Goldman Sachs gets into social impact bonds - but what are they?

Ryan Shorthouse of the Social Market Foundation explains the reasoning behind social impact bonds.

Fiscal retrenchment is catalysing radical thinking among policymakers about how to get better public services for less money. Social impact bonds (SIBs) are currently fashionable in policy debates as a possible means of financing interventions. With SIBs, social investors fund a particular service, and only get a return if the intervention improves outcomes which will lead to reduced government expenditure in the long-term. In the current environment, Government wants to pay investors only out of identifiable savings. And an idea that started here in the UK has now gone global. Just last week Goldman Sachs announced that it was spending $9.6 million on a 4-year programme aimed at reducing recidivism of offenders at Rikers Island prison in New York.

SIBs are potentially an ingenious way of getting more bang for taxpayer bucks at a time when public money is short. They are a vehicle for encouraging innovation in public service delivery because they devolve the financial risk to investors and organisations who can affect outcomes on the ground. At a recent SMF conference, Iain Duncan Smith MP said:

It could mean a change to the whole way that Government and private sector work together to solve social problems.

The first ever SIB launched in 2010 and funds work to reduce re-offending among offenders released from Peterborough Prison. Philanthropic investors will receive a return on their investment if the interventions funded achieve at least a 10 per cent reduction in reoffending each year, or at least 7.5 per cent across all three years. Other schemes are now emerging: in Manchester, for example, the Council is sourcing funds from social investors to provide intensive support for eight young people with challenging circumstances to live in foster care rather than in residential care.

SIBs are an important part of the funding jigsaw. But they are not the magic bullet for all public services. Social investment – where investors invest in the work of charities and expect a return – is still small: in 2010, £190m was sourced for social investment compared to £3.6bn in philanthropic grant funding and £55.3bn in wider bank lending. And SIBs only constitute a small part of all social investment. The small scale is mainly down to a lack of decent investable propositions. There are at least three big reasons for this.

First, because SIBs are embryonic market information about the likely risk and reward in different service areas is poor. Investors are jumping into the unknown. Little is known about how effective new interventions could be at, say, cutting re-offending levels, so investors don’t have much to go on in assessing the investment proposition. This uncertainty is exacerbated by the length of time it may take for outcomes to be observed, especially for early intervention programmes. The Government has helped set up Big Society Capital which it hopes will co-invest with private investors to send a signal to them and mitigate their risks by accepting lower interest rates or taking on the junior part of a debt. It is also hoped that Big Society Capital will fund new products that support impact measurement.

Second, there is a risk that investors are not paid appropriately. In most public services it is difficult for government to identify whether outcomes have improved, let alone to attribute those improvements to the work of the provider. If re-conviction rates fall after an intervention how can government distinguish between its being the result of the intervention or perhaps a change in the local policing strategy? An up-tick in re-offending could be the consequence of high local unemployment, or a statistical blip, rather than ineffective interventions. Correctly attributing outcomes to their cause is notoriously difficult. But without resolving that challenge both government and investors will remain reluctant to embark on large scale SIBs.

Third, even where outcomes are measurable, quantifying the financial benefits for taxpayers is tough. Improved employment outcomes for unemployed people or better GCSE results for children in care may be good in themselves, but quantifying the public savings is no simple task. All the more so if those savings are spread across a number of government departments, making coordination difficult.

The potential for SIBs and other payment by results schemes to revolutionise public service delivery lies in the incentives they create for providers to innovate. But there are many hurdles for government to overcome if this approach is to enter the mainstream. Improving measurement and data collection, working across departmental silos, and simply taking a punt on financially risky ventures to find out what works may all be necessary steps. In time SIBs could save government money. But the first steps on the road will be costly. And right now that’s not something that government wants to hear.

A guard at the entrance of Rikers Island in 1955. Photograph: Getty Images

Ryan Shorthouse is the Director of Bright Blue, a think tank for liberal conservativism 

The University Challenge final. Photo: BBC iPlayer
Show Hide image

Why University Challenge is deliberately asking more questions about women

Question setters and contestants on how the show finally began to gender-balance its questions – and whether it’s now harder as a result.

University Challenge has long had a gender problem. When the show first started airing in 1962, some Oxbridge colleges were still refusing to admit women as undergraduates; in the decades since, women have been consistently outnumbered by men, with all-male teams still a regular occurrence. Those women that did appear were all too regularly criticised and objectified in equal measure by audiences: notable contestants like Hannah Rose Woods, Emma Johnson, Samantha Buzzard and Sophie Rudd have experienced intense media scrutiny and criticised the sexism of the show and audiences. In recent years, sexism rows have dogged the show.

How satisfying, then, to see two women carrying their teams in last night’s final: Rosie McKeown for winners St John’s, Cambridge, and Leonie Woodland for runners-up Merton, Oxford. Both secured the majority of points for their teams – McKeown with visible delight, Woodland looking unsure even as she delivered correct answer after correct answer.

But there is another site of sexism on University Challenge, one that earns less column inches: the questions. Drawing on all areas of history, science, language, economics and culture, the questions often concern notable thinkers, artists, scientists, and sportspeople. Of course, our society’s patriarchal hierarchies of achievement have meant that the subjects of these questions are mostly men. General knowledge is, after all, a boys’ club.

