Social impact ties, a bad idea the liberals won’t let go


[Link] Federal Liberals continue to embrace privatization, disguised in the progressive false language of “social impact bonds”. Just days before the federal election was called, the Liberal government unveiled a scheme allowing investors to take advantage of a well-established community program.

Social impact bonds (SIBs) is a privatization program in which private investors provide cash upfront to provide social services, for profit. Governments pay consultants to design complex arrangements that target important social issues like chronic homelessness, the opioid crisis, and keeping Indigenous children out of foster care.

The programs are then presented as investment opportunities to attract private investors. If a program achieves certain goals, investors get their money back, plus a profit. The reimbursement, plus all profits and consultant fees, comes from public funds which should go directly to the provision of the service.

There is nothing “innovative” about social impact bonds. SIBs are a means of privatizing public services by creating space and encouraging private interests.

The Liberal government’s commitment to SIBs shows that they are comfortable turning deep-rooted social injustices into sources of profit for huge investors. No one should make money from important social programs for people vulnerable to poverty, racism or other injustices, whether the investor is a wealthy individual, business, foundation or organization. charitable. The federal government should provide funding directly to social service providers to support the health and well-being of our communities.

Alternative suspension program: newest in Canada SIB

The YMCAThe Alternative Suspension program is the latest SIB. Five days before the Liberals called an election, Public Safety Minister Bill Blair announced that the federal government, working with consultants from the MaRS Center for Impact Investing, had selected five major investors for the SIB. The federal government will spend up to $ 4.5 million on consultants, lawyers and other intermediaries, as well as to reimburse investors with a considerable profit.

The YMCAis a long-standing initiative for students who have been suspended from school. Pupils have access to homework help and counseling services. The program helps students make a successful return to school and is a way to prevent dropping out of school and reduce criminal activity.

Until SIBwas announced, Public Safety Canada and various community partners directly funded the Alternative Suspension program. A 2017 evaluation of the program by Public Safety Canada found that the program is indirectly self-financing, through the difference between federal income taxes paid by those with a high school education and those who dropped out.

In 2020, the Liberal government decided to turn this important social program into a lucrative opportunity for private investors. The SIBexpand the existing program to other sites – a simple goal that could be achieved by increasing direct government funding.

The latest publicly available information showed a potential benefit for investors of between 8.9% and 11.7% if program targets were met or exceeded. Investor payouts are based on a “positive behavior change” among program participants and the number of people who complete the program. There is nothing new or innovative about these results. The program has been evaluated several times and has a positive result on both measures.

The COVIDThe -19 pandemic has hurt the hunt for investors. More than a year after its initial launch, the SIBhad failed to raise funds. School boards across the country were switching to e-learning and adopting no-suspension policies. The lack of school suspensions meant that private investors were not interested.

With the resumption of in-person learning, the federal government has secured private investment. Before funds were raised from investors, the government spent more than $ 600,000 to set up the SIB; 25 percent went to legal and consulting fees.

Private investors always win with SIBs

Proponents of privatization like MaRS and the Liberal government promote SIBs as a “pay for success” model. They claim that the government pays investors only for successful programs. Yet behind the scenes and in negotiations with investors, governments promise investors that there is minimal risk of losing their money. Research has shown that governments cannot attract investors without important guarantees. These include choosing proven programs, using simple and easy-to-implement measures, and including contractual provisions that protect investor capital.

For example, the Public Health Agency of Canada announced last year that investors in the first SIB, Activate (formerly known as the Community Hypertension Prevention Initiative), would achieve a return on investment of over seven percent, even though the program recruited 35 percent fewer participants than its target.

Investors also have the right to vote on a SIBproject supervisory board. Often the service provider is unable to change the program without investor approval.

Set up, monitor and evaluate a SIBconsumes a lot of public money. Intentionally, SIBs are a lucrative business opportunity for financial intermediaries like consultants, lawyers, auditors and project managers. Public money is diverted from direct funding into the pockets of investors.

There is no place for profit in social services, nor in any public service. CUPEcalls on governments to reject for-profit social impact bonds and to properly and directly fund the social services and programs we need to advance social and economic justice, and reconciliation, in our communities and country.


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