Remember “social bonds”? From the Ministry of Health:
Social bonds are an innovative way for private and not-for-profit organisations to partner in delivering better social outcomes – and be rewarded by Government. The Ministry of Health is leading cross-government work to pilot social bonds in New Zealand.
Last year MS wrote here:
The stupidest idea this Government has had yet
This is the sort of thing that only a Merchant Banker would think was a good idea. The Government is planning to issue “Social Bonds” to corporations and individuals investing in social services with the expectation that market forces will produce a superior result.
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This belief that the invisible hand of the market will always deliver verges on cultism. It will also ensure that existing levels of inequality will only get worse. Perhaps that is the real motivation. …
Internationally the experiment is still underway, with plenty of failures (of various kinds) stacking up. In July this year NZ added its own failure to the list:
Government’s first social bond collapses
The government’s first social bond has collapsed, with negotiations breaking down and the provider walking away.
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Last year nearly $29 million was put aside for the rollout of four bonds. The first was to be a programme to help people with mental health problems get into the workforce, and the plan was to put employment consultants in GP practices. But the provider, Wise Group, confirmed yesterday that it had withdrawn from the scheme. It would not make any further comment saying it had been directed to refer inquiries to the Ministry of Health. …
Today it seems that a scapegoat for this failure has been found:
Report on NZ social bonds pilot cites lack of commercial expertise by public officials
A report on failures within the government’s first social bonds pilot blames them on a lack of commercial expertise from the bureaucrats involved.
Work started in 2013 on social impact bonds where typically a central or local government pays private investors a return based on achieving agreed social outcomes.
The government earmarked nearly $29 million in 2015 for the rollout of four bonds but the first one aimed at helping people with mental health problems get into the workforce failed to get off the ground mid-year when the provider, Wise Group, withdrew from the scheme. It won’t comment on why.
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A joint Treasury, Ministry of Health release on the report, made public with redactions, said the main problem was a lack of commercial financial expertise within their pilot team. That led to a heavy focus on “process diligence” as opposed to achieving a successful outcome.
Government officials by their nature are not expected to have “commercial financial expertise” and “process diligence” is what they do. The “successful outcome” was the responsibility of the contracting organisation, that’s the whole point of “social bonds”.
Other issues included a lack of visible senior sponsorship of the pilot within the agencies and the need to include investors earlier in the process and provide them with clearer information upfront on the basic commercial and financial parameters the Crown is willing to contract at. …
Or in other words, it was a risky idea that was poorly implemented by an incompetent minister. But you can’t say that, so sure, whatever, blame the officials.
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