Cameron to push G8 on finance bonds for new ‘social investment’
The Prime Minister will use the UK’s presidency of the G8 this year to develop new agreements on “impact investing” where funds buy bonds with a guaranteed return if certain public policies are delivered.
One of the first social impact bonds in the UK was launched three years ago to support a project to reduce re-offending by inmates at Peterborough Prison. The projects are delivered by social enterprises, not-for-profit organisations, foundations and charities.
“Britain and other developed nations face a shared challenge – sorting out our debt problems and achieving economic growth. We need to do this at the same time as improving public services and tackling our deepest social problems,” the Prime Minister told The Sunday Telegraph.
“That’s why this Government has placed such an emphasis on social innovation from charities, social enterprises and other businesses.
“Making this work requires a new kind of financial investment to help grow a bigger, stronger society. Britain is a global leader in this field.
“We launched the world’s first social investment bank Big Society Capital and we invented the world’s first social impact bond to help fund payments by results in public services where government only pays for what works.”
Big Society Capital is chaired by Sir Ronald Cohen, the founding partner and former chairman of Apax Partners. It uses funds from dormant bank accounts and the four “Merlin” banks, Lloyds, Royal Bank of Scotland, HSBC and Barclays, which each donated £50m.
“There is growing interest in Britain’s social investment model around the world,” Mr Cameron said. “So I want to use our G8 presidency to push this agenda forward. We will work with other G8 nations to grow the social investment market and increase investment, allowing the best social innovations to spread and help tackle our shared social and economic challenges.”
In the Peterborough example, bond holders are only paid if recidivism rates reduce. A social enterprise business, St Giles Trust, works with the prison and offenders to support them when they are freed.
Nick Hurd, the Conservative MP and minister for civil society, is responsible for the project. He said at a time when public sector budgets were under pressure social impact investing gave organisations access to “long term affordable finance”.