The case for transparency in Social Impact Bonds

Josh Pritchard

Josh Pritchard

September 23, 2019 | @jb_pritchard

What is a Social Impact Bond?

A Social Impact Bond (SIB) is a contract with the public sector or governing authority, whereby it pays for better social outcomes in certain areas and passes on the part of the savings achieved to investors. It is therefore based around two key principles:

  1. A form of contract where the longer-term social impacts (known as the outcomes) define the success of the model, rather than the inputs, processes, or outputs as is traditional in public service commissioning. This method requires a greater focus on data to effectively measure these outcomes during service delivery.
  2. Social investment (i.e. charitable or private capital) is used to finance delivery and take the risk of outcome success, as investors only receive a return on their investments if the intervention is successful and agreed upon targets are met. This means that if the programme is unsuccessful, the costs are paid by the investor and not the commissioner (whether local authority or central government department).

The below figure is an example of a SIB structure, referencing the Essex Edge of Care project commissioned by Essex County Council.


The data challenge

Transparency in public services is a vital tool for ensuring that services are delivered at the highest quality, by the most appropriate provider, and with the best value for money. When taxpayers are footing the bill, it is crucial that the process by which their money is spent encourages openness and accountability, not only to enable scrutiny by Parliament and other official bodies, but for the ordinary taxpayers themselves as the ones most likely to suffer in the event of failure.

Funded by private investors (typically charities or social investment funds), delivered by the third sector, and largely aimed at some of the most vulnerable people, SIBs find themselves at a nexus of competing arguments around transparency and public services. The use of an outcomes-focused payment mechanism for investors brings with it a much greater emphasis on data and delivering results for citizens which make the model an interesting tool in the commissioner’s toolkit. Yet SIBs remain only a small part of the total spend on public services, with about £60 million having been invested into UK SIBs overall.

Furthermore, the ability of this model to trial innovative solutions to intractable social problems has seen it gain attention that far outweighs its impact, not least because commissioners are provided with a large, upfront injection of private capital that is repaid only when and if savings are made due to the intervention. The belief behind SIBs is that the heavy focus on outcomes, combined with the reduced risk for commissioners due to external financing, allows room for creativity and ingenuity during the delivery process since it is the end, not the means, which matter most. The success or failures of these interventions can be evidenced due to the comprehensive information necessary to confirm outcomes have been reached and thus trigger payments to investors.

But this data-focused commissioning has sometimes come at a price for those involved. Based on in-depth data trawls of SIB projects and interviews with a wide range of stakeholders (including investors, commissioners, providers, and intermediaries), Reform research has shown that there are significant inconsistencies for SIBs in terms of outcomes achieved, data produced, and evaluations made, at least according to data put into the public domain.

For instance, initial calculations have indicated that of £56 million of potential outcome payments promised to investors for completed SIBs, only £6 million has been publicly declared. Furthermore, for a number of completed SIBs, basic information such as the definitions of outcomes, the number of people engaged, and the payments made by the commissioner for the service remain outside of the public domain, making it difficult for independent evaluations by those not involved with the projects. Confusion over data ownership and control further complicates the issue, with multiple interviewees expressing uncertainty about what information they were able to share with us due to contractual constraints. Forthcoming Reform analysis will help shed more light on the prevalence of these gaps and suggest some solutions.

Different stakeholders in SIBs also had very different experiences of the data-intensive requirements, often dependent upon their existing capabilities and their involvement in the service design process. One provider described the model as “death by data”, with several others emphasising how the stringent data collection necessary to prove outcomes had negatively impacted upon the ability of frontline staff to deliver services. Some commissioners also stated that the involvement of investors within the SIB model has added an additional burden in the shape of “a large carrot but also a large stick”.

Yet not all of the feedback around the data requirements has been bad. A number of investors revealed that the clarity around outcomes and performance was reassuring as to the success of their investment. The ability of intermediaries, like Social Finance, to analyse data also enabled a better support for those delivering services with real-time feedback on what was working and what was not. Furthermore, some providers were able to use the data to model and forecast the risks and engagement rates themselves, something they had struggled to do in other models.

Whilst transparency and access to data are often portrayed as enabling better accountability, that is not the only reason why we should push for open public services. Openness enables peer-to-peer learning from both successes and frustrations, by making the reasons for achieved outcomes easier to evaluate. Organisations and individuals, whether commissioners or providers, are less likely to reinvent the wheel or repeat the mistakes of others, thereby increasing the efficiency and cost-effectiveness of a service. This can only happen if there is a degree of transparency inherent in the system and this proves a particular challenge when the private sector is involved, as with SIBs, due to the fears of commercial sensitivities and concerns about the public image surrounding profits being paid from taxpayer money. But given the amount of information generated by an outcomes-based approach, there is no reason why a consistent approach to publishing key information could not be adopted.


On Friday 6 September, Dr Joshua Pritchard, Senior Researcher at Reform, participated in a panel on the issue of transparent public services and data at the Social Outcomes Conference held by the Blavatnik School of Government, University of Oxford. You can watch the panel here.

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