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Those pushing social impact bonds are taking the same approach as those profiting from P3 privatization schemes – focus on the new service being provided and hope it distracts people from the problems with the way it’s being funded.
Ottawa (23 Jan. 2019) — Given how enthusiastic proponents of social impact bonds are about them, you’d think they’d been keen to talk about the details of how they work and how much they cost. But as recent announcements illustrate, nothing could be further from the truth. Instead of talking about why using social impact bonds makes sense, announcements focus on the benefits of the programs receiving funding.
The problem with this approach is that it ignores what worries people about social impact bonds. Most people recognize the need for improved public services. What people are questioning is why the government is using social impact bonds instead of just funding services directly.
Cost of investor profits, consultants and administration kept hidden
One of the problems with social impact bonds is the extra costs that you don’t get with public funding. These include investor profits, and the consultants, lawyers, and intermediary organizations required to set up the complex contracts under which social impact bonds operate.
But even though the higher costs of social impact bonds are a concern, there is nothing in announcements of social impact bond projects to reassure the public. If social impact bond proponents were genuinely convinced that social impact bonds provide value for money, they would be providing a detailed breakdown of the costs.
That’s not happening. For example, a recent announcement regarding a federal government social impact bond to assist people with high blood pressure didn’t even mention how much the project was costing. The original announcement only provided a figure for the total cost with no information about how much of that will go to investor profits and overhead.
Impact on service quality and accountability also not discussed
Also absent from announcements of social impact bonds is how using social impact bonds will affect service delivery or accountability. As there are a number of concerns about how using social impact bonds will affect both the quality and accountability of public services, this is a significant omission.
So to0 is the lack of information on what restrictions will be placed on the organizations delivering the service. There are already reports of service providers doing things that go against their basic values as a result of social impact bonds. A contract for a Saskatchewan social impact bond showed how service providers could be asked to take risks and give investors the power to decide how to provide the services.
Track record of social impact bonds may be why information is being kept back
When details of social impact bonds projects are available, they are far from reassuring. With the first federal government social impact bond, 60% of the money went to administration and investor profits. Contracts for social impact bonds in Saskatchewan showed how the people who most need help could be excluded — and how service providers face restrictions.
The lack of information in the project announcements about how social impact bonds will work in practice suggests that nothing has been done to correct those problems. Instead those pushing social impact bonds are taking the same approach as those profiting from P3 privatization schemes: focus on the new service being provided and hope it distracts people from the problems with the way it’s being funded.