Over the course of this 2017-8 series, though, I noticed a shift. More women than ever seemed to be making their way into the questions, at times with deliberate reference to the inherent sexism of their lack of cultural prominence. On 5 February, there was a picture round devoted to female composers, with contestents asked to identify Clara Schumann, Ethel Smyth, Rachel Portman and Bjork from photographs, who, Paxman explained, are all “women that are now listed in the EdExcel A Level music syllabus after the student Jessy McCabe petitioned the exam board in 2015.” Episodes have included bonus rounds on “prominent women” (the writer Lydia Davis, the pilot Lydia Litvyak, and the golfer Lydia Ko), “women born in the 1870s and 80s” (Rosa Luxemburg, Elizabeth Arden and Vanessa Bell), and the female philosophers Mary Midgely, Philippa Foot and Iris Murdoch.

Elsewhere, questions raise a knowing eyebrow at the patriarchal assumptions behind so much of intellectual endeavour. A music round on famous rock bands quoted the music critic Kelefa Sanneh’s definition “rockism”: “the belief that white macho guitar music is superior to all other forms of popular music”. Another, on opera, quoted Catherine Clement’s Opera, Or The Undoing of Women, which explores how traditional opera plots frequently feature “the infinitely repetitive spectacle of a woman who dies”. “Your music bonuses are three such operas,” Paxman said dryly, to audience laughter.

University Challenge’s questions editor Thomas Benson confirms that there has been a deliberate attempt to redress a gender imbalance in the quiz. “About three years ago, a viewer wrote in to point out that a recent edition of the programme had contained very few questions on women,” he explains. “We agreed and decided to do something about it.”

Last night’s final included a picture round on artists with works concerning motherhood (Mary Casatt, Lousie Bourgeois, Leanora Carrington and Frida Kahlo) and a music round on Marin Alsop, the first woman to ever conduct the Last Night of the Proms, as well as sets of bonuses on the American writer Willa Kather and Byzantine historian and princess Anna Komnene.

Former winner Hannah Rose Woods is delighted by the increase in such questions. “I think it’s fantastic!” she tells me. “These things are really important in changing people’s perceptions about women in the past, and the way women’s contributions to science and the arts have often been written out of history. We need to keep challenging the idea of the White Male Canon.”

Last night’s winner Rosie McKeown says that while she didn’t necessarily notice a deliberate attempt to gender balance the questions, she was “very pleased with the quality of those questions that did come up”.

“Although it wasn’t in one of our matches,” she tells me, “I thought the picture round on female composers was especially good for highlighting women’s achievements.”

For all the enthusiasm for these questions, in the studio they’re often met with blank stares. While University Challenge questions are broad and imaginatively posed, there are some reliable revision topics and techniques: from Nobel laureates and the years of their wins to identifying famous paintings and classical music excerpts. McKeown says she has been a religious viewer of the show since she was 11 years old, and admits to watching reruns of the show to prepare. Shift the kinds of answers you might be looking for, and teams may struggle.

“Do we know any female British composers?” Leonie Woodland said weakly, looking at a picture of Ethel Smyth. Trying to come up with a female Muslim Nobel laureate, one contestant desperately suggested Aung San Suu Kyi. Asked to provide a first name linking an American concert pianist with the sister of Lazarus one male contestant still buzzed in with “Daniel”.

“Even if we didn’t always get them right,” McKeown tells me, citing that round on female philosophers, which saw them pass on every question, as an example, “it was great to see so many important female figures represented.”

“I don't think the questions about women necessarily affected our performance, but it’s certainly a very good thing that they were there and I hope that they’ll arouse people’s interest in the women featured and in their achievements.”

Benson believes that it hasn’t had a significant effect on performance. “The great majority of the questions that feature women are no different to any others, in that they sit firmly within the realm of standard academic general knowledge.”

He notes that they often refer to historical and background details, citing sets of bonuses on Canadian novelist Ruth Ozeki and British physicist Hertha Ayrton, which both teams answered correctly in full. “Though Ozeki and Ayrton may not be household names, the questions are definitely answerable and deal with central themes in their work and achievements.”

It’s easy to brush off the significance of a fairly geeky Monday night BBC quiz show, but University Challenge still regularly pulls in three million viewers. In any case, a show like University Challenge has a cultural significance that outweighs its viewing figures. It helps to shape our understanding of which subjects are intellectual or important, which are history’s most notable achievements, and who is worth learning about. To ignore questions of identity is to risk intellectual laziness, relying on tired ideas of canonical figures – or worse, supremacist propaganda, privileging the achievements of white men over all others.

Quite aside from making for less predictable and more enjoyable television, by including questions on the likes of Stevie Smith, Nella Larsen, Gertrude Stein, Myra Hess, Margaret Mead, and Beryl Bainbridge, University Challenge can diversify the mental encyclopaedias of its viewers, be it a tweed-wearing 60-year-old in Leamington Spa or an 11-year-old like Rosie McKeown with her own dreams of one day competing. It has a responsibility to do so.

Anna Leszkiewicz is the New Statesman's deputy culture editor.