The Cabinet Office has announced the launch of seven new social impact bonds which will help disadvantaged young people, children in care and those with long term health conditions and mental illness.

The seven new SIBs will bring the current number in the UK up to 31, more than the rest of the world put together. Four of the new SIBs will be funded by the Youth Engagement Fund, and will support up to 8,000 disadvantaged young people to improve educational qualifications and secure employment.

The Fund, which aims to find new ways to address challenged facing disadvantaged young people, includes £10m from the Cabinet Office, £5m from the Department for Work and Pensions and £1m from the Ministry of Justice.

The Social Outcomes Fund will provide £2.5m to support three additional SIBs to help people with long term health conditions, mental illness and children in care. £1m will support a SIB to support 8,000 people in the North East with health conditions such as lung disease, diabetes and asthma.

A SIB is a type of payment-by-results contract in which a charity agrees with a commissioner to deliver an outcome. The charity receives social investment which it uses to pay for the service. If the outcome is achieved the investor makes a profit. If the outcome is not achieved the commissioner makes no payment and the investor loses out.

Social Finance developed two of the new SIBs launched. Its new initiative, the Health and Employments Partnerships, will launch its first SIB over the next year to support 2,250 people from three areas in London and two in the West Midlands into work.

Adam Swersky, programme lead for health and employment at Social Finance, said: “Fewer than one in ten people with severe mental illness are in paid employment, yet 70 to 90 per cent want to work. We're excited to be working with Cabinet Office, local authorities and the NHS to develop a Social Impact Bond that will invest in a proven approach to supporting more people into employment and to improve their wellbeing.”

Three social investors, Bridges Ventures, Esmée Fairbairn Foundation and Impetus–PEF have invested in the Teens and Toddlers Social Impact Bond. The delivery will be managed by Social Finance.

The Bridges Social Impact Bond Fund, managed by Bridges Ventures, has agreed to invest £1.35m in two of the new SIBs – those provided by Career Connect and Teens and Toddlers. Impetus-PEF is investing £200,000 in the SIB awarded to Teens and Toddlers, which it has been supporting since 2009.

Teens and Toddlers and Career Connect have both already delivered successful SIBs.

The success of the Teens and Toddlers SIB, which Social Finance will manage, will be measured by improved engagement at school, educational qualifications and employment opportunities.

Antony Ross, partner and head of social sector funds at Bridges Ventures, said: “This is an important milestone in the development of the social impact bond market. The success of Career Connect and Teens & Toddlers shows that SIB-funded interventions can deliver better social outcomes for the Government, at lower cost – while also generating positive returns for investors.”

Amelia Sussman, Impetus-PEF’s investment director, said: “We are delighted to be return investors in a second social impact bond in which Teens and Toddlers are delivering their distinctive and pioneering programme. Social investment is an important platform for their longer term sustainability and growth and we view the Youth Engagement Fund opportunity as a critical next step.”

Rob Wilson, minister for civil society, said: “As part of our long term economic plan this government is committed to supporting charities and social enterprises to access the finance that they need to do more.

“By working together across government and creating social impact bonds we can confront complex issues – whether it is chronic health conditions or youth unemployment – and save money in the long term as well as improving the quality of life for tens of thousands of people throughout the UK.”

The four winning bidders for the Youth Engagement SIB are:

• Unlocking Potential Ltd working in Greater Merseyside

• Prevista Ltd working in London

• Futureshapers Sheffield Ltd working in Sheffield

• Teens and Toddlers Youth Engagement working in Greater Manchester

The three winning bidders for the Social Outcomes Fund SIB are:

• Newcastle West Clinical Commissioning Group in collaboration with Ways to Wellness Ltd working in the North East

• Evidence Based Social Investments Ltd has developed a new model for local authorities to easily access social investment support using Multisystematic Therapy and Family Functional Therapy. They both help children at the edge of care and help provide intensive support to enable successful adoption and foster care placements

• Social Finance will support another £1.3m SIB to help 2,250 people with severe mental illness into employment in locations in London and the West Midlands