Social Impact Bond pilot to receive £6m in lottery cash

A pilot that will involve using an innovative funding mechanism to fund a Government project aimed at reducing reoffending rates has received £6 million from the Big Lottery Fund.

The Social Impact Bond (SIB) mechanism, which was proposed by consultancy Social Finance, works by drawing up a contract between the Government and a third sector service provider that agrees to deliver a measurable social outcome, for example reducing the number of young people not in employment or training (Neet) by a specified level.

Investment from the private sector is then raised on the back of that contract to help the organisation deliver the service. The Government would later make a payout to investors based on the success of the project, with investors making a return if it hit the target.

Regeneration & Renewal reported in March that the Ministry of Justice will trial the bond to fund a project run by London-based charity the St Giles Trust, in collaboration with other charities the YMCA and the Ormiston Trust, to provide intensive support to 3,000 males serving short-term sentences of one year or less at Peterborough Prison.

The Big Lottery Fund has today allocated £6.25 million to the Social Impact Bond pilot. A further £5 million has been awarded to Social Finance to develop a further package of pilots that use the bond to tackle a range of social issues, and also to raise awareness of such bonds among policymakers and create a base of potential investors.

Chief executive of the Big Lottery Fund Peter Wanless said: "At a time of tight public finances, Social Impact Bonds represent a new and innovative way of attracting investment from outside the public sector. By funding Social Finance’s work, we are hoping to pave the way for many more similar projects across the UK."

Development director at Social Finance Toby Eccles said: "We are delighted that the Big Lottery Fund has agreed to support our efforts to develop a market for the Social Impact Bond. The SIB aligns the interests of government, charities, social enterprises and socially motivated investors around a common goal.

"[We are aware that] developing the SIB will take years, but we believe that with care it can enable future investment of hundreds of millions of pounds a year in ways to tackle society’s most intractable problems."
 

www.regen.net 31/08/2010