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Alternative to Private Finance of the Welfare State a GLOBAL ANALYSIS of SOCIAL IMPACT BOND, PAY-FOR-SUCCESS and DEVELOPMENT IMPACT BOND PROJECTS

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Alternative to Private Finance of the Welfare State a GLOBAL ANALYSIS of SOCIAL IMPACT BOND, PAY-FOR-SUCCESS and DEVELOPMENT IMPACT BOND PROJECTS WISeR catalogue no: 2015.24 Alternative to private finance of the welfare state A GLOBAL ANALYSIS OF SOCIAL IMPACT BOND, PAY-FOR-SUCCESS AND DEVELOPMENT IMPACT BOND PROJECTS Dexter Whitfield 2015 SUBTITLE Alternative to Private Finance of the Welfare State: A global analysis of Social Impact Bond, Pay-for-Success and Development Impact Bond projects Report name here Australian Workplace Innovation and Social Research Centre The University of Adelaide 230 North Terrace Adelaide, South Australia 5005 www.adelaide.edu.au/wiser Published 2015. ISBN: 978-0-9923617-7-8 WISeR catalogue no: 2015.24 Suggested citation: Whitfield, D. 2015. Alternative to Private Finance of the Welfare State: A global analysis of Social Impact Bond, Pay-for-Success and Development Impact Bond project. Adelaide: Australian Workplace Innovation and Social Research Centre, The University of Adelaide. WISeR and ESSU have taken care to ensure the material presented in this report is accurate and correct. However, we do not guarantee and accept no legal liability or responsibility connected to the use or interpretation of data or material contained in this report. Acknowledgements Many thanks to the following for their assistance in the preparation of this study: Bill Rosenberg, New Zealand Council of Trade Unions; Melissa Sanchez, Catalyst Chicago; John Spoehr, Australian Workplace Innovation and Social Research Centre (WISeR), University of Adelaide; Diana Hetzel, Public Health Information Development Unit (PHIDU), University of Adelaide; Andrew McNeill, National Union of Public and General Employees, Canada; the Canadian Union of Public Employees; and Dorothy Calvert for comments on the draft. The Australian Workplace Innovation and Social Research Centre (WISeR) focuses on work and socio-economic change. WISeR is particularly interested in how organisational structure and practices, technology and economic systems, policy and institutions, environment and culture interact to influence the performance of workplaces and the wellbeing of individuals, households and communities. WISeR also specialises in socio-economic impact assessment including the distributional impacts and human dimensions of change on different population groups and localities. Our research plays a key role in informing policy and strategy development at a national, local and international level. The European Services Strategy Unit is committed to social justice, through the provision of good quality public services by democratically accountable public bodies. Research and strategic advice for public bodies, trade unions and community organisations includes analysis of regional/city economies and public sector provision, jobs and employment strategies, impact assessment and the effects of marketisation, privatisation, public private partnerships and transformation. The Unit continues the work of the Centre for Public Services, which began in 1973. http://www.european-services-strategy.org.uk CONTENTS KEY FINDINGS AT A GLANCE ............................................................................................................................. I 1 PRIVATE INVESTMENT TO PRIVATISE THE WELFARE STATE ...................................................................... 1 1.1 NEW DEVELOPMENT IN THE MUTATION OF PRIVATISATION ................................................................................... 2 1.2 AUSTERITY ACCELERATED NEOLIBERALISM ......................................................................................................... 2 1.3 EARLY INTERVENTION AND PREVENTION ........................................................................................................... 3 1.4 RECONFIGURING PUBLIC SERVICES AND THE WELFARE STATE ................................................................................. 4 1.5 THE EMERGENCE OF SOCIAL IMPACT BONDS ...................................................................................................... 7 1.6 LANGUAGE OF THE MARKETPLACE ................................................................................................................... 9 1.7 OBJECTIVES AND STRUCTURE OF THIS REPORT .................................................................................................. 10 2 BIG BANKS, PHILANTHROCAPITALISM AND IMPACT INVESTING ............................................................ 11 2.1 PRIVATE, SOCIAL AND PHILANTHROPIC FUNDING MODELS ................................................................................... 11 2.2 PROMOTING SOCIAL IMPACT BOND AND PAY-FOR-SUCCESS PROJECTS ................................................................... 13 2.3 IMPACT INVESTING – EMBRACING NEOLIBERALISM ............................................................................................ 16 3 POLITICAL ECONOMY OF IMPACT INVESTING AND SOCIAL IMPACT BONDS ........................................... 18 3.1 CRISES AND INEQUALITIES ............................................................................................................................ 18 3.2 FINANCIALISING THE WELFARE STATE ............................................................................................................. 19 3.3 SIMILARITIES WITH, BUT KEY DIFFERENCES FROM PPPS ...................................................................................... 22 3.4 NEW MARKETS IN EARLY INTERVENTION AND PREVENTION ................................................................................. 23 3.5 SOCIAL IMPACT BOND PROJECTS ARE PRIVATISATION ......................................................................................... 23 3.6 FRACTURING AND PRIVATISING THE STATE ....................................................................................................... 24 3.7 VALUING PUBLIC GOODS AND SERVICES .......................................................................................................... 26 3.8 EMBEDDING CORPORATE WELFARE ................................................................................................................ 26 4 ECONOMIC FLAWS IN SOCIAL IMPACT BOND AND PAYING FOR SUCCESS PROJECTS .............................. 28 4.1 THE STRUCTURE OF SOCIAL IMPACT BOND PROJECTS ......................................................................................... 28 4.2 GLOBAL SPREAD OF OPERATIONAL SOCIAL IMPACT BOND PROJECTS ...................................................................... 29 4.3 CONTRACT COMPLEXITY .............................................................................................................................. 32 4.4 MEASURING OUTCOMES ............................................................................................................................. 32 4.5 SAVINGS ANALYSIS ..................................................................................................................................... 35 4.6 PAYMENT-BY-RESULTS ................................................................................................................................ 37 4.7 PERFORMANCE OF SOCIAL IMPACT BOND AND PAY-FOR-SUCCESS PROJECTS ........................................................... 39 4.8 IDENTIFYING RISK ....................................................................................................................................... 41 4.9 EXAGGERATED INNOVATION ......................................................................................................................... 44 4.10 EQUALITIES AND SOCIAL JUSTICE ................................................................................................................... 44 4.11 PUBLIC COST OF SOCIAL IMPACT BOND PROJECTS .............................................................................................. 46 4.12 SOCIAL IMPACT BOND PROJECTS AND FREE TRADE AGREEMENTS .......................................................................... 49 4.13 FINANCIAL FLAWS ...................................................................................................................................... 49 4.14 PUBLIC POLICY FLAWS ................................................................................................................................. 51 5 EXPORTING IMPACT BONDS TO THE GLOBAL SOUTH ............................................................................. 54 5.1 DEVELOPMENT IMPACT BOND PROJECTS ......................................................................................................... 54 5.2 PROMOTING PAYMENT-BY-RESULTS ............................................................................................................... 55 6 DEMOCRATIC ACCOUNTABILITY, PARTICIPATION AND TRANSPARENCY ................................................ 56 6.1 ERODED ACCOUNTABILITY ............................................................................................................................ 56 6.2 ABSENT PARTICIPATION ............................................................................................................................... 56 6.3 LIMITED TRANSPARENCY .............................................................................................................................. 58 6.4 CORPORATISATION OF NON-PROFIT ORGANISATIONS......................................................................................... 58 7 EMPLOYMENT IMPACT .......................................................................................................................... 60 7.1 JOBS – THE
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