Social impact bonds – a kind of Private Finance Initiative scheme for NHS and social services in deprived areas

Whatever philanthropic rhetoric surrounds them, Social Impact Bonds are

“a growth capital vehicle targeting market-rate returns…”

Bridges Fund Management

Social Impact Bonds are a financial instrument that raises private capital to invest in largely 3rd sector-run public services in deprived areas, in order to return a profit to investors.

A kind of PFI scheme for NHS and social services in deprived areas, social impact bonds result in private and voluntary sector organisations delivering services on behalf of the cash-strapped public sector in a specific type of public/private partnership, through social outcomes-based contracts.

It seems this profiteering from the poor, ill and vulnerable is set to rocket. The self-declared “leading social impact-led investor”, Big Society Capital, announced on 15 September it intends to help double the size of “the market” to between £10 to £15 billion by 2025.

It reckons this expansion will be driven by social impact investment in the UK Government’s “levelling up” plans, while the Treasury reverts to a stingy approach to public sector funding.

Social Finance – a social impact bond fund management company – and the Healthcare Financial Management Association are proposing that social impact bonds can

“offer a way for NHS bodies to invest in prevention and support NHS recovery following the Covid-19 pandemic.”

How social impact investing works

A public sector organisation, such as a cash-strapped local authority or Clinical Commissioning Group, invites bids for a so-called Social Outcomes Contract to provide a social service in deprived areas AND the money to pay for them.

The money comes from a so-called Social Impact Bond that is provided by a Fund Management Company. It consists of funding raised from investors, with the prospect – but not the certainty – of them getting their money back, with profit.

The Fund Management Company pays for the contract upfront via a Social Impact Bond. This means the commissioning organisation doesn’t have to pay for the services. The Fund Management company also acts as the project manager for the service. Their role is to make sure the 3rd sector organisation providing the service achieves the required outcomes and so gets the investors’ money back, with profit.

If the service does improve specific health and/or social outcomes – for instance, keeping children out of care or keeping dying patients at home rather than in hospital, the Council or Clinical Commissioning Group saves money. It would then pass on part of the savings to the Social Impact Bond investors, as their return on investment. In this role, Councils or Clinical Commissioning Groups are known as “outcomes payers.”

The use of Social Impact Bonds was initiated in the UK by the New Labour government and has been driven by successive neo-liberal governments since then.

World Economic Forum’s stakeholder capitalism has NHS in its sights

The New Labour promotion of social impact bonds was part of the promotion of “stakeholder capitalism” that was a notable part of the World Economic Forum response to the 2008 financial collapse, brought about by the greed of deregulated banks.

The World Economic Forum has again given stakeholder capitalism pride of place in its June 2020 Great Reset plan, with a specific focus on “health and social challenges”

“The third and final priority of a Great Reset agenda is to harness the innovations of the Fourth Industrial Revolution to support the public good, especially by addressing health and social challenges. During the COVID-19 crisis, companies, universities, and others have joined forces to develop diagnostics, therapeutics, and possible vaccines; establish testing centers; create mechanisms for tracing infections; and deliver telemedicine…”

Funny how these investment opportunities for stakeholder capitalists map so precisely onto NHS England’s sustainability and transformation goals for redisorganising the NHS into a version of the USA’s public/private Medicare/Medicaid system that provides limited publicly funded, privately provided health care for patients who are too poor, old or ill to pay for private health insurance. To be written into law by the contentious Health and Care Bill currently making its way through Parliament.

As Open Democracy recently reported,

“The idea of stakeholder capitalism and multi-stakeholder partnerships might sound warm and fuzzy, until we dig deeper and realise that this actually means giving corporations more power over society, and democratic institutions less.”

Social impact bonds are an aspect of the financialisation of the NHS and social care services, where the bottom line overrides the needs of patients and the wellbeing of staff

Health and social services are transformed into quasi-businesses and the overriding priority is keeping costs down.

The effect can be dire for staff as well as patients. Enforcing a regime where the overriding commitment is to keep budgets down involves more and more managerial surveillance and control of the activities of social workers and NHS staff.

An example of this is the Mental Health and Employment Partnership’s Social Impact Bond finance for commissioning and procuring a specialist intervention known as Individual Placement and Support. This support aims to help people with mental health problems into employment.

