Allyson, this is an interesting concept, similar to Victory Bonds or the proposal for Green Bonds that came out a few years ago. A worth endeavor! Some questions it raises for me include issues associated with raising the money (how much needs to be spent on marketing in order to raise the desired amount?) and who spends it. If funds go to a government department, it risks being raided in bad times by an increasingly poor department of finance. If it’s important enough for government to create a bond, outside of political reasons, why not just raise taxes? I clearly need to read the UK’s white paper.

Wanted to post as Tim, not 21inc, but didn’t let me change twitter users when signing in.

Allyson, this is an interesting concept, similar to Victory Bonds or the proposal for Green Bonds that came out a few years ago. A worth endeavor! Some questions it raises for me include issues associated with raising the money (how much needs to be spent on marketing in order to raise the desired amount?) and who spends it. If funds go to a government department, it risks being raided in bad times by an increasingly poor department of finance. If it's important enough for government to create a bond, outside of political reasons, why not just raise taxes? I clearly need to read the UK's white paper.

Wanted to post as Tim, not 21inc, but didn't let me change twitter users when signing in.

Victory Bonds were repaid.nnThis type of financial scheme has been tried in North America to reduce energy consumption. Energy Service companies introduced energy management systems into a clients buildings and received half the value of the energy saved. I worked on developing a such a shared savings programme for Ontario Hydro in the 1980′s. It didn’t work. The savings generated were never enough and the quality of the indoor environment deteriorated too much. This was the experience of US utilities that had tried similar programmes.nnThe British scheme offers “investors” a revenue stream based on savings that accrue to government resulting from reduced costs associated with the social intervention financed by the bonds. If the intervention doesn’t save the government money the “bond holders” get nothing. There is a risk that substantial auditing costs could be involved. Did the intervention really achieve the stated gains? Did other ancillary services deteriorate? Who decides.nnAs an investor my interests would clash with civil service unions. I expect that most of the potential savings available to investors would arise from privatization of the services that the social investment is being made in. Privatization of social services has been expanding rapidly with no need for financial incentives.nnThen there is the Value Engineering (VE) model used by the US military. Contractors that come up with products of equivalent performance at a lower cost then the US military splits the future savings with the contractor. Having lived through two of these VE change proposals (VECPs) I can only suggest that government is incapable of acting quickly enough to make these VECP’s worth pursuing. The US VECP process also highlights the extent to which government agencies and private business become embroiled in turf wars.nnSocial Impact Bonds might prove to be a worthy but a lot of thought will have to go into their structure to make them more attractive than straight charitable donations that come with tax deductions. The ideas are by no means new nor are they untried.

Victory Bonds were repaid.This type of financial scheme has been tried in North America to reduce energy consumption. Energy Service companies introduced energy management systems into a clients buildings and received half the value of the energy saved. I worked on developing a such a shared savings programme for Ontario Hydro in the 1980's. It didn't work. The savings generated were never enough and the quality of the indoor environment deteriorated too much. This was the experience of US utilities that had tried similar programmes.The British scheme offers “investors” a revenue stream based on savings that accrue to government resulting from reduced costs associated with the social intervention financed by the bonds. If the intervention doesn't save the government money the “bond holders” get nothing. There is a risk that substantial auditing costs could be involved. Did the intervention really achieve the stated gains? Did other ancillary services deteriorate? Who decides.As an investor my interests would clash with civil service unions. I expect that most of the potential savings available to investors would arise from privatization of the services that the social investment is being made in. Privatization of social services has been expanding rapidly with no need for financial incentives.Then there is the Value Engineering (VE) model used by the US military. Contractors that come up with products of equivalent performance at a lower cost then the US military splits the future savings with the contractor. Having lived through two of these VE change proposals (VECPs) I can only suggest that government is incapable of acting quickly enough to make these VECP's worth pursuing. The US VECP process also highlights the extent to which government agencies and private business become embroiled in turf wars.Social Impact Bonds might prove to be a worthy but a lot of thought will have to go into their structure to make them more attractive than straight charitable donations that come with tax deductions. The ideas are by no means new nor are they untried.

There is also a question of willingness to invest in these social bonds. How secure will they be?