Social Outcomes Fund

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This case was submitted as part of the Call for Innovations, an annual partnership initiative between OPSI and the UAE Mohammed Bin Rashid Center for Government Innovation (MBRCGI)

The Social Outcomes Fund (SOF), launched in 2012, was the world’s first Social Impact Bond (SIB) linked to government outcomes. This £20m fund catalysed the use of SIBs to address complex social issues in the UK by helping to align local and central government budgets. Today, the UK has had over 50 SIBs helping to improve people’s lives across the UK, and a substantial proportion of this growth has been stimulated by SOF.

Innovation Summary

Innovation Overview

The traditional delivery of public services has not succeeded at tackling entrenched social problems, such as homelessness or youth unemployment. In general, it does not incentivise innovation nor the delivery of better outcomes for the most vulnerable people in society.

Against this backdrop, the UK government has identified SIBs as a mechanism to tackle complex social issues and improve outcomes for vulnerable individuals. SIBs involve social investors that supply the upfront funding to providers to deliver a service. The key advantages of SIBs include:

- Driving innovation: SIBs transfer the risk of service failure to social investors, so if an intervention fails to achieve outcomes, government commissioners do not have to pay. This allows government to experiment with novel and innovative services that tackle complex social issues.
- Enabling early intervention. In contrast to reactive services that respond to crises, SIBs can channel investment into early interventions that prevent future problems and generate savings.
- Delivering results for vulnerable individuals: SIBs can help get better results from existing services, by driving the delivery of better outcomes through payments. SIBs typically target vulnerable service users that have so far not been helped by existing services.
- Building partnerships: SIBs bring a range of stakeholders from the public and private sector together and break down traditional fragmented and ‘siloed’ services, solving complex issues through a multi-agency approach.
- Scalability and system-wide impact: SIBs are improving and transforming the delivery of public services in partnership with social investment. They can have an impact at scale on some of society’s most pressing challenges.

The UK Government recognised that SIBs have the potential to transform the delivery of public services, and therefore looked for ways to catalyse their development and overcome the barriers to adopting them across the public sector, which included:

- Cultural inertia: there is a lack of awareness of SIBs and their benefits among commissioners, which are often risk-averse and hesitant to try new ways of doing things. This results in a lack of drive and funding to develop SIBs within central and local government.
- Structural impediments: Fragmented and ‘siloed’ public services result in a) difficulties to aggregate savings of SIB projects that accrue across multiple public sector spending silos b) reluctance among local commissioners to pay for outcomes in SIBs that generate savings to the wider public purse and to central government. After reviewing a number of possible solutions to overcome these barriers and drive the development of SIBs, the £20m Social Outcomes Fund (SOF) was created in 2012
- the first central government outcomes fund in the world.

SOF has played a key role in helping to grow the use of this innovative funding model in the UK. The objectives of SOF were to:

-catalyse the development of SIBs;
-overcome barriers to adopting SIBs;
-improve the cooperation between local and central government; and
-improve public service delivery and tackle complex social issues.

SOF provides top-up funding for outcomes payments in locally developed SIBs and thereby directly benefits local commissioners and service providers, enabling them to develop SIB projects in order to address the most complex social issues in their local areas. It empowers them to define the outcomes they want to pay for and gives them the flexibility to design the service and procure the service provider they think is best placed to deliver these outcomes.

In addition, SOF fosters partnership working and aligned budgets across government to tackle specific social issues. It contributes funding to central government departments to develop centrally-led outcomes funds for Social Impact Bonds:

-The £16m Youth Engagement Fund
- a partnership between the Centre for Social Impact Bonds, the Department for Work and Pensions and the Ministry of Justice pays for outcomes in four SIBs supporting young people not in employment, education or training.
-The £15m Fair Chance Fund, created by the Centre for Social Impact Bonds and the Department for Communities and Local Government, pays for outcomes in seven SIBs delivering significant educational, employment and accommodation outcomes for homeless young people.

Ultimately, these SIBs support the most vulnerable individuals with complex social issues, which include older people struggling with loneliness, young people without employment or training, children in care or people with long-term health conditions. SOF was a major milestone for the UK Government, primarily because it led to the growth of the Social Impact Bond market in the UK, but also because it enabled cooperation between a range of local commissioners, central government departments, social investors and voluntary sector organisations.

Innovation Description

Innovation Development

Innovation Reflections

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Year: 2012
Level of government: National/Federal government


  • Generating Ideas or Designing Solutions - finding and filtering ideas to respond to the problem or opportunity
  • Implementation - making the innovation happen

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