The NHS and local authority contracts were managed by MHEP’s appointed contract management team and included a renegotiation of the original contracts when they weren’t working to generate the outcomes and the financial profits that depended on them.

Relatedly, the knowledge base of social work has been reshaped by the Coalition government’s ‘What Works’ agenda. This agenda includes NHS and social care services.

In 2014 the then-head of Monitor, (at the time, the NHS quango responsible for enforcing competition and economic regulation – now absorbed into NHS England), claimed that the NHS was to become a regulated service like privatised utilities such as gas, power, rail and water.

The elevation of “the market” as the be-all and end-all of society has replaced notions of social justice and equality with “value for money” to create ‘the social work business’ (Harris 2003).

“[This] … approach depends on measuring these variables which are capable of measurement. Not surprisingly therefore, it lends itself to behaviourist approaches which measure behavioural change and which usually have a strongly individualistic focus, with little concern for wider social factors… it presents social and personal change as essentially a technical matter – We are concerned with what works in achieving a specific end – such as reducing crime – rather than looking at the wider causes of that behaviour.”

Like PFI for buildings, Social Impact Bond contracts are more expensive than publicly funded contracts – and don’t do what they say on the tin.

Unsurprisingly, Social Impact Bond contracts are more expensive than standard publicly-funded contracts that pay on the basis of the service that is actually provided rather than on the outcomes of the service. A 2017 Guardian article reported that Social Impact Bond contracts could possibly be as much as 25% higher.

In July 2018 the Policy Innovation and Evaluation Research Unit (PIRU) published its Final Report on Evaluation of the Social Impact Bond Trailblazers in Health and Social Care. These schemes ran from June 2014 – May 2017.

Like the already-mentioned Guardian report, the PIRU Evaluation found that so-called Social Outcomes Contracts are more expensive than publicly funded services. And only one of the 5 Trailblazers reported having made any cashable savings during the evaluation period as a result of the Social Impact Bonds-financed ‘interventions’. Only one of the Trailblazers had set up a counterfactual outcome evaluation to use as the basis for making outcome payments to investors in the period of the study.

So much for evidence-based NHS and social care. It seemingly all comes down to what you decide to measure as evidence.

And even within the terms of this problematic evidence-based approach to health and social services, Social Impact Bonds do not do what they say on the tin.

A 3 year research programme into Social Impact Bonds in the UK, Canada and the USA concluded that the role for Social Impact Bonds is very limited and suggested a return to more traditional forms of grant-based funding for the many small and medium sized voluntary sector organisations that are doing excellent work but which are struggling with the lack of available funding.

Despite this, the size of the UK social impact investment “market” grew 6-fold from 2011 to 2019 and is now £5.1Bn, according to Big Society Capital.

No evidence Social Impact Bond health and social care services create better outcomes, save money or what their costs and benefits are

A 2017 article in the Journal of Social Policy refers to the introduction of social impact bonds funded by private capital as a new form of the quasi-marketisation of welfare services. Its findings

“suggest that the introduction of private capital in outcome-based commissioning has had a number of unique and unintended effects on service providers, operations and outcomes.” It concluded that “without evidenced effects of improved (and sustained) social outcomes, the public sector runs the risk of paying increased transaction costs associated with private social investment without realising the putative benefits offered through the SIB model.”

The July 2018 Policy Innovation and Evaluation Research Unit Evaluation (already mentioned above) couldn’t tell whether the Trailblazers’ stronger emphasis on demonstrating results than comparable non-Social Impact Bonds services translated into better client outcomes. It was difficult to reach a clear verdict on the costs and benefits of Social Impact Bonds in this field over the three years of the evaluation.

Another July 2018 report, by the Government Outcomes Lab at Oxford Unitversity similarly concluded in response to the question of whether Social Impact Bonds work:

“Unfortunately, this is hard to answer based on evidence available at the moment.”

The Government seemed undeterred by these findings. Having built a rather feeble Social Impact Bond market in the UK, due to concerns around cost, complexity, and data access and the reluctance of local authorities to play ball, the government became keen to export the model to so-called developing countries, as part of its post-Brexit trade strategy.

