Premier’s social bond promise ignites controversy – Critics call private funding “repellent,” advocates say they’re “innovative”

By Karen Kleiss, Edmonton Journal January 30, 2013 7:20 AM

EDMONTON – Premier Alison Redford’s suggestion Monday that Alberta will introduce “social infrastructure bonds” has ignited a heated debate among politicians, investment experts and social service workers.Supporters of social bonds say they are an innovative and progressive way to fund money-saving social programs that wouldn’t otherwise exist, while detractors call them a “slippery slope” toward privatization of public social services.

Mark Hlady, president of Finance for Good, has been advocating for social impact bonds since 2009 and has met with four government departments that are considering the idea, including officials in human services, justice, education and health.

“The investors make a return if we do social good,” Hlady said Tuesday. “We’re helping people live better lives. If we do that, we get paid.”

Redford said the province is looking to introduce “social infrastructure bonds,” a variation of the “social impact bonds” she proposed during the Progressive Conservative leadership race in 2011.

The concept originated in the United Kingdom in 2008 and has caught on worldwide including the United States, where they are known as “pay for success” bonds.

Canada’s federal Human Resources Minister Diane Finley announced in November the Harper government will start issuing social impact bonds this year.

The concept rests on the idea that good social programs save the government money. For example, a program that provides housing and supports for homeless people can dramatically reduce policing, incarceration and hospital emergency room costs.

Bond structures vary, but typically a private investor finances a proven program operated by a non-profit agency. If the agency meets its targets – say, getting 10 homeless people off the streets — the government returns the cost of the program to the investors, with interest. The interest comes from the money saved on police, sheriffs and doctors who would otherwise have been paid to serve the newly housed homeless.

In Edmonton, the Pathways to Housing program has helped 80 homeless people get off the streets, saving an estimated $2.2 million in hospital costs alone each year, according to the organization’s annual report. A social impact bond could help the program grow, without additional government investment.

Redford’s social infrastructure bond may be different from a social impact bond and could take the shape of a more traditional government bond, one used to build a school, for example. Alternatively, money raised for a social infrastructure bond could fund investment in social assets that yield returns, like low-income housing.

The government did not offer any clarity Tuesday on the issue.

Hlady said social impact bond investors have a “philanthropic mindset” and want to make a difference in their communities. If they were after a high rate of return, they would invest elsewhere, he noted.

He acknowledged the politicians have to be careful and introduce strict regulations around their use.

“We have never intended social impact bonds to cover all areas of society,” he said. “ You only want social impact bonds where you’re funding additive programs that are working at root causes. You never want to have a social impact bond that is going to help address crises or symptoms.”

He added that social impact bonds have the most value when the programs they fund help the people with the most complex problems.

Alberta College of Social Workers spokeswoman Lori Sigurdson said the college on Jan. 18 passed a motion to oppose the use of social impact bonds in Alberta.

“We don’t want some people to profit from the misery of others,” said Sigurdson, who ran unsuccessfully for the NDP in the 2012 provincial election.

“The motive becomes profit, not service,” she said. “The primary responsibility of government is to be supporting vulnerable and marginalized people.”

NDP MLA David Eggen called the bonds experimental, “untried” and “regressive.”

“Essentially what you’re doing is taking social programs for the most vulnerable people and putting them on the market to buy, sell and trade,” Eggen said. “It’s ludicrous and I think it’s somewhat repellent as well.”

Wildrose spokesman Vitor Marciano said the party won’t comment on the bonds until Redford provides more details.

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