- July 21, 2023
The Department for Education has just published the Final Report from a longitudinal evaluation of three SIBs that aimed to improve outcomes for young people leaving local authority care, with a particular emphasis on employment, education and training (EET) outcomes. ATQ Director Neil Stanworth was part of the evaluation team, which has been evaluating the three projects (In South London, Greater Bristol and Sheffield) since 2018.
Commenting on the report, Neil said “We’re really pleased that this report has finally been published, after a number of delays. It shows how social outcomes contracts can make a real difference to the lives of some very vulnerable young people, and also how social investment funding enables real flexibility in the way complex support is delivered.”
- July 31, 2019
If we lived in less turbulent political times, Labour’s new policy on insourcing of public services might have attracted more attention than it has. Promising an ‘insourcing revolution to end [the] “scandal” of public service outsourcing’ it was launched through an interview with John McDonnell on the Today programme and was picked up by the Guardian and a number of specialist journals. But the coverage did not seem to do justice to what would be a major change – and challenge – for local government.
The BBC presented the story as Shadow Chancellor McDonnell’s revenge for Margaret Thatcher’s introduction of compulsory competitive tendering (CCT) of local services in the 1980s, when he was a GLC Councillor. But that seems to underestimate the thinking behind this: the detailed policy document runs to more than 50 pages, and sets out in detail why Labour believes services should be delivered in house.
Although some coverage implied that Councils would be forced to move services in-house, the document does not say this. What is does say is that when a contract expires there will be a presumption that it will be insourced, unless the Council can satisfy 10 tests of everything from its contract management skills to whether the contract involves ‘significant contact with at-risk groups’. If it fails these tests it can still outsource for ‘good reason’ – notably because it lacks in-house capacity or because there is a case for separation of services from the Council. However the Council must in addition ensure that its contract and chosen provider meet nine further conditions relating to legislative compliance, treatment of workers and past contractor ‘behaviour’.
The document acknowledges that there is much detail to work through to implement this policy – to which one might retort: ‘not half!’. A sensible short-term reaction might be to wait and see – since even if a Labour government were elected, it would take some time for this policy to be enacted in legislation, and much longer for it to bite as current contracts expire.
But is worth essaying a couple of observations, one political and one practical. The political point is that while it may be a stretch to call this ‘McDonnell’s revenge’, it is undoubtedly ideological. The conclusion to the policy paper says
“Local government is a key site in the struggle to unwind neoliberal reforms and democratise the economy………And through insourcing there is an opportunity to reassert at the local level the value of the collective ownership that is the hallmark of a socialist society.”
But arguably what we learnt from the Thatcher CCT reforms is that it is a mistake to impose a top-down, ideological blueprint on local democratic decisions; and take a simplistic ‘four legs good, two legs bad’ approach to service delivery and transformation. It was wrong of Thatcher to assume the private sector would always be better than the public, and equally wrong for Labour to now assume the opposite. Moreover a criticism that has been levelled at all UK governments, of whatever persuasion, since at least the 1980s, is that there is far too much control from the centre, not too little. Does a new Labour government want to be the one to shift that imbalance further?
The practical point is that it may not work. As Labour’s own policy paper ironically points out, more than a decade of Thatcherite and then Majorite compulsion had limited effect, with over two thirds of forcibly tendered services still in-house in 1993. Yet in the two and a half decades since then, predominantly under a Labour government that removed much of that compulsion, outsourcing steadily increased, as Councils made (mostly) rational and well-informed decisions on what to keep in-house and what to outsource. If they got it wrong it was their decision, not Whitehall’s.
So will a metropolitan authority that has contracted with a charity to deliver specialist support to vulnerable young people, through a service that is deliberately arm’s length from its Children’s Services Department, want to insource that service? And will a small District Council that has long benefited from the global capability of a large IT provider, want to start recruiting its own programmers and arranging 24/7 IT help desk support?
Either there will be much wriggle room in Labour’s legislative reforms, so those wanting to outsource will likely jump through the newly imposed hoops and carry on as before (and possibly extend their existing contracts by a few years before legislation is passed). Or the new regime will be more restrictive than it first appears, in which case many local officers, and I suspect many of their councillors, will end up being forced to make decisions that they do not necessarily believe to be in their best interests.
