The Cabinet Office has decided to allocate some of the £28m Futurebuilders repayment money to the Social Outcomes Fund, which is only open to government and other commissioning bodies.

The decision has been criticised by the voluntary sector's Early Action Task Force, which claims that taking the money out of the sector now effectively "punishes it for its success".

The Social Outcomes Fund is a £20m fund launched by the Cabinet Office to support “intelligent commissioning” of public services.  According to a progress update issued by the Cabinet Office last December, the Fund is “a £20m central top-up fund that will bring in investment to help finance early, preventative programmes on some of the most complex and expensive social problems”.

Government departments, local councils and other commissioning bodies such as police forces or clinical commissioning groups in England can apply to the Fund for extra money to help them deliver innovative services that are almost fully funded for launch but require a final tranche of funds.

Applicant projects must involve payment by results and ideally be financed by a social impact bond.

Examples provided on the Cabinet Office website include a bid from a central government department for top-up payments in a payment-by-results scheme to help problem drug users, or a bid from a Police and Crime Commissioner for top-up payments in a social impact bond aiming to reduce gang membership.

The Cabinet Office admitted last September that the Social Investment Business, which managed the Futurebuilders fund on behalf of the government, had received some £28.5m in loan repayments which are currently sitting in an escrow account.  At the time the Cabinet Office had not yet decided what to do with the money.

Last week, in response to a follow-up enquiry from civilsociety.co.uk, a Cabinet Office spokesman confirmed that a share of the returns would be allocated to the Social Outcomes Fund but no decision has been made yet about how much or what will happen to whatever is left over.

The Social Outcomes Fund website points out that not all outcome payments have to be made by the commissioner; some could be made by an organisation with an interest in a particular area, such as a charity.  A spokesman explained that this means that a charitable funder such as a foundation might want to team up with a public sector commissioner to help devise and invest in a new social impact bond or outcomes-based programme.

The Fund encourages bids from multiple commissioners acting jointly and a non-public sector intermediary may also be involved.

The £215m Futurebuilders fund opened in 2005 to provide loans and grants to help charities deliver service delivery contracts. It closed in 2010 after allocating grants and loans totalling £155m.

Sector response: Wrong decision by government

The Early Action Task Force, which comprises leading figures from various charities and sector umbrella groups, had urged the government to allocate the Futurebuilders returns to ‘early action projects’.

David Robinson, chair of Community Links and a member of the Task Force, said the government was wrong to divert the money away from the sector.

"We welcomed the establishment of the Social Outcomes Fund because investment in early action often results in cross-departmental savings," he said.

"However, although the savings may not accrue to a single department or local public agency, they do benefit government as a whole. The Fund should therefore either be directly financed by the Treasury or funded by contributions from each benefiting department. 
 
"The Futurebuilders fund was designated for the third sector. The repayment pot has been aquired as the funded programmes have delivered on their promises and returned the loans. This money should now be redirected towards a new third sector programme dedicated to early action.

"In time it too would benefit the public purse but taking this money out of the sector now and giving it exclusively to other government agencies effectively punishes the sector for success." 

The Cabinet Office is due to publish an update on its social investment strategy today, which will include news of two new social impact bonds partly funded by the Social Outcomes Fund.