Social Bonds

The Herald reports:

Health Minister Jonathan Coleman says private investors in the mental health sector will not be able to cherry-pick clients or “fudge results” in order to get a return on their investment.

The Government has confirmed plans for New Zealand’s first social bond, which will focus on job support within the mental health sector.

Dr Coleman defended the scheme against claims that it was gambling with New Zealand’s most vulnerable people.

Until now there had been no sanctions or incentives in the mental health sector, he said. Because individuals, private companies or charities would be paid a return only if targets were met, there would be an incentive to provide high-quality services. “This will sharpen everyone’s minds,” Dr Coleman said.

The history of the world is incentives work. If incentives can produce better results for mental health patients, then that’s a great things. The focus should be on results.

Labour MP Annette King said the policy was a “disaster in the making” which treated vulnerable people as “guinea pigs”. She pointed to independent advice to the Department of Internal Affairs from 2011, which said social bonds created significant risks and difficulties for both Government and investors.

New Zealand Initiative executive director Oliver Hartwich said social bonds could appeal to philanthropists such as Sir Stephen Tindall or to risk-averse investors such as pension funds.

He said social bonds removed the Government’s monopoly on social services, reduced risks to the taxpayer, and encouraged better results.

The key to their success was setting clear targets and timeframes, Dr Hartwich said. While it was easy to set targets for services such as criminal reoffending, it was more difficult to help mentally ill people find jobs.

A lot will depend on how they are implemented. It is a good concept, but as Oliver says you need clarity.