So why do Clinical Commissioning Groups and Councils continue to use social income bonds? Back to the 19th Century

Apart from turning illness and the problems of poverty into a source of profit for financial companies, the use of Social Impact Bonds is a key means of funding the reversion to the Victorian system of health and social care provided by charities – instead of by statutory bodies such as Local Authorities and the NHS.

This has been central to the 2014-19 NHS Five year Forward View and the 2019-24 NHS Long Term Plan – both intent on imposing US-style Accountable/ Managed Care (rebranded as Integrated Care) on our NHS. The government is now attempting to put this imposition on a legal basis though the contentious Health and Care Bill.

Social impact bonds are seen by their advocates as a means of making the voluntary sector more “resilient” by providing a secure source of finance for a number of years. The Richmond Group of health charities together with New Philanthropy Capital took to pushing them as the means of funding socially-prescribed services for the old, fat, poor and mad as a key part of Sustainability and Transformation Partnerships, with Somerset Sustainability and Transformation Partnership as the testbed.

The Richmond Group claimed that the way to tackle “pockets of deep seated deprivation and high prevalence on long-term health conditions” is

“to help improve the potential of voluntary organisations to help improve health. As a place-based health foundation looking to grow our impact through partnerships, understanding what great collaboration looks like is critical to us.”

Opponents say social impact bonds are the means of making civil society subordinate to the government’s agenda and removing its key role of dissent and resistance to cuts, privatisation and the austerity ideology.

According to Bridges Fund Management, Social outcomes contracts are

“having a broader systemic impact by changing the way health and social outcomes are commissioned and achieved.”

How Social Impact Bonds are feeding the government’s ‘Integrated Care’ agenda

Social impact bonds tend to be targeted at populations with highly complex needs, most vulnerable to social exclusion and policy failure, that would benefit from tailored, responsive and intensive service interventions (Cabinet Office, 2016).

These populations are central to the “new care models” imposed by Integrated Care Systems, which aim to keep the most costly 8% or so of patients most at risk of unplanned hospital attendance and admission out of hospital, through the provision of so-called “care closer to home” services.

This is to be achieved through the so-called “left shift” that moves NHS services out of hospital, into primary care networks that rely on third sector organisations, patients’ self care and family support, as well as social care services provided by cash-strapped local authorities, community health services and mental health services that have been the fastest growing areas of NHS privatisation over the last five years.

At the same time, Integrated Care Systems aim to tackle modern epidemics of obesity, respiratory illnesses, heart disease, diabetes, depression and anxiety through large-scale behaviour change schemes – on the mistaken assumption that these are the result of bad lifestyle choices, rather than structural social, economic and environmental injustice.

Both initiatives rely heavily on private and third sector providers.

These Integrated Care Systems measures are key to the growing use of so-called Social Outcomes Contracts and Social Impact Bonds in the NHS and social services, where contract payments depend on the achievement of specific cost-cutting health and social results.

Social impact bonds funding NHS services

As the accountable/integrated care model was rolled out over the NHS in 2015 with the imposition of 44 Sustainability and Transformation Plans, the NHS climbed onto the Social Impact Bond bandwagon.

End of Life Care Integrator

For example – the End-of-Life Care (EoLC) Integrator is a private ‘social purpose company’, that was established in 2016 with social impact investment from the £12m Care and Wellbeing Fund. The company is registered at the address of the social impact bond fund manager, Social Finance, which manages the fund.

The Care & Wellbeing Fund managed £12 million of investment from Big Society Capital and Macmillan Cancer Support. It seeks primary and community care providers

“which serve vulnerable groups and which can act as exemplars for strengthening more integrated and sustainable models of care provision.”

Update 21.1022 – The investment period for the Care and Wellbeing Fund ended in 2021. Social Finance has published a retrospective report on it.

In managing the Care and Wellbeing Fund, Social Finance partners with finance companies, government, service providers, and the voluntary sector using Social Impact Bonds.

It offers providers a combination of both financial investment and business advisory support and promises to

“tailor the structure of its investments to fit the needs of each organisation, and can consider both equity and debt (secured or unsecured) in amounts from £400,000 to over £1 million.”

The Care and Wellbeing Fund prospectus offered commissioners

“access to upfront capital for developing new or adapted services, alongside sector-specific expertise in the design and implementation of new interventions, data analysis and business support.”

