Social Bond(age)

Not-for-Profits providing social services are not working hard enough, or smart enough. The people they support are not trying hard enough. Both need a corporate investor, whose profit margin is at stake, wielding a big stick to chivvy them along to lift their game. Hence the need for social bonds. Or so it is implied.

There are so many reasons why social bonds are a bad idea, and downright insulting to both service provider and service users, it is hard to know where to start.

That our government believes people only perform at their best when there is money at stake is perhaps the saddest revelation in all of this. The idea that people and organizations do their work because they actually ‘give a damn’ seems totally beyond the government’s comprehension.

No one goes into the Social Service sector for the money. Thanks to cutbacks, and funding rates that have been stagnant for almost a decade in some cases, there is precious little of that. The mantra, ‘more for less’ has become ‘everything for nothing’ in the Social Services, Not-for-Profit, sector. They are regularly told “there is no more money available”.

Imagine the surprise to learn that there is money available to pay corporate investors a profit. Imagine the difference it might make to outcomes if that money was directed to organizations actually providing the services or the people they support.

Outcomes-based funding for organizations receiving government funding is fine, if the outcome is improved quality of life for the people they are supporting. For some this may well be paid work, but a liveable income is more important for everyone. As are activities that increase self esteem and enable people to make a valued contribution to their community. And sometimes just maintaining the status quo is a major achievement.

Achieving positive outcomes requires an individualized approach. Everyone has different needs and strengths. One size does not fit all. Innovation, collaboration, and a lot of trial and error are basic requirements. An investor in the background wielding a big stick won’t make anyone work harder, and may well be an impediment to trying new approaches.

Focusing on narrow outcomes such as paid employment also ignores the reality that there simply aren’t enough jobs for everyone.

So, why social bonds? It’s got nothing to do with Not-for-Profits or the people they support. They are just the meat in the sandwich.

Sure-fire investments are thin on the ground. Social bonds are safe. Social bonds allow investors to get their hands on government money without having to do any actual work. No big investor will enter into a contract that holds even the remotest possibility that they might lose out on their profits. Their lawyers will see to that.

Social bonds allow the government to defer payments for a number of years which makes it that much easier to balance the books – in the short term.

Social bonds are in line with the Trade in Services Agreement (TISA) that the government is determined to sign us up to, whether we like it or not.

Investment bankers Goldman Sachs were the first company in the US to become involved in social bonds. Ironically $7.2 million of the $9.6 million Goldman Sachs provided was guaranteed by a charitable trust (Bloomberg Philanthropies). Goldman Sachs stood to make $2.4 million in profit at the end of the three year time period.*

Need we say more?

 

* Community Development INVESTMENT REVIEW ‘Rikers Island: The First Social Impact Bond in the United States’ by John Olson and Andrea Phillips (Goldman Sachs)

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