Treasury should look for new ways to deliver more for less

Treasury should look for new ways to deliver more for less:

In the aftermath of Covid, the government must control public spending and draw on private sector investment and innovation

A new report by Julie Marson MP shows how Social Impact Bonds, and other outcomes-based approaches, could deliver better services for less money

Social Impact Bonds were invented in the UK but have struggled to take off in the UK like in other countries, despite success in tackling problems of addiction, homelessness, recidivism and much more

One study found only £3bn of the £230bn a year spent by the state on ‘human services’ involves any kind of payment for outcomes, and only £20m is delivered via Social Impact Bonds

The Government should act urgently to put these ideas at the forefront of public service delivery

Post-pandemic, the Chancellor needs to bring down borrowing and manage the country’s mounting debt while finding the money to continue to fund new interventions, infrastructure projects and service improvements that will get the whole country back on its feet.

In a new report for the Centre for Policy Studies think tank, Julie Marson MP is urging the Government to embrace results-based approaches like Social Impact Bonds (SIBs), as a way to bring external investment, expertise and innovation to the delivery of public services.

Outcomes-based approaches like SIBs can help tackle the hardest problems in society, including homelessness, addiction, and rehabilitation, and they could play a huge role in driving investment, levelling up the country and helping those who are being let down by the current system. The report highlights outcomes-based successes such as California’s prison system which cut the probation failure rate by 33% and the London Rough Sleeper SIB which helped cut rough sleeping more than traditional approaches.

Contrary to traditional input-led approaches that operate on a ‘fee for service’ basis, results-based approaches pay only when the agreed outcomes have been achieved. SIBs are unique from other outcomes-based approaches in their involvement of private investors to fund the working capital of a project. SIBs will deliver a profit to investors if they solve the problems they are meant to tackle – and help to deliver long-term savings for the taxpayer by reducing waste, improving efficiency and encouraging innovation.

To drive a focus on delivery and innovation, Marson’s report – ‘Getting Results’ – explores the potential for results-based approaches including SIBs, and makes 10 key recommendations to improve their performance and that of government spending.

She highlights the fact that as of 2016, the Government was spending roughly as much on purchasing goods and services from the private sector (£192 billion) as it was on paying its own staff (£193 billion). Yet one study found only £3bn of the £230bn a year spent by the state on ‘human services’, like healthcare, children’s services and rehabilitation, involved any kind of payment for outcomes, and only about £20m of that was delivered through SIBs.

Marson argues that at the Spending Review, Rishi Sunak should ask all departments to evaluate their use of outcomes-based approaches and where they could be employed, as well as making other changes to improve Social Impact Bonds and put them closer to the centre of government.

Releasing the report, Julie Marson MP said:

‘We all understand that Covid-19 required a massive response by the UK state. And now we face huge long-term challenges, not least levelling up.

‘But as we prepare for the Budget and Spending Review at the end of October, we must bring down borrowing and reduce wasteful spending while continuing to fund new interventions, infrastructure projects and services improvements that will get the whole country back on its feet.

‘By shifting focus on to results, with the same level of commitment that Thatcher gave to her programme of privatisation and market-led reform, this Government can succeed where others have failed and lead the machine of government into age of excellence that is driven by results, innovation and performance improvement.‘

Getting Results: The future of Social Impact Bonds and Outcomes-Based Approaches’ by Julie Marson MP is available here

Julie is the Member of Parliament for Hertford and Stortford. Prior to entering Parliament she worked in corporate banking

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The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, business, welfare, housing and green growth, its mission is to develop policies that widen enterprise, ownership and opportunity.