Social Finance also has a strategic partnership with NHS England/Improvement, and has contributed to two national workstreams: Commissioning, Contracting and Finance; and Digital Development for End of Life Care.

Social Finance’s partners in the End of Life Care Integrator the are the Department of Health, NHS England, Macmillan Cancer Support and Big Society Capital. The company has channelled more than £3m into six End of Life Care projects in England through Social Impact Bonds, “delivering wider savings for commissioners.” In return, Clinical Commissioning Groups and the wider system are

“expected to closely collaborate in co-designing and commissioning the service and to share savings in acute care.”

Information about the End of Life Care projects refers to the use of an EPIC team in the Waltham Forest End of Life Care Integrator project. The EPIC team included an EPIC nurse and an EPIC healthcare assistant. EPIC turns out to be the Enhanced Community Palliative Care Service, which was launched with investment from the Care and Wellbeing Fund

Somerset Symphony Healthcare – a hospital trust’s wholly owned subsidiary primary care provider

The Richmond Group of health charities and New Philanthropy Capital’s promotion of social impact bonds in the Somerset Sustainability and Transformation Partnership “testbed” clearly paid off.

In its role as the Care and Wellbeing fund manager, Social Finance works with NHS companies like Somerset Symphony Healthcare – a wholly owned subsidiary of Yeovil District Hospital that has “integrated” 16 GP practices into its primary care provider arm since its set-up in 2016.

The Care and Wellbeing Fund says it is

“supporting SHS by investing in key building blocks (HR and Finance systems, timely management information, wider data analysis) to drive broader transformation, improving access to quality primary care services for the local community.” 

In 2019 the Fund also set out its stall for social impact investing in GP practices,as

“GP surgery closures across the UK have reached an all-time high, affecting an estimated half a million patients in 2018. Over the next five years it will be important to fundamentally strengthen many primary care practices; to enable people to receive a greater range of support without needing to go to hospital and to ensure that people’s needs are met in the round. This will require greater collaboration, innovation and making better use of resources.”

Mental Health and Employment Partnership

Other Social Finance “partnerships” (such as the Mental Health and Employment Partnership, a subsidiary of BIg Issue Social Investments Ltd) work with NHS and Local Authority Commissioners to provide them with a specialist intervention known as Individual Placement and Support (IPS). For this scheme, Mental Health and Employment Partnership social impact bonds pay for employment advisors who are

“embedded in local mental health professional teams… to address the employment support needs of people with severe mental health conditions”

Contracts issued by the NHS and Local Authorities are managed by Mental Health and Employment Partnership’s appointed contract management team, provided by Social Finance. The contract management team has ‘addressed… performance issues’ through measures that included re-negotiation of contract terms.

According to the National Lottery Community Fund report on the Mental Health and Employment Partnership

“the SIB funding mechanism brought an investor stakeholder’s interests into play. This meant that pro-active contract management resources were put in place to support the providers and commissioners both with operational issues and with contract re-negotiations.”

This indicates that conflicts arose between financial, providers’ and mental health patients’ interests. Such conflict is likely to be intense, because if the service the social impact bond pays for does not achieve the specified social outcomes, investors don’t get their money back.

In that case, not only does the public sector organisation not get the social/health outcomes it wanted, it doesn’t get its share of the “savings” from achieving them.

If the Mental Health and Employment Partnership Social Impact Bond investment had worked as planned for its first three contracts, the value of outcome payments to the service providers in Staffordshire County Council , London Borough of Haringey and Tower Hamlets Clinical Commissioning Group would have been up to £2.9m based on the achievement of employment outcomes for up to 2,800 service users.

But the National Lottery Community Fund report found that a continuing issue (which had a financial impact on providers) was a lower than expected volume of referrals and lack of initial success in integrating the employment advisors into new community mental health teams.

A second Mental Health and Employment Partnership social outcomes contract ran from 2019-2021 in Haringey and Barnet. The money for the Mental Health and Employment Partnership has come from £2.2 million of national, outcomes-based funding from Big Lottery Fund and the government’s Social Outcomes Fund to add to local resources.

Ways to Wellness social prescribing scheme for patients suffering from modern epidemics

Ways to Wellness (Newcastle), a 7 year social prescribing scheme funded in 2015 by a £1.65m social impact bond from Bridges Fund Management, also found “inherent tensions in the approach” that emerged

“from organisational and sectoral differences in culture, perspective, and preference” among the public sector commissioners, private sector investors, and voluntary sector service providers.

