Dominic Llewellyn is the Co-Founder of Numbers for Good, a pioneering social investment organisation. He stood for Parliament in Newcastle upon Tyne in 2010 and has a background in politics and setting up charities and social enterprises.
In 2010, a Labour Treasury Minister left the Coalition Government a now infamous note: “there’s no money left”. George Osborne used the 2010 Spending Review, to respond to this challenge, stating “today is the day that Britain steps back from the brink” and “that a strong Britain starts here”. There’s no doubt, the last Spending Review – and Government – was about fixing the economy. The deficit has been halved as a proportion of GDP and more jobs have been created in the UK over the last five years than in the rest of the EU all together – 1,000 new jobs every day since 2010. The Coalition also made other progress in creating opportunity – for example, one million more children are in schools rated Good or Outstanding by Ofsted than in 2010.
But, what should this Spending Review – and Government – be all about? The Prime Minister gave some clues as to what he would like Government to look like in a speech on the Smarter State in September. He followed it up in his speech to party conference “to make Britain greater, we need to tackle some deep social problems…problems we only just made a start on, as we focused on the economic emergency that faced us. The scourge of poverty. The brick wall of blocked opportunity.”
While the public finances may be being restored to health, for too many entrenched disadvantage isn’t just a statistic, it’s everyday life. What hope should the Government be giving to the 700,000 young people who don’t have a job or aren’t in education or training? Or to the 50,000 people who are homeless? Or, to the 1.2 million people in contact with mental health services? What about children on the edge of care or the 68,000 children that are looked after by the state? This list could go on. The public sector was designed to support people in acute and infrequent need. But the need is now neither acute nor infrequent: more people need more help.
These people’s experiences should challenge those of us who believe that this is too high a level of human suffering for a developed country. Our reactive model also represents a missed opportunity to contribute to improving UK productivity and economic growth. Only 6 per cent of public spending is spent on preventing social problems, instead of reacting to them. The UK needs to create opportunity for all in society in a new way.
Over the past five years, there has been more focus on the public sector paying for outcomes; for example, in tackling long-term unemployment by only paying when people get – and keep – a job or tackling youth homelessness through only paying when a young person is housed and then accesses employment, education, training and volunteering opportunities.
Since standing for Parliament in 2010, I co-founded and help run Numbers for Good, supporting charities and social enterprises increase their impact through raising investment. Some of the work we do is help organisations bid for contracts like this, and create what are called social impact bonds. Social impact bonds – or SIBs as they are sometimes called – are where local or national government only pay for outcomes (i.e. for what works – often preventing the social issue in the first place, therefore saving money) and where investors take the risk on the innovative charities and social enterprises do by lending them the money upfront.
Too good to be true, you may ask? Not so. A Department for Work and Pensions programme targeting youth unemployment has stopped thousands of young people become unemployed in the first place and repaid investors, such as Bridges Ventures. Last year we worked with charities to launch two social impact bonds tackling youth homelessness across the North East and Yorkshire tackle homelessness through social impact bonds. We are currently working on ten more social impact bonds across health, education, employment and criminal justice.
The 2015 Spending Review presents the opportunity to reshape public finances to effect and create a smarter state with a dramatic improvement in public services for vulnerable groups in a way that leaves public services more innovative, integrated and locally-responsive, and above all focused on achieving better outcomes at lower cost. There is also now an opportunity for Treasury to think about devolution settlements in terms of social as well as economic impact.
Over the last few weeks, leading charities and social investors, including our clients and partners, have suggested that George Osborne creates a local outcomes fund of between £1-1.5 billion as part of the Spending Review, This fund would work with local authorities, clinical commissioners, Police and Crime Commissioners and others to support them in paying for what works and also focus on prevention. If the Treasury agrees to this, it would not only signal that this Government is serious about creating opportunity for all in society, it would mean real improvements in the lives of vulnerable people and save taxpayers money.