SIBs and ABS

One of the problems which the Work Programme faced from the outset was that there was to be no, or very little, payment to the providers up front; they would have to stump up the money to finance it until the job outcomes started coming in - if they ever did. It's hugely risky, it excluded all but the biggest companies, and it drove even them into partnerships with other firms. But there's another model on the table, one which A4e's Mark Lovell is keen on. It's called Social Impact Bonds. There's an explanation and diagram here. Investors come in and put the money up to finance the providers' "interventions"; they work on the "target population", and the government repays the investors from the money saved by the success of the "interventions". Sounds reasonable. Certainly the private companies will get paid, and the risk is borne by people who can afford the gamble.

But the effect of this model is even worse than the current system. It further distances the state from those individuals who are seen as problems; they are not part of society, just nuisances who require intervention in their lives, and that intervention is a market in which financiers can invest.

Something else which interests Lovell is the Alternative Business Structure (ABS) for legal firms. It will come into operation this year, and allows any "fit and proper" person or company to own a legal services firm. It's been called "Tesco law" because supermarkets will be able provide legal services. There are lots of safeguards but it opens the sytem up to competition. And of course A4e is interested! They got into the Community Legal Advice business by partnering with an established legal firm, but if they can set up their own ABS a whole new market opens up. Lovell says that his focus is on what it could do for people on benefits and low incomes.