- July 21, 2015
Below is a blog ATQ wrote for the Commissioning Better Outcomes (CBO) Evaluation site. ATQ is working with Ecorys on the CBO evaluation and co-wrote the Deep Dive report referred to.
How do we improve the health of individuals, in a way that prevents health issues arising in the first place or getting worse? And how can Social Impact Bonds (SIBs) be developed in health and other areas where the benefits are longer term, with less immediate results and savings to the public purse?
These questions were at the heart of an event held last Friday (10 July) in Birmingham. It brought together a range of stakeholders with a strong interest in improving the nation’s health, especially through the use of SIBs.
The event was hosted by the Big Lottery Fund, whose Commissioning Better Outcomes (CBO) Fund looks set to play a major role in encouraging more SIBs in the next few years. It was held to discuss a new SIB which breaks new ground in health and has just been examined in depth as part of the evaluation of…
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- July 22, 2014
When you are as old as I am, certain things start to come around again, and I am reminded how little there is that is genuinely new or untried in the realm of public sector service provision.
For example, as ATQ has blogged about before, Payment by Results was first tried in schools during Victorian times, which is before even my grandparent’s era.
My latest sense of déjà vu came this weekend when I read how Labour is likely to propose that public sector organisations should be allowed to freely compete and bid to deliver services – taking the model of the East Coast mainline train operator as an exemplar.
This reminded me of compulsory and voluntary competitive tendering (in local government) and market testing (in central government) which were used in the late 1980s/early 1990s as a way of using a competitive tender process to try and drive efficiencies and reform. The idea was for in-house teams to compete for the services that they were currently delivering. In this way, it forced an assessment of inputs vs outputs, how costs of services were made up and where changes could be made in working patterns and processes and so forth.
In local government competitive tendering was often a Thatcherite stick with which to beat left-wing Councils; while in many central government Departments, market testing was often a somewhat artificial process where the in-house team was never going to be replaced by a new provider and little benefit was derived. However, in some Departments and particularly in local government white and blue collar services, these processes led to noted improvements in in-house provision, and/or the outsourcing of services including through privatisation following management buy-outs. As a result, competitive tendering and market testing in many ways, set the public services industry ball rolling.
The world has moved on since then but similar exercises have taken place and are still underway. In 2010 and 2011, the NHS ‘right to request’ and ‘right to provide’ processes created new social enterprises for delivery of health services by previously in-house teams – which will have to compete for their ‘dowry’ contracts after five years. According to the Department of Health some 40 services and 20,000 staff are now operating in such social enterprises. The creation of these new providers was highlighted as a factor in the growing proportion of services provided by non-NHS organisations in Nuffield Trusts recent (July 2014) report. http://www.nuffieldtrust.org.uk/publications/red-state-nhs-finances
The political philosophy arguments about use of non-public sector organisations in the delivery of public services remains a constant and has, over time, clearly influenced what type of organisation will win a contract award e.g. the increasing desire to make full use of the VCSE provider base. However, the underlying idea of ‘market testing’ is the same as it ever was.
- January 15, 2014
Now that we are in a New Year, it’s apparent that both government and opposition are already thinking about the next election, and starting to make policy announcements and commitments. For those of us who are focused on the world of government commissioning and contracting, one of the intriguing aspects of the next election is what an incoming government (if different) will do about this government’s major contracts for the delivery of public services.
Contracts which straddle governments are nothing new, of course, but what has changed is the type of contracts and the extent to which they impinge directly on policy. While the outsourcing of any service can be controversial, in general few people tend to get too worked up these days about a contract for the delivery of back office support processes or information technology. A new government will almost certainly continue such contracts largely unchanged, at least until the contract ends or reaches a suitable break point.
But in recent years, we have started to see governments use the private and third sectors to deliver social policies which a new government may want to change radically, or discontinue altogether. The two obvious and large areas where this may be the case in 2015 are employability support and offender rehabilitation. A brief look at both these areas shows some of the tricky dilemmas that are likely to arise for both the current government and the opposition.
