1. DWP Innovation Fund: testing social impact investment to support disadvantaged young people 

2. Social Justice
Support for the most disadvantaged families and individuals
Second chance society
Getting on to the first rung of the ladder (progress up it = social mobility)
Disadvantage is multi-faceted – more to it than income
Need for approaches which can be sustained

3. Social Justice: Approach to Delivery
Early Intervention
Focus on causes and recovery (not maintenance)
Tackling multiple barriers to employment
Key role for the VCS and niche providers
Innovation in commissioning, funding and delivery
Value for money: payment by results, private investment to promote social good

4. Social Justice and the Innovation Fund
Focus on prevention and early intervention
Tackling complex and deep seated barriers to (future) employment
Significant role for the VCS in delivery
Innovative commissioning model: “black box” and payment by results
Innovative financing model – social impact investment

5. Social Impact Bonds: Peterborough
MOJ and Big Lottery Fund pilot to reduce re-offending after a custodial sentence
Managed by Social Finance (intermediary) who raise the finance (£5m) and who support and fund the partnership of delivery agents
Outcome payments for a reduction in re-offending across the cohort (10%+ improvement)
Investors seek to recoup their investment plus a return ( % p/a)
Long payback and evaluation period – last payments in 2017

6. Social Impact Intermediary Delivery Bodies Target population
Social Impact Bonds an innovative financial product that provides a mechanism for aligning the interests of investors, providers and commissioners to deliver enhanced social outcomes to a specified target population.
Financial returns dependent on outcomes
Make payment based on defined outcomes
Social Impact
Intermediary
Public Sector
Investor(s)
initial investment
Improved social outcomes
Reduced public sector costs
Wider benefits to society
Delivery Bodies
Funds
Services
Information
Target population

7. Innovation Fund: Objectives
Deliver support to help young people who are disadvantaged, or at risk of disadvantage to participate and succeed in education or training and thereby improve their employability, reducing their longer term dependency on benefits
Test the extent to which the Innovation Fund generates Annual Managed Expenditure (AME) savings, other wider fiscal and social benefits, and delivers Social Return on Investment.
Support the development of the social investment market, the capacity building of smaller delivery organisations and generate a credible evidence base which supports social investment arrangements

8. Design principles: Provision will last for up to 3 years
Up to £30 million is available in total over two bidding rounds.
100% payment by results.
Up to £3 million per year to any single contract - expect most to be substantially less
Focus on young people aged 14 upwards
Assumption that support will target the most disadvantaged
Must generate employment related outcomes
Must use social investment models to deliver (but don’t have to be SIBs)
Delivery partners are fully funded and are separate legal entities to the investor. Investor takes 100% of the risk

9. Innovation Fund: Timetable
Round One:
Successful Bidders announced; January 2012
Round Two:
Notification of intent and invitation to register for launch events, December 2011
Invitation to submit an Initial Application; January 2012
Full ITT; early Spring 2012
Contracts awarded/delivery commences; Summer 2012

10. Key Issues (policy)
Challenges to working across Departmental boundaries/objectives (powers and funding)
You get what you pay for – need to be clear on objectives and avoid perverse incentives
Establishing Value for Money criteria – ex ante valuation of fiscal and social benefits
Challenge to evaluation – balancing innovation with the need for robust evidence

11. Key Issues (delivery) Immature Market/imperfect competition
VCS capability and capacity/investment readiness
Investor awareness and understanding
High/unknown levels of risk
Long timeframes for outcomes
Partnerships take time to form

12. Conclusions Considerable interest and potential But… largely untested
Not suitable for all types of services
Big ongoing challenges around joining up funding and commissioning (and initiatives)
Scaling up
Need to continue to develop the market
Is Government giving sufficiently clear and strong signals?