“Milestone payments” should be paid to providers of early intervention services in order to be attractive to investors according to Graham Allen.
The Labour MP heads up the government’s Early Intervention Commission which has released an interim report on financing the sector before he makes final recommendations in May or June.
Pointing out that long repayment timescales on results from early intervention programmes is just one of the many obstacles to attracting private investors, Allen said “finding some means of providing milestone payments will be necessary, as investors will usually want to see some sort of return within a couple of years”.
He also suggests setting aside or ring-fencing the money to be paid to investors and providers. “We need to be careful when designing a new system which creates future commitments for expenditure at a future date and pressures on future budgets.” Tax incentives would also make investment more attractive, he adds.
Allen intends to investigate a number of finance options including social impact bonds, which are already being piloted by the Ministry of Justice in Peterborough with young offenders, mutuals and co-operatives, community budgets and private finance iniatives, the latter already controversially used to build new hospitals.
In regard to the national Early Intervention Foundation he recommended be set up in his last report, Allen said one of its many roles should be to provide greater economies of scale to ensure that different areas wanting to deliver similar programmes could share costs. It would also need to help to reduce risk for investors by developing robust metrics for assessing outcomes, for the purposes of paying investors.
“In summary however, we believe that external finance will help to bring about more immediate funding for early intervention and will enable greater transfer of risk out of the public sector. If the total amount of savings which the public sector will receive can be shown to be significantly greater than the cost of external finance, then it should be possible to demonstrate value for money,” the report concludes.
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