To take employability first, the use of external contractors to deliver policy in this area is long established, and we have already seen what can happen to contracts after a change of government. When the new government entered power in May 2010, it implemented the Conservative’s proposals for the Work Programme. Since this was effectively an extension – to more client groups and with a larger role for external providers – of the Labour government’s Flexible New Deal (FnD), the policy was in the same “direction of travel”, as the saying goes. But even so, all the existing contracts had to be terminated and an entirely new procurement process started. So there was a significant cost – in both time and money – to put in place a very similar set of policy tools.
Since then the Work Programme has been heavily criticised by the opposition, and it can hardly leave it in place and untouched if elected. But the cost of contract termination means that it may well continue the Programme at least until current contracts expire in March 2016 – although it will need to make clear its intentions well before that.
Offender rehabilitation is different, because there is no cross-party history of using external providers in this sector on a large scale. The previous government dabbled in this area, but had little in place by way of contracted out provision. In opposition the Labour Party seems to be broadly in favour of policies to reduce reoffending and rehabilitate offenders, but is strongly opposed to the means this government has adopted to achieve it, through its Transforming Rehabilitation proposals, which involve a mixed economy of public, private and voluntary sector provision that effectively outsources much of the current Probation Service.
So both government and opposition have big challenges ahead. The government plans to have Transforming Rehabilitation contracts in place by April 2015, and knows that, with the next election fixed for May of the same year, it cannot afford any delay. If contracts are not in place, it will be easier (though by no means painless) for a new government to reverse or significantly modify the policy.
However the opposition also has difficult issues to wrestle with. If the government does meet its timetable, new Labour Ministers will have to decide whether they want to incur another large bill for contract termination, or can live with and try to modify the contracts to meet their policy objectives. And as the election looms Labour will come under pressure to set out clearly what its policy is in this area – in a way that it probably would not have to do if private and third sector providers – and their investors – were not gearing up to deliver services.
In the longer term and if (as seems likely) the use of external providers in complex policy areas continues and grows, there are some bigger questions for government as a whole about how we avoid undermining the democratic process. Politicians will rightly complain if their ability to change policy which is contentious is unduly constrained by the decisions of predecessors effectively to outsource delivery of said policy. But those who are being asked to invest heavily in new provision – whether as providers or financiers – will be very reluctant to do so if there is no guarantee of continuity beyond each election cycle. Some may say of the latter “so be it and good riddance” but most will not.
What may happen is one of two things, or possibly both. First, more contracts will be awarded that are coterminous with general elections – something made easier if we stick with fixed five year terms. The second is that all parties will have to seek broader consensus on policy and the means to deliver it, before major programmes of service delivery outside the public sector are implemented. This may be no bad thing, and has some precedent in our approach to major infrastructure projects, such as the 2012 Olympics and, more recently, HS2. However since some in the Labour Party have been making noises about withdrawing support for HS2, a project which they first proposed, the auguries for the development of such consensus may not be that encouraging.
- October 1, 2013
Last week I went to the Local Government Association’s headquarters in Smith Square for the launch of the Commissioning Better Outcomes Fund. This is a new £40 million fund from the BIG Lottery, and aims to encourage and support commissioners (and especially local authorities) who want to explore the use of Social Impact Bonds (SIBs) to achieve better social outcomes and ultimately reduce costs.
The new fund is intended to be complementary to the Cabinet Office’s existing £20m Social Outcomes Fund, which means there will be around £60 million available to support new SIBs (less a bit that the Cabinet Office has already committed to existing projects). The two Funds have a slightly different focus, but essentially aim to provide some part funding for SIBs in order to improve their financial viability – especially if the commissioner does not think they can cash enough savings from the SIB to make it self-funding.
What is exciting about the new fund is that part of it (between £3m and £4m) has been earmarked for development grants through which commissioners can buy in the specialist advice they might need to get a SIB of the ground – for example, to carry out feasibility work. There will be a common expression of interest process for the two funds, and if an EoI is accepted a commissioner can then apply for a grant to do the more detailed work needed to submit a full application to one of the Funds – and hopefully get a significant contribution to the funding of the project as a whole.
