At Big Society Capital, we are seeing increasing interest in the use of social investment to pump prime public service reform. There are wide areas of government services which could benefit from being commissioned partially or fully on the basis of outcomes.
The interest from commissioners of social impact bonds is occurring at both a local and a national level. Big Lottery Fund has funded over 50 development grants to local authorities and Clinical Commissioning Groups developing social impact bonds through the Commissioning Better Outcomes Fund. In the 2015 Spending Review Central, Government has committed a further £105m to support the use of SIBs to commission services. Additionally, we are seeing a number of devolution areas develop Public Service Transformation Funds which might require social investment capital to achieve their objectives.
To ensure sufficient capital available for Social Impact Bonds, in 2013, Big Society Capital cornerstoned Bridges Ventures to manage a fund focused on outcome based contracts. Bridges has now made 14 investments into SIBs across different social issue areas. Amongst others, funds such as Care and Wellbeing Fund managed by Social Finance, and the Social Enterprise Investment Fund II managed by Big Issue Invest, are also contributing to provision of finance for outcome based contracts and Social Impact Bonds. Nevertheless the financing need is likely to increase and Big Society Capital believes the market will benefit from a diversity of finance providers going forward.
Concurrently with these developments, the development of Social Investment Tax Relief (SITR) has catalysed increasing interest from High Net Worth individuals and wider retail investors in investing for social impact. To date, the use of SITR to finance Social Impact Bonds has been limited with only two Fair Chance Fund SIBs using SITR to raise investment. However, SIBs are well suited to the use of SITR due to the risk profile, as well as the clear visibility on the impact achieved as a result of the investment. Additionally, the government recently announced changes to SITR to allow spot purchase SIBs to be eligible for tax relief.
To capitalise on these opportunities, Big Society Capital is calling for Expressions of Interest from organisations to create and manage a new fund to finance SIBs and other types of outcome based commissioning markets. We would welcome interest from new entrants into the market and are particularly interested in exploring how SITR could be used in such a fund.
We appreciate this is a new idea to many organisations and some participants would value an opportunity to share ideas and network. To this end we will hold an informal briefing event on March 14, 2016 2-3:30 pm at Big Society Capital’s offices. If you have any questions in the meantime, please get in touch with Daria Kuznetsova.