First Social Impact Bond privatization fails to meet target

Instead of acknowledging the flaws in the privatization schemes, Social Impact Bond supporters are proposing governments provide incentives or guarantees to encourage people to invest in them. In other words, subsidize privatization schemes.

Ottawa (08 Aug. 2014) — The first Social Impact Bond privatization scheme has failed to meet its initial target.

First Social Impact Bond privatization project fails to meet initial target, leaving investors without a payout

Britain's Social Impact Bond project was designed to provide support for prisoners released from the Peterborough prison. in order for investors to get an early payout, the project had to reduce the reconviction rate by 10 per cent. It failed to meet that target. 

What makes the failure to meet its target all the more surprising is that the criteria being used to measure the success of the project seemed to favour the investors.  After examining the criteria, British statistician Sheila Bird stated that the private sector intermediary group running the project had managed to get a process where it would be hard to fail.

While the drop in the reconviction rate is enough that investors will make some money when the scheme ends in 2016, the data released this week shows the scheme will come nowhere near achieving what proponents claimed it would when the project was launched.

Negotiations on how Social Impact Bond projects will work are a bigger problem than expected: the Peterborough project took 29 months to negotiate 

It is also clear that the cost of, and the time required for, negotiations on how Social Impact Bonds will work are an even bigger problem than first suspected. It took 11 months of negotiations between the private sector intermediary organization and the British Ministry of Justice before they could agree on what data to use for measuring whether or not the first Social Impact Bond project was a success. This is after spending 18 months negotiating on how the program would be set up.

But anyone who thinks these problems are enough to kill Social Impact Bonds is being optimistic. Instead of acknowledging the flaws in the privatization schemes, Social Impact Bond supporters are proposing governments provide incentives or guarantees to encourage people to invest in them.

In other words, subsidize privatization schemes.

NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE

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