingual’ approach. This means being able to talk to and bring together the public, private and social sectors to effectively help deliver positive change. In truth, this is what drew me to working here, I have always been interested in how you can bring those elements together to support people more effectively.
So, when I began working on something called ‘Social Impact Bonds’ over five years ago, I was really intrigued. Was it actually possible to bring all these parties together on a project that would drive more effective public service delivery for people across the UK?
What is a Social Outcomes Contract?
Under such a structure, the commissioner (usually local or central government) only pays for the successful delivery of outcomes for a specified cohort of people. Local social sector delivery organisations are then given the flexibility to constantly innovate and improve services to ensure they are tailored to individuals’ needs. These organisations need flexible working capital to deliver this, in advance of outcomes payments being made. Some have raised this capital from social investors who are only repaid if outcomes are achieved. In these cases, some of the financial risk typically sits with the social investors, not Government or the local delivery organisations. The term ‘Social Impact Bond’ has typically been used to describe an arrangement where capital is raised externally, and the term ‘Social Outcomes Contract’ (SOCs) describes the method of Government commissioning in this way.
Too good to be true?
As I quickly learned, this approach was not without its challenges. It holds that effective collaboration and partnership across a wide range of stakeholders isn’t always easy. However, I could see that when it worked it had huge potential to 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.
What’s more, it has had huge potential to support people with complex needs facing some of the most difficult intractable issues of our society from homelessness to long-term health conditions to children on the edge of care and more. We know that tackling homelessness is about much more than simply putting a roof over someone’s head. It often requires tailored solutions to address a range of specific needs for an individual. These people have largely fallen through the cracks of large ‘one-size-fits-all’ provision and yet in projects structured as a Social Outcomes Contract, we have seen incredible results. For example, the Greater Manchester Homes Partnership programme to tackle rough sleeping housed over 90% more people than originally targeted at half the cost of similar interventions funded in other ways. The success of this has led to the Social Outcomes Contract model being used to expand homelessness support services for young people across ten local authority areas in Greater Manchester.
The UK has been the pioneer of this approach, implementing the first ever project of this kind in the world just over a decade ago in 2011 and launching a further 89 projects since then, the largest number of any country. Despite this growth, there has been some scepticism. Public services are an area close to most of our hearts, we have all in some way or another interacted with and used them. So, it has come as no surprise to me that people held very strong views about this. But it also struck me that a lot of opinions about this type of commissioning have been held without much actual evidence to point to at market level.
We decided that it was time to take stock and actually see what has been achieved to date in the UK and share it publicly. We received data from our key partners and looked at our own information. To date, there have been 90 projects in the UK, where over 180 commissioners have utilised this method, enabling over 200 social sector delivery organisations to deliver vital, tailored services to over 55,000 people (noting that a significant proportion of projects are still live).
We also commissioned ATQ Consultants, an independent agency with extensive experience in conducting evaluations of SOCs for local authorities, central government departments and the National Lottery Community Fund, to do an independent assessment of impact achieved to date and value to government across the UK market. With data for 72 out of the 90 SOCs that have existed, we believe this is the most comprehensive published analysis to date.
We asked ATQ to take as conservative a view as possible during their analysis as we wanted to be sure of not overstating value. Despite this cautious approach, the results still far exceeded our expectations. The analysis has found that outcomes to date from these projects have generated over £1.4 billion of value. Corresponding payments from commissioners on those SOCs were £139 million; therefore the benefit to cost ratio is 10.20, meaning every £1 spent by Government generated £10.20 of public value. This value includes fiscal, social and economic value. If we take the fiscal value alone, which encompasses the direct savings to, or costs avoided by, the public sector, the benefit to cost ratio is 2.85. The results made clear that the projects have added significantly more value than they have cost to implement.
Where do we go from here?
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. 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. This is by no means the solution to all public service commissioning problems, but it definitely has a place as another tool in the commissioning toolbox. At the very least, we can see that it is one of the only methods of commissioning that is effectively tracking achievement rather than inputs, which enables scrutiny and evaluation on a data-driven basis. We hope this research will open up meaningful discussions amongst policymakers around the potential and future of Social Outcomes Contracts as an approach to enable better #OutcomesForAll people at better value to Government. Read the full report here to learn more about Social Outcomes Contracts and see our detailed ATQ document.