James Cleverly is the London Assembly member for Bexley and Bromley, and is PPC for Braintree.

Big business, especially the financial service sector have come in for a lot of stick recently, all of it understandable, much of it justified.  As Conservatives we shouldn’t feel the need to defend poor business practices but we shouldn’t join the anti-business mob either.

Social Impact Bonds may provide a means for big business to rehabilitate their reputations, empower charities to improve the lives of those living in some of the UK’s most deprived communities and show that the private sector can be a force for good.

Social Impact Bonds – known as SIBs – are a relatively new financial tool which aims to bring the private sector into the public service delivery process.  The government (whether central, regional or local) commissions a charity or social enterprise to solve a social problem.  The initial finance for the project is provided by the private sector and as the project produces results (which are predefined and clearly measureable) the investor gets a return, paid on results and funded from the savings to the public purse.

There are over 180,000 small and medium enterprises with social and/or environmental aims in the UK that have an estimated economic value of £55bn and provide two million jobs nationwide. While the social investment market is currently valued at £750m, there is an estimated additional £1bn of unmet demand in this sector. This is demand that the private sector could easily help to meet. Several programmes are already starting to operate around the country, with positive results.

By investing in social enterprises, the private sector could help to treat some of the 150,000 crack addicts that currently cost taxpayer £22.4bn. An SIB to help reduce the number of kids in care could help up to 68,110 young people and save £2.7bn, while a programme to improve end of life care for cancer patients would deliver savings of almost £158m p.a.

These are just a few examples of the kind of impact that greater coordination and the inclusion of the private sector could bring to the social investment market. The government has been highly supportive of social investment and with the Chancellor’s introduction of Social Investment Tax Relief last year, offering investors 30 per cent tax relief on any social investment, social investment is also more tax efficient than it has ever been.

Social investment provides a classically Conservative solution to the problem of delivering public services as efficiently and as cost effectively.  By providing social enterprises with the finance they need, private investors could help to generate a total of £148bn Gross Value Added, support 200,000 jobs, and help some of the UK’s most vulnerable people to overcome crippling social problems and still provide a financial return to the investor.

For more information on the benefits of Social Impact Bonds, check out my policy report, ‘Capital Investment: Private finance for social problems’.