Partnerships for public good: social benefit bonds in NSW

There are encouraging signs from pilot programs in NSW that have private firms partnering with the government to deliver social improvement.

Social benefit bonds — public-private partnerships that incentivise community improvement — are coming. But they will need to become cheaper and easier to develop to catch on.

SBBs, also known as social investment bonds, are a relatively new form of “government pays” PPP first trialled in the United Kingdom. Private investors provide funds to service providers to deliver improved social outcomes. If certain outcomes are reached — for example, reduced recidivism or fewer children going into out-of-home care — the government pays back the amount invested, plus a return.

Though SBBs have attracted much media attention, one of the architects of the first SBBs in New South Wales warns they are not a cure-all but a “tool” to address specific problems. Social impact analyst Emma Tomkinson says they are useful “anywhere where there is a clear problem and an additional preventative program could address that program and the problem is expensive. That’s probably where a social impact bond could be effective.

“Perhaps a program where you want to encourage innovation. It’s easiest if you’re already paying on a demand basis for that problem, such as per person or per night.” When demand is reduced, so is spending. Improving outcomes on expensive “wicked” problems, it’s hoped, will save large amounts of money over the long term.

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