Victoria's first social impact bond providers announced

By David Donaldson

April 18, 2017

The Victorian government has announced that the its first issue of two social impact bonds, which will aim to help at-risk youth and the long-term homeless, will be delivered by consortia led by welfare service providers Anglicare and Sacred Heart Mission.

Despite its well-developed not-for-profit welfare sector, Victoria has been somewhat wary of the innovative financing model — also known as a social benefit bond — which first came to Australia with New South Wales’ launch of two programs in 2013.

The Anglicare consortium, which includes VincentCare, proposes a mix of individualised case management, specialist support, and stable housing to improve outcomes for young people leaving out of home care.

Sacred Heart Mission will provide rapid access to stable housing and intensive case management to support Victorians experiencing chronic homelessness and harmful alcohol and other drug use.

These social problems represent a significant cost for government. Around 600-700 people aged 16-18 transition from out-of-home care into independent living each year in Victoria. They face poorer outcomes than other young people, particularly in areas such as unemployment, homelessness and contact with the justice system.

Apart from harming individuals’ life prospects, this social disadvantage is expensive — one study estimated their cost to police per person per year at $7156. For Justice and Correctional Services it’s $6913. There are undoubtedly other costs, direct and otherwise.

Alcohol and other drugs likewise have high direct costs to government — the prison system spends about $300 per prisoner per day on reducing harmful use, for example. For the courts it’s around $2700 per case finalisation. About 4% of all emergency department presentations included alcohol and other drugs as a factor in 2012-13.

The government says it will institute robust measurement and evaluation systems. The Department of Treasury and Finance acknowledges are are a host of difficulties in making SIBs work, such as defining the outcomes on which contracts will be based and making sure they are aligned with genuine progress, needing sufficient baseline data to measure improvements accurately and setting up the control group correctly.

Social impact bonds are seen by their boosters as an important new means of tackling difficult, expensive social problems and introducing innovation into social services. The key feature is a commitment by government to paying a third-party provider a fee if it is able to meet social outcome targets at the end of a multi-year period. They have been used most extensively in the United Kingdom, following the first in 2010.

But their detractors, including the Community and Public Sector Union, believe there is no reason why existing public funding models could not be used, arguing that SIBs constitute a form of back-door privatisation.

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