The recent Huckfield Killing Social Enterprise Softly briefing was pessimistic about the openings available for Social Enterprise and Third Sector organisations in their bidding to deliver public services.

This briefing is more pessimistic about the damage to the wider image of the Third Sector and Social Enterprises by the introduction by stealth of Social Impact Bonds.

JP Morgan “Impact Investments” Report, November 2010 and Big Society Bank Outline Proposal, May 2011

The JP Morgan Global Research Report described below advocates a new asset class of “Impact Investments” – investment and profits from supplying clean drinking water, maternity care and primary education to the world’s poorest people. Various themes from the Report are carried forward in the Outline Proposal submitted to the Cabinet Office for the Big Society Bank.

Though setting up the Big Society Bank has been delayed, as shown below, local councils are now piloting proposals for Social Impact Bonds for Children’s Services.

This Huckfield briefing seeks to develop the case that, despite current economic problems, these services should be delivered through local council, Social Enterprise or Third Sector structures and not become dependent on individual charitable donations, dormant bank accounts and investments driven by tax relief.


This Section traces the Social Investment Task Force from its inception in February 2000, its Reports in 2003 and 2005, to its advocacy of Social Impact Bonds in April 2010.

First Social Investment Task Force Reports

This Section covers the Task Force’s Reports from 2000 to 2005.

Social Impact Bonds

This Section deals with the Task Force’s Final Report in April 2010 and its advocacy of Social Impact Bonds.


This shows how the Social Investment Task Force Report April 2010 was incorporated into the Cabinet Office Report February 2011 on “Growing the Social Investment Market“. This projects a significant shift of individual charitable donations and investments into Third Sector structures for the delivery of public services.


This Section shows that the thoughts of some Victorian Philanthropists were not dissimilar from some advocating Social Impact Bonds.

Victorian Philanthropists

Despite the expansion of philanthropy, faced by demands which could not be be met, early Victorian Philanthropists were overtaken by demands for Government-led welfare systems.

Council of the Society for Organising Charitable Relief and Repressing Mendicity

Working with the Poor Law Guardians, this well known Victorian Charity actually began campaign against further public funding and intervention.

History of National Society for Prevention of Cruelty to Children

NSPCC’s history and the gradual replacement of its services and functions by local council delivered services are described in detail. These form a background against which some local councils are currently piloting projects for some children’s services to be funded by Social Impact Bonds.


Following the history of the NSPCC, this Section shows how developments in Manchester, Essex and elsewhere, through piloting projects for funding mainstream services through Social Impact Bonds, may be about to stand history on its head.


This Section deals with the JP Morgan Global Research Report on “Impact Investments” November 2010, its promotion of a new asset class based on profits from the world’s poorest people, and how its findings were incorporated into Outline Proposals for the Big Society Bank.

JP Morgan “Impact Investments” November 2010

This describes sections of the significant JP Morgan “Impact Investments” Report and its proposals for profitable investments through supplying clean drinking water, maternity care and primary education to the world’s poorest people.

Big Society Bank Outline Proposal May 2011

This shows how themes from findings of the JP Morgan Global Research “Impact Investments” Report were translated into Outline Proposals for the Big Society Bank.


This Huckfield briefing expresses concern and questions the wisdom of more mainstream public services funded through Social Impact Bonds dependent on individual charitable donations and investments.

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Links have already been provided above to those sections which now follow.


This Section covers Reports from the Social Investment Task Force from October 2000 till April 2010.

First Social Investment Task Force Reports

Like many Coalition Government ideas – Student Tuition Fees, the Work Programme, more commissioning of public service delivery to the private sector – Social Investment comes from a previous Government.

Gordon Brown as Chancellor announced this in a Speech at the NCVO Annual Conference in London on February 09 2000:

“To encourage the social enterprise sector in Britain, which can play a vital role in the economic regeneration of deprived communities the Chancellor also announced the setting up of a Social Investment Taskforce.

“The Chancellor made clear he wanted to see “more investment in the UK in social enterprises – projects which have social objectives, and are not simply profit orientated.

“…It will report by autumn 2000”.

The Social Investment Task Force described its remit on the opening page of its First Report on October 18 2000:

“To set out how entrepreneurial practices can be applied to obtain higher social and financial returns from social investment, to harness new talents and skills to address economic regeneration and to unleash new sources of private and institutional investment. In addition, the Task Force should explore innovative roles that the voluntary sector, businesses and Government could play as partners in this area.”

