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Peterborough social impact bond reduces reoffending but makes no payout yet to investors

Peterborough social impact bond reduces reoffending but makes no payout yet to investors
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Peterborough social impact bond reduces reoffending but makes no payout yet to investors3

Finance | David Ainsworth | 7 Aug 2014

The UK’s first social impact bond has met initial targets for reducing reoffending among offenders released from Peterborough Prison, according to results published today by the Ministry of Justice.

But the results show it has not yet delivered strong enough results to trigger a payment to investors.

The project reduced reoffending by 8.4 per cent among the first cohort of 1,000 prisoners it worked with, compared with a control group. There were 142 reconvictions per 100 offenders, compared to 155 reconvictions among a control group.

The Peterborough project was launched in 2010. It was the first example of the SIB, a type of payment-by-results contract where investors provide a not-for-profit organisation with capital to carry out interventions. The government pays out if the interventions are successful. The investors make a profit if the project works, and lose money if it does not.

The project was carried out by the One Service, a special purpose vehicle set up by Social Finance, the organisation which created social impact bonds. The project received £5m in commitments from 17 charitable foundations, and those investors will receive payments if all cohorts show at least a 7.5 per cent reduction in reoffending.

If the project continues to provide reductions at the current rate, it will trigger a payment for investors in 2016. If it had reduced reoffending by 10 per cent, this would have triggered an immediate payment.

David Hutchison, chief executive of Social Finance, said he expected to see improved performances in the second cohort.

“We’re anticipating a greater reduction based on what we’ve seen,” he said. “It took us a long time to gain the trust of some of the more prolific offenders and to build relationships with police and other stakeholders.

“One major thing we’ve learned is the importance of continuity of provision and knowledge in building a good service.”

Chris Grayling, the justice secretary, said the results showed outcomes-based results worked well.

"While the same old approach is having barely any impact on our sky-high reoffending rates, which have hardly changed in a decade, these through-the-gate pilots are getting results," he said.

Project closed early

The Ministry of Justice announced earlier this year that the Peterborough SIB would be closed early because it was not compatible with Transforming Rehabilitation, a nationwide programme which will replace existing probation services for medium and low-risk prisoners, and will also include a payment-by-results element aimed at reducing reoffending.

The SIB structure will be used to work with two cohorts of offenders, and the One Service will be allowed to complete its work with the second cohort. It will receive transitional funding from the Ministry of Justice to continue working with the third cohort up until the point that the prime contractor appointed to oversee probation in the East of England region is able to make a decision about the future of the service.

Hutchison said that the early closure was “regrettable but probably inevitable” due to the difficulty of working separately to the East of England provider and the difficulty of measuring the success of the bond against a control group.

Dan Corry
Chief Executive
New Philanthropy Capital
14 Aug 2014

It sounds like there's a reason to cautiously welcome today's announcement on the Peterborough Pilot. Reconviction rates may not have dropped by 10%, the percentage targeted by the government, but achieving reductions of more than 8% is still a substantial step in the right direction.

But it also throws up further questions. We'd need to know more about any differences in the type of reconvictions, which would give us much more information to work with than the number alone.

The Ministry of Justice ascribes this drop to the adoption of the SIB model for this pilot-if so, we'd need to know far more about what it is about SIBs which have helped deliver such results in such an intractable area of public policy. NPC's experience, outlined in our recent paper Challenges and opportunities, was that organisations delivering services benefited from the flexibility SIBs offered, which allows services to be adapted to meet unexpected patterns of demand. Good data collection and analytics around service delivery are central to achieving this and should lead to service improvement over time-which is what David Hutchison is expecting for the second cohort.

All of this would beg a further question about the minister's judgment: if the reason we have success is that a SIB was used, surely it is essential that the Transforming Rehabilitation programme, as it builds on lessons from Peterborough but without using a SIB, maintains some of the flexibility from which providers and contractors have benefited.

T Bigden
Trustee/ treasurer
DAVSS
7 Aug 2014

Why are we not surprised that the government in the form of the "Ministry of Justice" has wriggled out of a financial commitment. The whole premise of payment by results is seriously flawed. Worse it is damaging and has damaged good charities who have hitherto worked in this and related arenas.

Edward Harkins
Research & Knowledge Consultant
Edward Harkins
7 Aug 2014

Isn't this yet again another set of 'interim results' or 'interim evaluations' on the Peterborough experiment? A weird situation given that the Peterborough single episode has been used as much of the basis for top-down, centrally driven promotion of SIBs

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