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Brown backs social impact bonds pilot

8 December 2009
An artist's interpretation of the social impact bond

An artist's interpretation of the social impact bond taken from the Good Deals Social Investment Alamanack

A new form of social investment, the social impact bond, will be piloted by government in 2010.

Prime minister Gordon Brown made the announcement yesterday as part of a speech on creating a 'smarter' government.

Brown said the UK was entering the 'third generation' of public services during which power would shift to public service users.

He said: 'Civic society will have a crucial role to play in this third generation of public services as social enterprises and mutual not-for-profit providers so often ensure that public services meet people's needs, especially those of hard to reach communities.'

Pointing out that early help for families in crisis was less costly in the long run, Brown said: 'We will pilot a new way of funding the third sector to provide such services. What we call social impact bonds - money paid out now to deal at root with the causes, not the symptoms of a problem - will reward social investors for work which reduces future social costs, for example, in seeking to lower the reoffending rate of those coming out of prison.'

The announcement and the inclusion of social impact bonds in the Smarter Government white paper, published yesterday, were welcomed by Toby Eccles, development director at social investment research and development firm Social Finance, which has pioneered the idea of the bond.

Eccles said: 'We're delighted at the progress that's been made although there's still plenty of work to do.

Eccles is working with the government to investigate two possible pilots - one with the Communities and Local Government department and one with the Ministry of Justice. He said: 'Whether either, both or one of these will be piloted it is hard to tell at this stage.'

Eccles said he was confident the pilot would go ahead no matter what the result of the general election next year.

'The social impact bond is something on which there is broad political consensus,' he said.

'It's an idea that appeals to practical politicians that like to see new ways of working to deliver better social outcomes at a lower cost - which has to be attractive in the present environment.'

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