Among the Recommendations of the Social Investment Task Force in October 2000 were (as set out in the Chair, Ronald Cohen’s letter to the Chancellor):

  • A Community Investment Tax Credit to encourage private investment in community development
  • Community Development Venture Funds. We suggest a matched funding partnership between Government on the one hand and the venture capital industry, entrepreneurs, institutional investors and banks on the other. Initially, we suggest that £100 million be made available by the Government on attractive terms in matching funding over the programme’s duration
  • Disclosure of individual bank lending activities in under-invested communities
  • Greater latitude and encouragement for charitable trusts and foundations to invest in community development initiatives, even where these include a significant for-profit element
  • Support for Community Development Financial Institutions, including Community Development Banks, Community Loan Funds
  • Micro-loan Funds and Community Development Venture Funds

Arising from these original recommendations, the Task Force produced two further progress reports -“Enterprising Communities: Wealth Beyond Welfare” in July 2003 and “Enterprising Communities: Wealth beyond Welfare” in July 2005.

In the Social Investment Task Force 2005 Report, Sir Ronald Cohen was able to report in hits Foreword on page 1:

“The community finance development sector is now worth £400,000,000. It has financed over 9,000 businesses, created 10,000 jobs and sustained 85,000 more. This finance, which is delivered by community development finance institutions (CDFIs), has levered £160,000,000 funds from other sources into the UK’s most disadvantaged communities.”

Bridges Community Ventures released a Social Fund Report, including equity capital for social ventures. This followed Bridges’ introduction of Social Impact Reporting in August 2004.

Social Impact Bonds

Five years later, in the Final Report of the Social Investment Task Force April 2010, this had developed into advocacy of Social Impact Bonds

Chapter 3.2 “Social Impact Bonds” on page 18 of the Social Investment Task Force Report- “Social Investment – Ten Years On” in April 2010 says:

“Of £92bn health expenditure in England, only 3.7% is spent on preventative interventions. As a consequence, the root causes of social problems are seldom addressed. If more money were allocated to preventative action, there could be a significant reduction in the demand for expensive acute services in the future. However, the Government has hitherto been unable to fund preventative services as well as acute services, and consequently funds only the latter.”

The Report continues on page 18:

How the Social Impact Bond Works
The SiB focuses on specific deep-rooted social problems that are a significant cost to the taxpayer (for example: re-offending by short-sentence offenders; acute hospital admissions for elderly patients; at-risk children placed into local authority care)”.


The Final Report of the Social Investment Task Force in April 2010 “Social Investment – Ten Years On” on page 16 under “A Vision for the Future” outlines the scale of future possible investment:

“The scale of this opportunity is significant. If just 5% of the £65.6bn of capital in UK philanthropic foundations, and, over time, 0.5% of institutionally managed assets in the UK, were devoted to social investment, this would unlock over £5.5bn of financing for social projects.

“This sum would supplement the £4.4bn of grant funding that is currently made each year. If 5% of the £86.1bn estimated to be invested in ISAs (Individual Savings Accounts) were also directed to social investment, this would generate a flow of an additional £4.3bn.

“Taken together, these four sources – philanthropic foundations, institutionally managed assets, grant funding and individual savings accounts – could generate £14.2bnfor social investment”

As reported in Killing Social Enterprise Softly, the Cabinet Office paper “Growing the Social Investment Market: A Vision and Strategy” in February 2011 speaks in very similar terms. On page 26, its projections are stated clearly:

“3.9 Recent years have seen great progress. But there are many symptoms of dysfunction in what remains an embryonic and ineicient market, including:

  • Small market size. Social investment in 2010 amounted to around £190 million, compared with £3.6 billion philanthropic grant funding, £13.1 billion individual giving and £55.3 billion of wider bank lending. Individual deals tend to be very small indeed, with recent research suggesting that only 15% are over £15,000. And only a small proportion of social venture start-ups are successful in obtaining early-stage finance from a social investor”

All this shows how the work of the Social Investment Task Force was taken up eagerly by the Coalition Government. It now appears to be Government policy for significant funding increases for the Third Sector and Social Enterprise to become dependent on managed institutional and individual investments and donations.

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This Section shows how, in their advocacy of philanthropy working alongside statutory services, the thoughts and aspirations of some Victorian Philanthropists were not dissimilar from some advocating Social Impact Bonds.

Victorian Philanthropists

During the time of Florence Nightingale (1820-1910), George Cadbury (1839-1922) and Joseph Rowntree (1836-1925), the Charitable Organisation Society was one of the leading philanthropic bodies during the lifetime of Charles Dickens.

