Government needs new tools to deliver $34b in social services

Wellington (13 May 2015): Ahead of next week’s budget, The New Zealand Initiative is calling on government to adopt new ways of delivering social services that increase accountability on the billions spent on these programmes.

That is one of the main findings of the public policy think tank’s latest report Investing for Success: Social Impact Bonds and the future of public services.

The model shifts the financial risk of funding and delivering social services to the private sector. Taxpayers’ money is only spent if programmes are successful and achieve set outcomes.

If successful, investors in Social Impact Bonds can expect to receive their principal back, as well as a return. The government only pays for what works.

“Around $34 billion of taxpayers’ money is spent on health, education and social services per year, yet there is little evidence to know whether these services are achieving the outcomes they are set up to achieve,” said Jenesa Jeram, a researcher at the Initiative and co-author of the report.

“Social Impact Bonds could overcome this, as service providers have to produce hard evidence of what they have achieved, which means the government is not taking risks by pouring money into unproven programmes. Unlike other innovative community-based programmes, such as Whanau Ora, clarity of purpose and accountability for outcomes are built into the model.”

Social Impact Bonds offer more freedom and flexibility than traditional government contracting. And for vulnerable populations, it offers an alternative programme if the current system is failing them.

Jeram said another corollary benefit of these contracts is that they encourage government departments to set performance and cost metrics on their programmes.

The Ministry of Health is currently developing a pilot for the model. There are more than 100 Social Impact Bonds in development worldwide, in countries such as the United Kingdom, Australia, and the United States.

Senior Research Fellow Dr Bryce Wilkinson says: "The government is to be commended for focusing on securing better social outcomes for recipients, and we hope further announcements will be made in the upcoming Budget. Social Impact Bonds are one of the tools it can use. Implementation can be a challenge and our report makes some recommendations for adapting them to New Zealand circumstances.”

Chairman of IHC Foundation Sir Roderick Deane, who wrote the foreword for the report, noted: “It is an exciting possibility and The New Zealand Initiative is to be applauded for pursuing such innovative ideas which could in time make a significant contribution to improved social policy outcomes and a better New Zealand.”

Download the report here.

ENDS

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