‘Momentum building’ for social impact bonds in Canada
12 April 2012 at 11:23 am
Three weeks ago I wrote a blog on the growing interest in social finance in Canada. I noted that the Canadian government led by Stephen Harper seemed to be foreshadowing its willingness to trial social impact bonds.
That prediction turned out to be correct. Tim Draimin, of Social innovation Generation (SiG), has just sent me details from the Federal Budget handed down on March 29, 2012.
In a section on Supporting Effective Government-Community Partnerships (page 173), it is indicated that the Minister of Human Resources and Skills Development (Diane Finley) will test ways to maximise the impact of federal spending “including pay-for-performance agreements and encouraging leveraging of private sector resources”. With this in mind the government “will continue to support the momentum building around social finance initiatives and will explore social finance instruments. For example, social impact bonds.” The minister is to announce details over the coming months.
Not surprisingly SiG, as convenor of the Canadian Task Force on Social Finance, has welcomed the Budget reference. It emphasises, however, that complementary measures will need to be introduced if government and social enterprises are to mobilise new sources of capital, including the creation of an enabling tax and regulatory environment.
There is also wary support elsewhere in the sector. Imagine Canada is a non-profit organisation which advocates on behalf of Canada’s charities. In responding to the Budget it expressed some concern about changes to the Income Tax Act which may restrict political activities of environmental groups funded by foreign sources and, potentially, impose disproportionate administrative costs on charities. It also expressed disappointment that the government failed to introduce a Stretch Tax Credit to encourage charitable giving.
In contrast it indicated cautious optimism at the commitment to social finance instruments. Indeed it encouraged the acceleration of such efforts given that the not-for-profit sector is struggling to meet growing demand under conditions of constrained funding.
Some organisations are already contemplating how SIBs might be applied. Michael Shapcott of the Wellesley Institute has a proposal to house people suffering from HIV-AIDS. Tim Richter of the Calgary Homeless Foundation anticipates a bond issue that would finance housing for newly released prisoners.
Other organisations are less convinced, even hostile. Professor Margie Mendell of Concordia University, in a background paper for the Canadian Community Economic Development (CED) Network, concludes that social impact bonds are “another step in the wrong direction”. She fears that SIBs will reinforce a “resolutely one-dimensional approach” to complex socio-economic problems and “involve a subordination of the public interest to private interests”.
It’s fair to say that even those Canadian not-for-profit organisations most open to new approaches to social finance don’t see SIBs as a panacea. They remain concerned that a vehicle that might usefully augment and complement existing avenues of funding could be used to justify governments reducing their continuing financial commitment to social services.
Heather Schoffield, writing in the Winnipeg Free Press, believes that SIBs are now “just a step away from becoming a reality in Canada”. She’s probably right. Yet my sense is that in Canada, as in New South Wales, the approach will be to commit to bonds in a measured and circumspect manner.
The Social Investment Expert Advisory Group (which I chair) is well aware that the New South Wales trials now contemplated will require a great deal of learning by doing on all sides. It can only be for the good if Canada, the UK and Australia can also learn from each other.
Professor Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW and Chancellor of the University of Western Sydney. He was the founding CEO of CSI from 2008 – 2011. This article is from the CSI blog.