The Metropolitan Association for Improving the Dwellings of the Industrious Classes began in 1841 to build new homes for the poor. This was known as ‘5% philanthropy’, where donors could invest their money for a good cause while receiving a respectable but below-market rate of return.

It soon became apparent that none of these efforts could match the scale of the challenge. Encouraged by Electoral Reform Acts in 1867, 1884 and 1885, by the end of the 19th Century, trade unions and political movements channelled much of these energies into Government until the 1906 Liberal Government, which began to create a new Government-led welfare system.

Council of the Society for Organising Charitable Relief and Repressing Mendicity

The Fifteenth Annual Report of The Council of the Society for Organising Charitable Relief and Repressing Mendicity at a Meeting held at Willis’ Rooms, King Street, St James, London on May 23 1884, on page 27:

What Money Can Do for the Poor in Connection with the Charitable Organisation Society
“It helps to provide the means of learning the cause of distress in applications for assistance, of searching out the best kind of help, of detecting imposture: in a word, or discriminating. It is also a means of introducing better methods of relief; of introducing reforms in charitable administration; or propagating and testing principles and methods of relief and having them discussed. It makes a confederation or organisation of charity possible”.

Similar cooperation was evident between Charitable and Statutory Organisations. On page 50, the Report continues:

“Of increasing cooperation with the Poor Law Guardians there is much evidence in the Reports of the District Committees. While the feeling in favour of a reduction of out relief becomes stronger, there is rising up a new appreciation of the possibilities which the Poor Law afford for effectual charity.”

These Charitable Organisation Society reports on working with the Poor Law Guardians and Boards seem echoed by Social Investment Task Force Report references to working alongside statutory provision.

History of National Society for the Prevention of Cruelty to Children

The history of NSPCC is especially relevant since it is Children’s Services which are now being encouraged to considered Social Impact Bonds for their funding.

In July 1884 the London Society for the Prevention of Cruelty to Children was established. This soon became the National Society in 1889. since then there has been:

  • 1889 Prevention of Cruelty to Children Act
  • 1916 War Charities Act – after which the NSPCC began using street collectors to raise money
  • 1932 Children and Young Person’s Act, and the further Act of 1933. Improvements to child protection, bringing together all existing child protection legislation into one Act
  • 1948 Children Act. Establishment of local authority Children’s Committees and Children’s Officers
  • 1963 Children and Young Persons Act. Local authorities given responsibility for providing support to families at home to reduce the number of children being taken into care. In 1963 the NSPCC had a child protection staff of 325, who helped 121,565 children during that year alone.
  • During the 1970s that NSPCC staff stopped wearing their Inspectors’ Uniforms
  • 1989 Children Act brought about a further review of the services provided by the NSPCC

This Huckfield briefing wonders whether Social Impact Bonds initiated for some Children’s Services in Essex and Manchester are about to stand history on its head.

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Huckfield wonders whether the Boston Consulting and Young Foundation’s “Lighting the Touchpaper – Growing the Market for Social Investment in England“, published in November 2011, has missed the point. In “Conclusion” on page 27, the Report says:

“Our survey shows that while the foundations for this revolution are solid, based on many years of nurturing from government funds and social banks, the more entrepreneurial spirit of social investment as a driver of radical innovation and social impact remains the exception rather than the rule within the market”

While this may have been the case during the currency of the Report until its publication in November 2011, the Report surely misses these developments elsewhere?

Social Finance Technical Guidance November 2011

Social Finance in November 2011 published more technical guidance on Social Impact Bonds. The “Technical Guide to Commissioning Social Impact Bonds” November 2011 in Chapter 8 from page 18 onwards gives wide reaching examples of:

  • “local authorities introducing Social Impact Bonds to fund foster with payments made on the basis of improved well-being for children and young people and reductions in the need for expensive residential care
  • DWP Innovation Fund introducing a Social Impact Bond to present young people’s becoming NEET
  • “Long term health condition management. There is considerable scope for Social Impact Bonds to support new approaches to better managing long term health conditions, such as diabetes or asthma. Any additional services funded by the Social Impact Bond, such as supporting greater self-care by patients, would need to be closely integrated with other services, such as the local GPs and/or local hospital Foundation Trusts”

In other words, detailed guidelines were now available for local councils and others seeking to introduce Social Impact Bonds.

