From Vern Huges, Centre for Civil Society, Australia

From Vern Huges, Centre for Civil Society, Australia

Forwarded by Rogan Hume


Dear colleagues


The following comment on Social Impact Bonds was contributed to the Centre for Social Impact blog, but was censored from publication.


It was written in response to the announcement on 5 September by the NSW Government that it is to trial a tender process for private investors in foster care and prisoner post-release programs, whereby investors may make a return on their investments if they yield budget savings for the Government.


This announcement is the direct result of lobbying work done with the NSW Government by the Centre for Social Impact, with financial support from JBWere and the Macquarie Group, for the introduction of for-profit private investment in public programs. Further details of this CSI intervention with the NSW Government are available at Social Impact Bonds.


These arrangements have been highly controversial in the UK, but have been introduced by an Australian Government with virtually no public debate. The financial interest of large financial houses in pushing these public policy arrangements should not be exempt from scrutiny and critical appraisal. My critical assessment of Social Impact Bonds was censored from publication in a CSI blog from Kylie Charlton titled, ominously, "We must not be afraid to do things differently".


I would welcome any contrary or critical views on this contribution in open discussion. Since the CSI is publicly funded to the tune of $12.5 million to develop public debate about such matters, censorship of diverse and dissenting opinion should have no place in its work. Unfortunately, a pattern of suppression of dissenting views is being well-established.


Censored Comment on Social Impact Bonds – Peter Shergold


The Scottish Social Entrepreneurs Network’s Laurence de Marco, has this to say of the Social Impact Bonds in the UK:


"One of the UK’s top level social and political commentators – none is as sure footed around the third sector as the Guardian’s Polly Toynbee; her demolition of Social Impact Bonds (SIBs) on Saturday was scathing. “It’s a novel solution to extreme inequality” she says “inviting the rich to make money out of the poor”. But the English govt is very keen on SIBs – they love the idea that social deprivation could be ‘marketised’. In my opinion the whole thing is mince – and I’m astonished at the complicity of third sector leaders. In Scotland, the SNP manifesto commits to 3 SIB pilots – but I’m sure John Swinney knows that ‘payment for success’ mechanisms lead to service providers selecting easier (profitable) client groups.”


It is astonishing that a radical program of for-profit private investment in social programs is being introduced by an Australian Government with almost no public debate. Innovative ideas in foster care, or disability, or mental health, that arise from users of services, or parents and carers, or residents, rarely get the ear of governments, despite years, indeed decades, of trying. If an innovative idea comes from a charity or service provider, it will be considered more favourably. But if it comes from private investors, then, apparently, all you need to do is ask.


This concept betrays a misplaced belief that private sector investors can somehow weave positive social impacts if they are offered incentives to apply their financial investment “expertise” to communities, through a “payment for results” framework. The deep flaw in this thinking is the naive assumption that social goals (in this case, reduced demand for foster care and lower re-offending rates among former prisoners) can be orchestrated by programs and investors if the incentives are right. No. Social relationships are the key to reduced demand for foster care and lower re-offending rates, and the people who might make these relationships happen are not private investors. They are people in civil society – family and friends, neighbours and communities, mentors and teachers.


Many such people have worked tirelessly for decades to get governments to recognise that managerial approaches in foster care do not work. But governments have relentlessly pursued failed programs until …. a proposal for private investment with a return for budget savings comes along. It is offensive that private returns from budget savings should flow into the likes of Macquarie Bank, the "millionaires factory", when individuals and groups have been calling for radical change in foster care for years, with no expectation of any financial reward.


That governments have listened to ivory tower academics and investors on a topic of such sensitive complexity as foster care, and not listened to voices in civil society who are immersed in the relationships that potentially make a difference, is contemptuous of those individuals, families and communities.


The assumption that positive social impacts can be leveraged by getting the incentives right for investors to make profitable returns is 
a further triumph for shallow managerial thinking on the part of governments and public policy academics, for whom social well-being can apparently be adjusted upwards or downwards by manipulating this or that program lever or amending this or that set of incentives. This assumption is dead wrong.


Vern Hughes