New research into social impact bonds reveals “unintended effects”

We’ve written quite extensively about Social Impact Bonds (SIBs) elsewhere on this blog.

SIBs have been pursued as a specific policy initiative because it is said they enable more flexible services, reduce the risk of service innovation (by ‘distributing’ that risk to private investors), and result in improved outcomes for service-users. In this, they can be seen as a ‘marketised’ variant of Payment by Results (PbR).

Third Sector online has just covered an interesting paper by Daniel Edmiston and Alex Nicholls, researchers at the University of Oxford, published as an open access article in The Journal of Social Policy.

The paper, Social Impact Bonds: The Role of Private Capital in Outcome-Based Commissioning, finds that SIBs have had a number of “unique and unintended effects” and of the four schemes examined in detail concludes that: “There is no current evidence to suggest that these SIBs were able to produce improved social outcomes relative to previous and other existing service interventions.”

The paper finds that the SIB mechanism:

  • Has high transaction costs (set-up, legal requirements, management, data gathering).
  • Introduces additional administrative and monitoring burdens for delivery agencies (costs “that could be better spent on frontline services”).
  • Can increase the pressure on some providers to “cream” and “park” — i.e. focus on clients most likely to boost outcomes and bypass those with the most complex and intractable needs.
  • May stifle flexibility and reduce autonomy for frontline practitioners.
  • May bring additional rigour to assessing effectiveness and performance but not necessarily result in service innovation.


This paper isn’t an easy read — it is, after all, an academic paper — and the “unintended effects” it describes seem entirely predictable in many ways, but it is interesting and anyone seeking to keep up with public policy thinking around SIBs will find it of some value.

Birmingham UK. Freelance research, evaluation and policy consultant specialising in social enterprise and the third sector. I maintain the BSSEC blog and website

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