Service delivery
May 27, 2012

SIBs are no easy sell

On March 29th, the federal government brought down one of the most anticipated budgets in recent years.  

The budget contains a number of different themes. The first includes new spending initiatives such as for aboriginal schools, the Pan Am Games, the Coast Guard and Via Rail. The second theme contains a number of policy initiatives that have been sitting in the Department of Finance’s in basket for years but could not find sufficient support from previous governments. These include the abolition of the penny and the raising of the OAC threshold from 65 to 67.

The third theme highlights reducing the size of the federal government by announcing some selective cuts and promising to become more efficient. In this category the government sliced the CBC budget by $100 million, eliminated Katimavik (a Trudeau era youth program), and did away with the Public Appointment Commission (part of the Federal Accountability Act).  

In many ways, this budget is reminiscent of several mid-1990s budgets when the Liberal government sought to remedy the fiscal situation by encouraging the creation of alternative service delivery (ASD) mechanisms as a means of making government more cost effective. At the time, the government avoided getting on the New Public Management bandwagon by choosing instead to pursue a non-doctrinaire approach to ASDs by looking for ways to experiment with new governance and delivery models.  

In the recent March budget, the Finance minister continues this approach to deficit fighting by declaring his intentions to look at a new ASD model in the most indirect way possible. In the finest example of bureaucratese, Jim Flaherty states that, “the government will continue to explore social finance instruments as a way to further encourage the development of government-community partnerships.”

He goes on to say that, “the minister of Human Resources and Skills Development is also testing ways to maximize the impact of federal spending to support community-level partnerships, including pay-for-performance agreements and encouraging leveraging of private sector resources. Building on these partnerships and the work of the Canadian Task Force on Social Finance, the government will continue to support the momentum building around social finance initiatives and will explore social finance instruments. For example, social impact bonds hold promise as a tool to further encourage the development of government-community partnerships.”

Social impact bonds (SIBs) are currently being experimented within the U.K. in the wake of the arrival of the Cameron government. Based on his big society theme, David Cameron has championed moving the delivery of public services from the public sector into the private or not-for-profit sectors.

Unlike earlier efforts, the SIBs enable government to calibrate its costs by paying an arms-length organization for the degree to which they are successful in achieving a predetermined set of social outcomes. At its core, the risk of meeting the program’s objectives rest with the delivery organization and the investors’ returns depend on the outcomes that are achieved rather than program inputs.  

This approach has the advantage of encouraging the providers to offer a variety of program delivery mechanisms and to develop innovative work environments instead of relying on established institutional arrangements used by governments that are already known to be ineffective. While the early SIBs in the U.K. are oriented around correctional services, there is great potential in Canada for experimentation in areas like aboriginal health or on-reserve education programs where current efforts have had only mixed results.

Given the importance of outcome measures and explicit goal setting for SIBs, not all programs are suitable for SIB pilot projects. At a minimum, the benefits to government of a SIB must be greater than the costs of program delivery, the outcomes of the interventions must be measurable and attributable to the initiative, and they must not create any negative impacts.

SIBS might also be a tough sell to the public. Governments are not used to using investors to solve social problems, measuring outcomes and paying for results in a transparent way.

In the case of SIBs, austerity may prove to be the mother of invention. However, to succeed the government needs political champions, beyond words nested in budget papers, for SIBs to have a chance to make a difference in delivering social programs.


David Zussman holds the Jarislowsky Chair in Public Sector Management and is the director of the Graduate School of Public and International Affairs at the University of Ottawa (dzussman@uottawa.ca).

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