May 17, 2015 4:00pm by David Farrar

Social Impact Bonds

Treasury should set up a special unit to lead private companies looking to make a return on social services, a new report says.

Social impact bonds are becoming more frequent in the United States and the United Kingdom, but have yet to be tested in New Zealand.

They involve private and non-profit organisations partnering with the Government to fund and deliver services to improve social outcomes.

If the contracts achieve agreed results, investors get paid back their investment plus a return.

Sounds worthwhile and a win-win.

Right-wing think-tank The New Zealand Initiative has released a report analysing overseas examples and looking at the application of social bonds in New Zealand.

One of the authors, Dr Bryce Wilkinson, said they could have a real impact here.

“There’s been widespread concern about the extent of certain social problems, and there’s a feeling New Zealand could and should be doing better.

“There’s real hope that in the right set of circumstances, there’s considerable gains to be made,” he said.

But those circumstances were limited. Areas in which the bonds might be applied included reducing prison recidivism, lowering the number of children needing to go into state care and helping keep truancy rates down.

So if an organisation managed to reduce the truancy rate in an area, then investors get back a return on their investment.