Govt social bonds pursued despite failed pilot

By Paul McBeth

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A social bond allows the introduction of new, private money into social programmes without increasing public debt and without the need to decrease spending.
A social bond allows the introduction of new, private money into social programmes without increasing public debt and without the need to decrease spending.

The Ministry of Health is still pursuing the Government's social bonds pilots, claiming to have learnt a number of lessons after the Wise Group withdrew from what would have been the first programme funded with such an instrument.

Hamilton-based Wise Group, a charitable organisation seeking to enhance the well-being of people and communities, withdrew from negotiations with the Ministry over a potential social bond to fund a pilot delivering employment services to people with mental illnesses.

The Ministry kicked off talks with Wise and its financial arranger, ANZ Bank New Zealand, last year after the 2015 budget set aside $28.8 million for social bond programmes, "but at this late stage, they have advised they are not able to proceed with the contract", Ministry chief strategy and policy officer Hamiora Bowkett said.

"That is not unexpected in a process like this and the work to progress the social bond continues," Bowkett said.

"One of the goals of the pilot was to develop and grow knowledge in the market on outcome-based contracting and establish a toolkit of templates and lessons learnt, which are being applied to subsequent bond pilots. This has been achieved."

A social bond allows the introduction of new, private money into social programmes without increasing public debt and without the need to decrease spending, with investors paid based on the level of social value achieved.

But they bring "significant public policy and economic difficulties", such as evaluating the success of the contract and potential for a low rate of return with high risk, according to a 2011 report by Ross Philipson Consulting for the Department of Internal Affairs.

- BusinessDesk

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