Local Examples

On March 06 2012, Essex County Council won Government support for a new Social Impact Bond to “finance intensive family and community based work with young people on the edge of care and custody”. The Council’s statement continued:

“Social Impact Bonds will be used in Essex to fund high level programmes that support vulnerable children and help keep families together, particularly when there is a risk that a child may come into local authority care. The approach is an innovative way of attracting investment to the public sector by deploying socially motivated private investment to pay towards tackling public service issues where a dual return of social benefit and savings to the public purse can be achieved. Investors receive a payment only if a programme hits its target, thereby reducing the risk to the public sector”.

Manchester City Council on March 15 2012 reported that it would “pilot a new scheme to improve outcomes for looked after children and young people:

“Manchester City Council’s Executive today agreed to pilot a brand new scheme to improve outcomes for looked after children and young people whilst saving the Council up to £4.7m over eight years.

“Funding for the pilot scheme will be provided through a new form of public investment known as the Social Impact Bond. The Council will enter into a partnership with an ethical investor who will be contracted by the Council to both underwrite the scheme and provide the carefully vetted service itself on behalf of the Council. This third party investment, together with savings that arise as a direct result of the intervention will pay for the roll out of the scheme in the future”

Department of Work and Pensions in Perth, Scotland. On March 15 2011 the Herald reported:

“Scotland’s first social impact bond (SIB) has attracted a group of individuals and small businesses to invest in funding a Scottish charity’s work with young people.

“The SIB will enable the Perth-based YMCA to benefit from the new funding model, trialled in England last year, which will target the corporate social responsibility budgets of bigger companies as well as philanthropic investors and charitable trusts.

“SIBs aim to ease the burden on public sector funding by offering investors returns linked to measurable social outcomes in infrastructure projects. The Perth project is one of six across the UK about to be announced by sponsoring agency the Department of Work and Pensions, a conference in Glasgow heard yesterday.

“Jill McGraith, acting chief executive at YMCA, said: “We thought there would be a couple of big investors but what happened was small individuals and businesses came forward.”

One Huckfield conclusion from this is that the introduction of Social Impact Bonds for funding Children’s and Young People’s Services may risk increasing their vulnerability through lack of willing investors and difficulties in measuring performance.

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This Section shows how a Report from JP Morgan Global Research, the Rockefeller Foundation and Global Impact Investing Network formed the basis of the Outline Proposal for the Big Society Capital Bank.

JP Morgan “Impact Investments” November 2010

One of the most important rent publications forming a theoretical underpinning for much of this is “Impact Investment” in November 2010 from JP Morgan Global Research, the Rockefeller Foundation and Global Impact Investing Network

This collaborative research explores how so called “impact investments” offer a new alternative for channelling large-scale private capital for social benefit. The report also includes the first large-scale data analysis of return expectations and, when available, realised returns for impact investments.

“Exploiting Poor People”

Page 12 of the JP Morgan Global Research Report on “Current Market Landscape” is candid about the risk of poor perceptions of “impact investments:

“Managing impact investments
The risks for impact investments are similar to those for venture capital or high yield debt investments, with heightened reputational and legal risks, particularly in emerging markets where regulatory infrastructure can be onerous and the rule of law is less well defined. Further, critics may argue that impact investments exploit poor people for the sake of profits. Indeed, exploitation and mission drift are risks that are amplified when poor populations are concerned, but we believe the potential of impact investing to create a pathway out of poverty, combined with the emergence of systems to track and manage social performance, outweigh these risks. Investors need to be vigilant to ensure that the social impact and outcomes are delivered by monitoring social performance.”

“Social Impact Bonds”

Under “Investment Structures”, the JP Morgan Global Research Report on page 20 describes Social Impact Bonds:

“Some more innovative investment structures have also been devised, including bonds that employ equity-like features that allow the investor to benefit from financial profits or even, in the case of the UK’s Social Impact Bonds, from successful social impact. The Social Impact Bonds, structured by the UK-based investment organization Social Finance, employ government commitments to use a portion of the savings that result from improved social outcomes to reward non-government investors that fund the intervention activities. The existence of such innovative structures allows investors with different (social and/or financial) return and risk appetites to invest via the vehicles that best align with their goals”

“Base of the Pyramid”

Throughout the JP Morgan Global Research Report its pages are candid about making profits from supplying services to some of the world’s poorest people. Typically, as shown on page 8, “In this report, we focus primarily on investments that target the ‘base of the pyramid’ defined by the World Resources Institute as people earning less than $3000 a year”

Clean Water for Rural Areas

On page 52 the JP Morgan Global Research Report describes the profit to be made through supplying “Clean Water for Rural Areas”

“Revenues, margins, capital and profit
As noted in Table 12, reaching 273 million households over the next ten years results in potential revenues of $29–$71bn. Applying an operating margin of 10% suggests profit potential of $2.9–$7bn and applying our one-to-one assumption of invested capital to year 10 revenues suggests required capital of $5–$13bn”