Ways to Wellness describes itself as

“a ‘special purpose vehicle’ holding key contracts with partners: public sector commissioners, local voluntary sector delivery organisations, and a specialist social investor. It is expected to reach approximately 9,000 patients over seven years and provide social prescribing for up to 3,000 patients at any one time in the west of Newcastle.”

Clearly with an eye on a far wider market created by modern epidemics resulting from social, economic and environmental injustice, the social impact bond investor Bridges Fund Management announced,

“Over 15 million people in the UK suffer from long-term health conditions (‘LTCs’) such as diabetes, asthma, chronic obstructive pulmonary disease and heart disease. Most experience poorer health outcomes and reduced quality of life as a result. They are also proportionately higher users of health services: 70% of national NHS spend is on patients with these conditions.

“To address this issue, a newly-formed organisation called Ways to Wellness has developed an innovative programme based on the concept of ‘social prescribing’ – the use of non-medical interventions to achieve sustained lifestyle change and improved self-care among people with long-term health conditions. Ways to Wellness believes this first programme, which will start next week and run for an initial seven years, can improve the health of approximately 11,000 people living in the west of Newcastle.”

But by its Year 6 Report, Ways to Wellness had identified that the use of an outcomes contract caused “inherent tensions” between the partners because

“financial consequences for not achieving target outcomes… impacted trust and partnership working… Ambitious targets and managing for high performance are often incompatible with creating an environment of collaboration, trust and shared power.”

With potential maximum outcomes payments of £8.2m, the stakes were high.

For the investor, Bridges Fund Management, the scheme was a financial success. The repayment of the Social Impact Bond capital investment was completed at the end of year six (March 2021). And additional costs of finance and returns on investment have been paid to the investor, largely linked to outcome payment achievement and surplus generation.

It may have been less successful for its patients in a deprived area of Newcastly. An evaluation of the Ways to Wellness scheme’s impact on the glycemic control of type 2 diabetes patients identified the evaluation’s significant limitations and concluded only that

“social prescribing CHW-interventions addressing the wider social determinants of health may play a role in reducing the long-term public health burden of type 2 diabetes”

Reduction of the long term public health ‘burden’ of type 2 diabetes relates to both outcomes in the Ways To Wellness contract:

Social impact bonds funding children’s services

Norfolk County Council’s ‘Stronger Families’ service – part of the Government’s cost-cutting “Edge of Care” “transformation” of Local Authority Children’s Services – is funded by a social impact bond provided by Bridges Finance management, along with 49% match funding from the Government’s Life Chances Fund.

By contributing to outcome payments to Social Impact investors, when social outcomes contracts achieve their required outcomes, the Government’s Life Chances Fund lures local councils and other commissioners to procure social impact bonds to pay for services for drug and alcohol dependency, children’s services, early years, young people, older people’s services, and healthy lives.

The Local Authorities have to procure a service provider along with the Social Impact Bond for the Edge of Care service. This means that they have had to outsource this new service – Children’s Services can’t provide it.

This creates further complexity and fragmentation – how is the new provider going to work with both statutory Children’s Services and CAMHS providers, who are mostly privatised?

The new service aims to cut Norfolk County Council’s costs by £7m over 5 years, by using Functional Family Therapy to reduce the number of children going into care. The therapy provider is a local community interest company operating on licence from the US corporate owner of Functional Family Therapy-Child Welfare.

A Jan 2019 press release says,

“Norfolk County Council has committed to pay the Social Impact Bond for any successful outcomes alongside the Government’s Life Chances Fund.”

I guess this means they will use some of the anticipated £7m savings to pay the Social Impact Bond investors if the service successfully keeps children out of care.

Info on the Government Outcomes Lab website shows that the Total Potential Maximum Outcomes Payments are £8,715,000 and that both Norfolk County Council and Central Goverment will make the outcomes payments to investors.

One comment

  1. The Tories just keep adding fancy labels and other psycho-trickery to shift care and health costs out of the directly, most economically funded, public NHS realm and shift responsibility for NHS outcomes from themselves. It was Jeremy Hunt who steered the legislation, releasing himself as Health Secretary from NHS performance responsibility.


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