This dossier of disgrace exposes the self- interest and lack of integrity
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- The first NHS Social Investment Bond
- SIBs mean big money
- Social Investment Bonds and Goldman Sachs
Social Investment BondsOne of Social Finance Ltd’s main projects is the development of Social Impact Bonds (SIBs). It is promoting these as a new funding system for the NHS, which will bring in private lending to close the looming investment ‘gap’. In a social impact bond, a public body borrows money from private investors by issuing a bond. The catch is that the rate of return rate on the bonds is linked to the ‘impact’ or performance of a particular project.151 In the US these have been called ‘pay for success’ bonds. The first SIBs were tested in the criminal justice system. The first ever, developed by Social Finance Ltd, was issued in September 2010 for Peterborough prison. The ‘impact’ measure, in this case, was linked to reoffending rates. Since, then, according to Social Finance, there have been 13 further SIBs in the UK, and around 100 worldwide. (ibid) Social Finance aims to introduce SIBs to the NHS. In 2012 it commissioned Professor Paul Corrigan (former health advisor to Tony Blair) to write a report promoting SIBs as a new model for NHS funding.152 On 8 October 2014 Social Finance’s founder and development director Toby Eccles spoke at a Nuffield Foundation event on SIBs and other forms of ‘social investment funding for a sustainable NHS’, chaired by Mike Farrar, recent former Chief Executive of the NHS Confederation. This event is intended to lead to a report that will advocate new ways to meet the NHS ‘funding shortfall’ beyond the public purse. SIBs could be at the heart of a new agenda for private debt finance of the NHS.153 The first NHS Social Investment BondSocial Finance is now working with the Department of Health on the first pilot NHS Social Investment Bond – for ‘end of life care’ in Sandwell and West Birmingham. Sandwell and West Birmingham CCG is currently tendering for providers to take over end of life care services in its area. The CCG says the contract will pay on ‘an outcomes only basis’ and that it ‘anticipates’ that bidders ‘will need to seek investment via a Social Investment Bond (SIB) in order to fund their activity.’ 154 Social Finance worked on the design of this SIB. It was employed in 2013 to make the initial plans for the scheme, together with Marie Curie cancer care. Other ‘partners’ involved were: the NHS Confederation, NHS Clinical Commissioners, Social Investment Business, law firm Bevan Brittan, and Unipart. The project was funded by the Social Investment Business and supported by the Department of Health.155 The basic idea is that investors in the end of life SIB will be paid a return that depends on two results: The number of patients who die at home, rather than in hospital Reduction in ‘unnecessary’ emergency hospitalisations The moral rationale for the scheme, as outlines in Marie Curie’s statement, is that it will help people die at home, which is most people’s preferred choice. 156 The financial rationale is that the project, if successful, will save money by reducing hospital care costs.157 The danger is that it may create perverse incentives: investors will stand to gain if people are left to die at home rather than being hospitalised for emergency treatment. The tender is currently open, with an initial deadline (for submission of pre-qualification questionnaires (PQQs) of 30 October.158 SIBs mean big moneySocial Investment bonds could make private investors mega-profits out of the NHS, with interest rates as high as 12%. SIBs are being spun as ‘philanthopy’ – whereas in fact they can be very profitable business opportunities. Information on profit rates for UK SIBs is not widely available. However, The Guardian newspaper reported that in the Greater London Authority’s 2012 SIB for homelessness reduction Social Finance Ltd “raised £3.1m from investors, who can expect a return of 8%-12% a year, if the scheme meets its targets.”159 The Evening Standard reported on the same deal that investors “will receive a return of up to 12% a year if it is deemed a success.”160 Data on US SIBs is more transparent. For example, in the ‘Massachusetts Juvenile Justice Pay for Success Initiative’ SIB, the public authority announced that the senior lender, Goldman Sachs, invested $9 million. Goldmans will receive 5% annual interest on the loan if the project meets its basic target. If higher success targets are reached, it will get a further bonus of up to $1 million.161 Even 5% is a very high rate for a public sector bond. For example, currently US 5 year Treasury bonds yield 1.34%162; and UK government 5 year bonds yield 1.37%.163 It could be argued that, unlike standard government bond investors, SIB investors face the extra risk that projects will fail. But Goldman Sachs, at least, thinks the risks are low: the firm estimated the risk-adjusted return on its first two US SIB investments as a whopping 6-8%.164 According to Alicia Glen, head of the Goldman Sachs unit involved: "We do these deals to get strong financial-risk-adjusted returns that have a strong impact." (ibid). (A key issue here is how ‘impact’ is measured – and by whom.) Social Investment Bonds and Goldman SachsGlobal investment bank Goldman Sachs is the biggest private investor in SIBs. The major investor in Social Impact Bonds is Andrew Law’s old firm – Goldman Sachs. The first SIB in the US was issued in August 2012 by New York mayor Michael Bloomberg, to fund a programme at Rikers Island prison. Goldman Sachs provided the finance, $9.6 million. Lloyd Blankfein, CEO and Chairman of Goldman Sachs, said: “We’re proud to work with Mayor Bloomberg and his team on this innovative approach to harness private sector financing for important public initiatives. We believe this investment paves the way for a new type of instrument that enables the public sector to leverage upfront funding from the private sector.”165 Goldmans has since funded a number of further US SIBs, and launched a $250 million dedicated ‘Social Impact Fund’ to invest in the new sector, the first of its kind.166 This is still small potatoes by Goldman standards, but could have massive potential if the model takes off. It has not been publicly announced whether Goldman Sachs has invested in SIBs in the UK. It has been announced that unnamed ‘private investors’ have. Unlike the US, many ‘third sector’ investors were involved in early UK SIBs; but Social Finance has said that the aim is to develop a ‘wider investor base’ as the market becomes established, including ‘more private individuals, banks and financial institutions, pension funds and corporate social responsibility funds’.167 Directory: uploaded -> documents uploaded -> Post Magazine & Insurance Times 26 May 2011 Editions uploaded -> Alabama Historical Association Annual Meeting Presentations 1980–present 33rd Annual Meeting — 1980 uploaded -> Corbicula an annotated bibliography 1774 2005 uploaded -> Current as of June 5, 2013 Note: This list contains only associate members. To see a full directory of cs4 members uploaded -> Mr. Donald S. Moss Du Quoin Community Unit District 300 Educational Foundation 2011 Excellence in Achievement Award uploaded -> Harold j. Brody, md uploaded -> Kerry B. 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