Maternal Care in Urban Areas

The JP Morgan Global Research Report on page 53 on Health: Maternal Care in Urban Areas

“The price ranges from INR 2,000 (about $40) for a normal delivery in a general ward to INR 14,000 (about $300) for a Caesarian delivery in a private room. Multiplying these prices by the number of deliveries over the 10 year period gives us an estimated revenue opportunity of $2–$14bn. Factoring in a profit margin between 5% and 10% we calculate a potential profit opportunity of $0.1–$1.4bn. Based on revenues in year 10, we conclude that potentially $0.4–$2.5bn of impact investment capital could be allocated to fund hospitals that deliver maternal health care over the next 10 years.

Primary Education

In Education, on “Revenues, Margins, Capital and Profits for Primary School Age Children” the JP Morgan Global Research Report says on page 59:

“Making a more conservative assumption (particularly given we are comparing fees charged by schools that are different from the ones for whom we consider the operating cost), we will assume profit margins between 10% and 20%, which gives us an estimate of the potential profit opportunity of $2.6–$11bn. In our analysis, year 10 revenues provide the estimate for required funding of $5–$10bn.”

Alongside many readers of this briefing, as expressed on page 12 of the JP Morgan Global Research Report , Huckfield shares concerns about a new asset class arising from profits through supplying clean drinking water, basic maternity services and primary education to some of the world’s poorest people.

Big Society Bank Outline Proposal May 2011

These Huckfield concerns are greater since the lead author of the JP Morgan Report is now the Chief Executive of Big Society Capital – the Big Society Bank.

All this gives the at least an appearance of making a short conceptual leap from profits out of clean water, maternity care and primary schools in India and Africa to providing services in more deprived areas in England.

The Big Society Bank Outline Proposal submitted to the Government in May 2011 includes on page 2: Section 1: Mission, Objectives and Operating Principles:

  • Achieving better attendance at schools
  • Supporting disabled people and other disadvantaged groups into the workplace
  • Reducing homelessness and boosting affordable housing
  • Reducing re-offending and promoting better alternatives to custody, particularly for younger people
  • Delivering better outcomes for vulnerable children
  • Delivering better prospects for chaotic families
  • Providing better access to drug and alcohol rehabilitation programmes
  • Improving healthcare in the community and reducing the need for hospital admissions
  • Boosting preventative action in order to reduce the strain on the health system from chronic diseases
  • Improving access to and control over finance for individuals excluded from mainstream banking
  • Achieving effective mixed use of community assets, thereby enhancing community cohesion
  • Encouraging entrepreneurship to stimulate employment in under-invested areas

On page 2, Big Society Bank’s Objectives will be to help:

  • Develop intermediaries to operate effectively between sources of capital and those in need, be they social ventures or individuals, and so to augment the flow of investment and skills to the social sector
  • Connect social entrepreneurs to the capital markets so that they can access growth capital
  • Support financial innovation so that social organisations can be rewarded for their performance in delivering valued social outcomes
  • Develop the investor market through the creation of social investment vehicles that support high growth ventures, as well as smaller local organisations
  • Support the development of community-led, social enterprise initiatives to improve opportunities for young people

To Promote Best Practice, on page 7, specifically the Big Society Bank will:

  • Promote transparency of intermediaries in the utilisation of funds provided by the BSB
  • Publish in its Annual Report details of the social and financial performance of its investments
  • Promote innovative products such as Social Impact Bonds that link investment returns to social outcomes
  • Promote initiatives that help communities to raise local capital for local provision of services

All this surely represents an amalgamation of the Social Investment Task Force on Social Impact Bonds April 2010, the JP Morgan Global Research Report, November 2010 and the Cabinet Office paper “Growing Social Investment: A Vision and Strategy” of February 2011?


Huckfield and many others still believe that many of these services should still form the basis of delivery by Central and Local Government and appropriately funded Third Sector and Social Enterprise organisations, rather than their becoming dependent on individual charitable donations, dormant bank accounts or the Big Lottery.

All of this is taking place against a background where, following the Chancellor’s Budget of Wednesday 21 March 2012 the Chartered Institute for Personnel and Development and Office for Budget Responsibility are predicting that one in seven public sector jobs will now be lost. They projected that 880,000 public sector jobs will be lost by 2017.

As more of these services become funded through Social Impact Bonds, how long will it take before we see NSPCC uniformed Inspectors back on the streets?

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