Former PM urges investors and policymakers to adopt social outcomes-based contracts

14 Jun 2024 News

Former prime minister Gordon Brown

Gordon Brown's team

Former prime minister Gordon Brown has urged investors and policymakers to adopt outcomes-based contracts, which channel capital to deliver public services through organisations such as charities or social enterprises.

This week, Better Society Capital (BSC) published a report that says that social outcomes contracts, also called social impact bonds, have generated £1.86bn of social value to date.

BSC, formerly known as Big Society Capital, reported that public commissioners had paid £217m towards these contracts, meaning every £1 they spent generated nearly £9 of social value.

Brown endorsed BSC’s report and called for public service innovation ahead of the general election. 

He recently suggested that the government should introduce a £1bn children’s social impact bond focused on reducing poverty.

Brown: ‘There’s much more to do’

Commenting on the report, Brown said: “Meeting unmet needs while using unused resources is what makes a finance minister happy and shining a spotlight on unclaimed assets was an important mission for me both as chancellor and prime minister. 

“Outcomes contracts deliver public services through third-sector organisations and the taxpayer only puts up cash for high-quality, well-targeted services.

“This report shows the great impact that this approach is making on complex, entrenched issues such as children’s services and homelessness, but there is much more to do.

“I hope this report will encourage investors and policymakers to scale up support of BSC’s important mission.” 

Outcomes-based contracts are a method of public service delivery that channels socially motivated investment into social sector organisations to tackle entrenched social issues.

Unlike traditional public services, outcomes-based contracts do not cost anything to the government until pre-agreed delivery outcomes are met. 

£507m saved in fiscal value

BSC commissioned ATQ Consultants to look at how 86 outcomes-based contracts had produced social value through positive improvements to society including improved health, reduced crime and helping people with mental health issues into work.

It found that these contracts have delivered an overall adjusted present value of £1.86bn, with commissioners spending £217m, saving taxpayers £507m in fiscal value (direct savings to or costs avoided by the public sector due to a specific intervention). 

Aman Johal, managing director at BSC, said: “This research proves what we have known from individual projects – these contracts not only deliver meaningful change in communities and prevent social problems where complex needs exist, but also save the taxpayer considerable money.

“The next government has the opportunity to safely transform key areas of public services with trustworthy delivery partners, who not only know their local communities but also operate with no up-front cost.

“Furthermore, this is an approach that is highly measured compared to other types of commissioning, which can provide new data and evidence to support overall public service reform.”

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