Paying for Social Services Results in the UK and the US

NEW YORK, April 24, 2018 – Governments on both sides of the Atlantic are attracted to financing models that encourage social innovation, but challenges persist around when and how to apply these outcomes-based models, and how to right-size these investments, according to a new book.

The book, Payment by Results and Social Impact Bonds, published by Policy Press at the University of Bristol, evaluates what’s known to date about the effectiveness of an approach to contracting that ties payment for service delivery to the achievement of measurable outcomes. The approach is known as Payment by Results and Social Impact Bonds in the UK, where it originated, and Pay for Success in the US. Regardless of differences in implementation between the UK and US, this approach offers a way for governments to scale up effective programs and interventions, as well as test innovative models of service delivery.

The book is jointly authored by experts from Manchester Metropolitan University, University of Southern California, and Nonprofit Finance Fund. Among its findings:

• While still untested across many policy areas, the approach has potential for addressing social challenges that have proven resistant to traditional policy responses.
• In the UK, Payment by Results and Social Impact Bonds originated as a means to attract new sources of funding for public services, increase competition among service providers and drive innovation. Over 30 Social Impact Bonds have been launched and £15 billion of government services involve Payment by Results. However, evaluation has been limited and, to date, there is little evidence that these approaches have driven substantial innovation in service response.
• In the US, Pay for Success projects have been characterized by rigorous evaluation to minimize the potential risk to taxpayers if outcomes aren’t achieved. More than 20 Pay for Success projects have addressed, for example, criminal justice, homelessness, and early childhood needs in at-risk communities. 

“Social Impact Bonds and Payment by Results represent an innovative and radical approach to commissioning and funding important social services, yet there has been remarkably little evaluation of these programs in the UK,” said Chris Fox, the book’s lead author and a professor at the Policy Evaluation and Research Unit, Manchester Metropolitan University.

“I felt it was essential to make this contribution now to help those working in spaces where they might consider Social Impact Bonds to drive social change,” said co-author Gary Painter, a professor at USC Sol Price Center for Social Innovation. “This is a new strategy and funding method for social services that a lot of people in the field still don't fully understand.”

“We’ve all learned a great deal from piloting this approach in the US over the last eight years, as our sector continues to seek better ways to connect effective services to vulnerable people,” said co-author Jessica LaBarbera, Vice President at Nonprofit Finance Fund, which has been involved in many US PFS projects and also maintains the Pay for Success field-wide learning resource.

Payment by Results and Social Impact Bonds: Outcome-based Payment Systems in the UK and US, authored by Kevin Albertson, Chris Fox, Chris O’Leary, and Gary Painter, with Kimberly Bailey and Jessica LaBarbera, was published by the Bristol University Policy Press in the UK in February 2018 and will be released in the US on May 15, 2018; it is distributed in the US by the University of Chicago Press.