Birmingham has been chosen as one of four local authority areas to trial a SIB aimed at raising investment to deliver services which will turn around ‘problem families’ and it is evident that the government is also considering SIBs as the key means of paying for a range of early intervention services.
But these examples of SIBs are essentially ‘macro’ level public sector Bonds. They aren’t investment options being offered by individual organisations.
But this is about to change. Third Sector Online has just announced that the disability charity Scope is offering a £20m Bond aimed at the “mixed investment market”. This is the first Bond to be offered at scale — it’s four times larger in value than the Peterborough SIB, for instance — by a single operational charity.
Where Scope are leading it is expected other major national charities will follow.
Now this to me marks a sea-change in how SIBs are being presented. While I remain sceptical of the marketisation of ‘sub-prime behaviour’ (not my description but Polly Toynbee’s writing in the Guardian) I can’t help but think that for at least some investors Bonds offered by major operational charities — especially where those charities are national “brands” — will have more credibility and a stronger sense of social mission.
On the other hand, I suppose investors will argue that credibility and social mission count for little: all that needs to be assessed is the risk. Whichever Bonds offer the best returns and the most palatable levels of risk will be the winners, irrespective of any other factors that might make an investor identify more strongly with the provider.
Whatever the case, it is clear that the crucial issue here is scale. In order to make the costs of transaction worthwhile the scale of individual SIBs has got to be significant in order to absorb the administrative, legal, monitoring and financial management costs that are an inherent part of SIBs.
Interestingly, a Bond offered by a single provider could arguably have lower transaction costs than complex multi-partner delivery Bonds such as the Peterborough model. But as no one really wants to talk about the transaction costs it’s hard to judge: when I asked the question back in March at Social Finance’s conference in Birmingham it was simply ignored…
Chris Newis’s blog at Footprint Associates has interesting analysis of this development, which Chris says will render obsolete both the Charity Commission and the CIC form. Read it here.