Mission-driven public services: Three things we’ve learnt from the UK’s experience with social impact bonds

The constraints facing the new government in the UK raise difficult questions about how to deliver improved public services without a substantial increase in resources. Economic growth is part of the answer, but we should also look deeper at the way public services are funded and delivered. What does it take to radically reimagine public services, not just for greater efficiency in public spending, but – crucially - to deliver meaningful outcomes for those most vulnerable in our society?

The UK’s experience with innovative, outcomes-focused partnerships over the past fifteen years shows that a relentless focus on meaningful data coupled with responsive, relational ways of working can lead to more effective and efficient public services. In a new report by the Government Outcomes Lab, which features contributions from leading practitioners in the field, alongside analysis based on our own research and data, we take stock of the UK’s experience with social impact bonds. Below we share three lessons and what they mean for a mission-driven government.

Social impact bonds, increasingly referred to as social outcomes partnerships, were pioneered in the UK and are now used in over 35 countries, with nearly 300 such projects launched globally to date. They’re not a financial instrument (as the word ‘bond’ might suggest) but rather a form of cross-sector partnership that brings together government, non-profit service providers and socially motivated investors in the pursuit of measurable outcomes. Government typically acts as the outcome funder. Socially motivated investors provide upfront working capital to service providers, only seeing returns if the desired outcomes are achieved. More than a technical specification for outcome measures in a transactional arrangement, we’ve seen a shift away from a punitive, rigid application of key performance indicators towards outcome measurement as a tool for learning and adaptation. Naïve claims about transferring risk away from government have been replaced by conversations around appropriate risk sharing and management. The over-hyped adoption of social impact bonds as a tool of financial wizardry has waned and, in its place, we see more reflective, partnership-led public services.

The world’s first impact bond was launched in 2010 by the UK’s Ministry of Justice to reduce reoffending rates among short-sentenced offenders. Since then, social impact bonds have been implemented in the UK to address a range of complex social issues - in Kirklees, for example, a social impact bond model has been used to prevent homelessness and enable independent living; in Norfolk to provide therapy to children in care or at risk of entering social care; in multiple locations across in the country to enable individuals facing mental health issues or learning disabilities to secure and sustain employment. These are all areas of high cost - and historically poor outcomes - for local and central government.

1. Data & transparency are key to ensuring value for money

An ‘invest-to-save’ logic was a key part of the early appeal of social impact bonds and while the quest for ‘cashable’ savings has proven more challenging than initially envisaged, services funded through this approach have helped prevent or reduce demand for social services and avoid costs to the public purse. How do we know that? Tying payment to outcomes can bring a level of data scrutiny during delivery that is often absent in more traditional commissioning and contracting. For example, for a set of 29 projects, which are funded through a UK government programme – the Life Chances Fund - outcomes achievement and payment levels are shared openly not just across the project stakeholders, but transparently in the public domain. This level of transparency in government contracting is truly groundbreaking and while not all impact bond projects share their data in this way, the Life Chances Fund shows the art of the possible in using data effectively for accountability AND learning.

2. For better services we need a broader understanding of public value

Beyond any fiscal benefits that this way of funding public services might bring, our research has helped identify how and when these outcomes-focused partnerships can provide greater public value than traditional ways to pay for public services. We found that well designed social impact bonds put public value - what is good for and valued by the public – at their heart. Public value is innately multifaceted. There are various domains to what it might mean – probity, security, efficiency, effectiveness, value for money. However, too often, government officials have defended ‘value’ by opting for the lowest cost or simply going through the ‘process’ of awarding delivery contracts, without any reflection on whether the ultimate outcomes that the service exists to deliver are achieved. When contracting, we need to think of government as a co-creator of public value, working across departments and with local public sector bodies, as well as with partners in the private and social sectors, to deliver value for the citizens they serve.

3. A different way of working for government and partners is possible

Done right, social impact bonds can offer a form of partnership working that directly acknowledges delivery challenges and works proactively to put people – and meaningful outcomes – at the heart of services. But there is no magic formula that unlocks a successful outcomes partnership. Teams need to be intentional about both technical and relational work in bringing partners together to see the benefits discussed in this report. These purposeful and impactful partnerships aren’t forged by themselves, and so government at multiple levels needs to be deliberate in curating an enabling environment.

The experience with social impact bonds brings us to an uncomfortable conversation about the corrosion of local government capability over the past fifteen years and the patchy partnership management practice across government as a whole. Public services often lack timely metrics on costs, coverage and performance which are essential foundations for driving improvements. Social impact bonds legitimise multi-functional teams and active, confident and distributed use of data. To do this at scale, we need longer term funding and partnership agreements, and we need investment in the core skills, capacities and systems that enable new approaches, like formal relational contracting, to support effective partnership working to address complex social issues.

Mission-focused government defines the outcomes it wants to bring about. How do we make it easier for radical, outcomes-focused ways of working to become the norm?

None of this seems likely to happen without dedicated attention and resource. We will need to create an enabling environment for a fundamentally new way to provide public services. In our work, what we consistently hear from the organisations leading these outcomes-focused projects is that considerable value comes from their ability to shift institutions and mindsets for more effective cross-sector collaboration. This happens through greater data-led flexibility in delivery, more responsiveness to local priorities, more efficiency and accountability for outcomes. These are all necessary ingredients for a mission-driven government.

‘The evolution of social outcomes partnerships in the UK: Distilling fifteen years of experience from Peterborough to Kirklees’ will be launched in September at the Social Outcomes Conference.