Having been involved in the development of SIBs and similar social investment backed initiatives for around three years now, we think this is a potentially game-changing development. Many commissioners would like to explore the use of SIBs, but in the current financial climate, the cost of initial feasibility work and specialist advice and support is a significant barrier.
The only snag is that, as a first step, commissioners will need to have done some prefeasibility work and got to the point where they have a proposition that will get through the expression of interest process. The good news is that many local authorities and other commissioners already have ideas for improving outcomes in such areas as looked after children, family intervention, adult social care and the new challenge of preventative health interventions. The initial work to turn such ideas into credible propositions should not be too onerous, in our experience, and advisors such as us are available to help. With the opportunity to access development grants downstream, the time is right to turn concepts into reality.
If you would like to know more about how ATQ could help you make an expression of interest to the new funds, potentially at no cost to you, please contact us via our website here.
- August 8, 2013
I know most people are on holiday but I am not and in the slow time of August, I have had a chance to reflect on the sometimes vexed question of who is best placed to deliver public services.
In our consultancy work with commissioners, providers and investors operating on the boundary of public and private sectors, we are often struck by the confluence of influences on procurement decisions which determine who is selected to deliver a public service.
In a short paper here, we explore these influences as we find them today.
- August 6, 2013
Some advocates and supporters of social impact bonds appear to have shifted their position on the importance of cashable savings. My colleague (Eileen Robinson) attended a seminar a few weeks ago where a spokesperson from Social Finance argue strongly that SIBs did not need to be underpinned by cashable savings. Now an interesting piece by Adrian Brown has argued that a strong focus on cashable savings is holding back the development of SIBs and the social investment market generally. He argues that SIBs should be mainly about innovation, not about financial returns.
Simply put, the case for identifying cashable savings is that they enable SIBs to be self funding – effectively an extension of the invest to save principle. This was always one of the main attractions of the SIB approach, especially for a government looking for solutions to unprecedented financial pressure on public services. The case against – eloquently put by Adrian Brown – is that an over-emphasis on the cashability of savings may restrict both the outcomes that might be funded through a SIB, and the total funding made available. In essence, commissioners may look for projects simply because they enable savings to be cashed, rather than because they achieve the most important outcomes, or enable them to test new ways of doing things.
I have no problem with the argument that we should not obsess about cashable savings, or that we should focus mainly on the value of the outcomes to be achieved. However, I am concerned that we risk throwing the baby out with the bathwater if we start to argue that cashable savings are not important. Here are three reasons why I think they should remain at the centre of thinking.
First, while some commissioners may want to use SIBs solely to test innovation, most cannot afford to do this. Their main motivation is to find ways to fund outcomes that would otherwise not be funded – and usually to fund preventative or early intervention which reduces the need for (more expensive) crisis intervention. Not all the savings achieved will be cashable, but some will be, and often enough will be cashable to make the whole project viable.
Second, there are some outcomes which are socially worthwhile and do achieve early, cashable payback. This is particularly the case when dealing with an existing issue which imposes high costs, such as children in residential care, and vulnerable adults with high care needs. If interventions can be commissioned which enable such groups to live in the community, there are likely to be improved outcomes for them as individuals AND cashable savings to pay for the services. In these cases, what’s not to like?
The final argument is about the rigour that a SIB or PbR process imposes on commissioners. Adrian Brown suggests that instead of trying to match outcomes to savings, commissioners should “regularly look across the portfolio of services they buy and ask themselves which are the least effective. Decommissioning these services frees up current spending that can be used to fund SIBs in policy areas where innovation is most urgently needed”.
But we see little evidence that commissioners have either the data available, or review processes in place, to enable them to do this rationally. In our experience of working with commissioners over the last three years, a key benefit of the SIB development process is that it allows the commissioner to consider in detail what it costs to provide a service, what is the impact of that service – in both financial and non-financial terms – and whether an alternative service will achieve better returns – both social and financial. And if their financial analysis shows that they can improve outcomes to the point where they can decommission a service to achieve cashable savings, that is surely better than making less well informed and perhaps arbitrary decisions about what services should no longer be funded.
