Remember social bonds?

Insights Newsletter
6 May, 2016

Remember social bonds? Or Social Impact Bonds (SIBs) as they are known internationally?

Social bonds are an innovative way of funding and delivering social services, involving the private sector.  

The New Zealand Initiative published a report on the model and came to the tentative conclusion that while promising, their success would depend on the contractual details.  

Well, it has been almost a year since it was first publicly announced that the Government would be implementing four social bonds. At the time, there was a fair amount of protest and outrage from the Opposition. The Labour Party called it “a disaster in the making, tantamount to gambling on New Zealanders' mental health.”  

Health professionals too challenged the implication that the private sector would be profiting off the most vulnerable – perhaps momentarily forgetting that doctors and surgeons do not exactly work for free.  

Boy have things changed during the course of a year. Social bonds have still yet to be implemented, but public attitudes towards reforms like the social investment approach seem to be warming.  

The implementation of social bonds logically follows from the investment approach. Data collection is a good first step. But the real value of the social investment approach is how it can improve services.  

Over the weekend, an interview on The Nation demonstrated just that. Lance Norman, chief executive of the National Urban Maori Authority (NUMA), described the social bond they have pitched to government. NUMA have calculated the fiscal cost of failing a struggling child ($145k), and have proposed a programme to address this.  

Of course, it is not just about saving the government money. It is pretty hard to argue against social bonds when community service providers welcome the alternative funding, and recognise the change they can make to people’s wellbeing.  

Media coverage of other proposed social bond programmes have been equally optimistic, featuring passionate community providers offering creative and clever alternatives to the state system.  

The big question around social bonds now is not whether they should be implemented, but how?  

And that is no small issue. Radio New Zealand has reported that contractual negotiations for New Zealand’s first social bond have stalled. They cite “uncertainty over whether the government would guarantee the security of the private funding” as a major obstacle.  

But it is an unfortunate state of affairs: just as the idea gains public enthusiasm, the pilot could still be held back by its own contractual complexities.



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