SIBs “not cost-effective”

SIBs “not cost-effective”
Civil Society
September 2014


The meeting also heard questions over the cost-effectiveness of social impact bonds. One delegate, from homelessness charity St Mungo’s, said that in addition to the £4.6m cost of delivering services through a SIB his organisation was involved in, another £900,000 – an extra 20 per cent of the cost – was spent on set-up costs and payments to investors.


“You question whether this is the best use of resources,” he said. “Five and a half million has been turned into four and a half million.”


Labour position on social investment


The government must either give the Social Value Act real teeth or “stop wasting the charity sector’s time with it”, shadow charities minister Lisa Nandy said yesterday.


Speaking at an event on social investment at the Labour Party conference, Nandy said she had been told this by people working in the sector, and that she agreed with the sentiment.


“We need to do that, and we’re looking at how we can do that at the moment,” she told the event, which was jointly organised by chief executives body Acevo and two social lenders, Big Society Capital and the Social Investment Business.


At a second event, organised by the Social Economy Alliance, Celia Richardson, director of communications at Social Enterprise UK, the umbrella body for social enterprises, said the sector should value the Act more, after another member of the audience described it as “a pimple” compared to “the disaster of the Work Programme and disaster number two, Transforming Rehabilitation”.


“Yes it is a pimple,” she said. “But it’s a start and it’s valuable, and in other sectors they win something and they hold onto it and they try to build on it, they don’t try to run it down and say it’s not good enough.”


Social investment pensions a possibility


Nandy also said she saw the opportunity to attract more interest in social investment through pension funds, after Cliff Prior, chief executive of social entrepreneurs foundation UnLtd, asked whether she was interested in the French model of requiring pension funds to offer a social investment option.


Nandy said she liked the idea, but stressed no decision had been taken about whether the party would support it.


“I don’t know if we’re going to do it,” she said. “So put your Twitter away.”


Charities want “basic loans”


Nandy also agreed with a statement from Sir Stephen Bubb, chief executive of Acevo and chair of the Social Investment Business, who said he felt social investment had been overcomplicated and that what most charities really wanted was “basic loans”.


“We sometimes forget that a lot of the sector doesn’t understand what social investment is, or thinks it is a bad thing,” he said. “They are sitting there thinking ‘why would we want to do it?’


Nandy said she agreed with these sentiments.


“We want to prioritise this area,” she said. “But we know it isn’t for everyone and we’ve heard this loud and clear.”


Nandy said that she was keen to allow charities more flexibility to learn and develop and innovate, and that the right type of funding was needed to do so.


“Social investment enables this to happen,” she said.


Nandy said that her party remained interested in plans for a community reinvestment act, which would force banks to reveal where they were not lending, and potentially encourage lending into deprived communities through third sector intermediaries.