So if commissioners want to see SIBs as a way to test innovation and have the funding to use them in that way, fine by me,. If they want to use them to save money and introduce much greater rigour into their commissioning processes, why not?
- June 12, 2013
I attended an interesting breakfast seminar organised by my business school, IESE, yesterday entitled “The Challenge of Sustainable Social Investment” with panelists Prof. Heinrich Liechtenstein, Deirdre Davies of Deutsche Asset Management Group, Oliver Karius of LGT Venture Philanthropy, and Nick O’Donohue of Big Society Capital.
Interestingly, the Dormant Accounts Act defines quite carefully what social impact means for Big Society Capital by laying down what organisations its co-funded intermediary investment managers can put money to work with. These are defined as third sector organisations that are delivering a “social gain”. As a result, BSC has identified Community Development Finance Institutions (CDFIs), charities, social enterprises and organisations addressing financial inclusion as fitting this criteria.
For others, social impact is defined by the outcome sought and it matters not whether the organisation delivering the outcome is for profit, a social enterprise or a charity. A good example backed by LGT is a for profit private education business filling a gap in the market in Kenya based on a business model that charges $4 per child per month. Another example given was of a branded leather goods company that was bought out by private equity backers who then invested heavily in both ensuring that its supply chain eliminated any use of child labour and that its tanning processes were clean. It did this to create value for itself on exit by creating a sound organisation that could, therefore, be bought by others.
Clearly, an investor can decide what social impact it wants to support and also how it will measure the outcome to its satisfaction. Similarly, an organisation can decide how to include and measure social impact in its own mission statement and values no matter what its financing structure i.e. for profit or not for profit.
One other point emerged clearly for all those attending, which is that whatever the social impact arguments and story, social investors are just that – investors and they will always be looking for a return on their capital. Any organisation seeking social investment will need to understand this fully. Many social enterprises are expressly established as not-for-profit which is a decision that can be taken and is fine in and of itself. What it means though, is that only a more narrow and smaller set of potential funding is available and without “equity” risk capital, the ability to grow and deliver greater social impact will be constrained.
In my view, if social impact ends up being defined as only being delivered by not-for-profit organisations, then this will slow the growth in the social impact investment market and improved social outcomes. I, for one, believe that any investor and organisation can define for itself what social impact means and then go about delivering it.
- May 9, 2013
Today, 9th May 2013, sees the Ministry of Justice (MoJ) publish its rehabilitation revolution consultation response in “Transforming Rehabilitation – A Strategy for Reform”. See press release and links to MoJ publications here https://www.gov.uk/government/news/12-months-supervision-for-all-prisoners-on-release
ATQ submitted a response confined to the consultation’s Payment by Results (PbR) questions, as this is the main area where we are well qualified to comment.
While clearly attractive in terms of political presentation, we felt strongly that the proposed binary measure where outcome related payments were triggered only for total desistance would not work well. If a provider is paid only for offenders that desist totally for 12 months, then as soon as a person has re-offended there would be no further incentive to work with them. If the most prolific offenders are the ones more likely to re-offend, then such a binary measure could be almost counter-productive.
We suggested that PbR payments be linked to reductions in a total measure of offending across a cohort. In this way, providers would be incentivised to work consistently with all offenders in their cohort and especially those most likely to re-offend. This suggestion, no doubt also put forward by others, has been accepted as a component of the payment mechanism in a blended approach that retains the politically important success payments for total desistance.
“We have refined our ‘payment by results’ approach in response. Our payment mechanism will incentivise providers to focus resources on all offenders, including the most prolific and the hardest to help, and will ensure that they are not able to ‘game’ the system. Providers will be rewarded with success payments primarily when they achieve an offender’s complete desistance from crime for a 12 month period. However, our payment mechanism will also take into account the total number of re-offences committed by the cohort of offenders providers are responsible for rehabilitating, so that providers are incentivised not to neglect the most difficult offenders and those who have already reoffended. Every victim of crime matters and we need to ensure this is reflected in providers’ payments.”