Pioneers Post

Payment by results pushed ‘far and fast’ says minister

13 September 2010

'If the Social Impact Bond works as well as we hope, expect, and frankly require it to, it will be groundbreaking'


Prisons minister Crispin Blunt

The government looks set to make a major commitment to contracts that ‘pay by results’ – beginning with the groundbreaking Social Impact Bond launched last week.

Prisons minister Crispin Blunt said: ‘We want to push the boundaries of payments by results as far and as fast as possible.

‘If the Social Impact Bond works as well as we hope, expect, and frankly require it to, it will be groundbreaking.’

Blunt made the comment while launching the Social Impact Bond (SIB) at Peterborough prison on Friday.

The SIB is set to be one of a series of innovations the government will trial as part of the November green paper on sentencing and rehabilitation.

The £5m raised by the SIB will be invested in the One Programme, run by the social investment consultancy Social Finance, which created and developed the SIB. The One Programme plans to reduce re-offending at Peterborough jail by at least 7.5 per cent within six years.

If successful, investors will receive a return of up to 13 per cent on their money, with the returns increasing as the rate of re-offending drops. The financial return to investors will be paid for by the Treasury and by the Big Lottery. This means that the government does not have to pay for the risk involved in trialling rehabilitation programmes and will only pay for successes.

The concept of payment by results has drawn criticism from some sources, who claim it gives civil society organisations and private providers an incentive to work only with those people who are easiest to help.

General secretary of the Prison Governors Association Paddy Scriven told the BBC: ‘The thing that has to be guarded against is if this scheme spreads and it’s payment by results that the not-for-profit people and the charities that are administering it don’t cherry pick the most likely successes and leave the very hard line cases to the prison service.’

But Social Finance development director Toby Eccles told Social Enterprise that there were built in safeguards that would prevent organisations ‘creaming’ the easiest offenders to rehabilitate. He said the contract was structured so that results would be measured against the total number of convictions – that is, how many times a particular prisoner would be expected to go through the prison system.

‘If someone was expected to recycle through the prison service five times in the next year, which is possible, than actually we’ve got five times the incentive to succeed with them as we have with someone who is, in quotes, easier to work with, who would have a lower expectation of re-offending,’ said Eccles.

The Social Impact Bond will form part of the discussion at Good Deals 10 in a session facilitated by BBC In Business presenter Peter Day