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Trudeau government exploring strategy for private investors to finance social services

Social Development Minister Jean-Yves Duclos

Six years ago the Conservative government under Stephen Harper explored the idea of social impact bonds, now the Liberal government under Justin Trudeau is reportedly pursuing the very same idea.

In April 2012, the Canadian Press reported, “Incentives are key to possible changes to the way the government handles social programs, Human Resources Minister Diane Finley said. She suggested the government is looking at creating ‘social impact bonds’, which are contracts between government and private investors to fund social programs.”

Now the Toronto Star reports, “The Liberals are considering adding new funding streams to existing programs in a bid to make more federal spending friendly to social finance ideas that link the charitable and private sectors to help pay for and deliver services. …Social impact bonds see service providers partner with private or philanthropic backers who cover the up-front costs and the government pays a return on the investment only if certain outcomes are met. …Social Development Minister Jean-Yves Duclos is overseeing work on a federal strategy to be completed this year about how to unlock what the Liberals believe are billions in private cash that could finance programs and services and test new ways to deliver them.”

That article highlights, “In one such arrangement involving the Chicago education system, returns are set at 8 per cent.”

The Globe and Mail has previously reported, “As a concrete example of social-investment partnerships [the Harper government] points to Habitat for Humanity. By working with private-sector companies like Home Depot, the low-income housing charity and its volunteers can achieve far more social good than they could otherwise.”

The first Social Impact Bond was launched by United Kingdom-based Social Finance Ltd. in September 2010.

Promoting the idea several years later, Conservative Prime Minister David Cameron stated, “Businesses need finance to grow and make profit. Governments need finance to fund big infrastructure projects. That’s why we have banks, bonds, investment markets and all the rest. The idea here is just as simple and just as powerful. Social enterprises, charities and voluntary bodies have the knowledge, human touch and personal commitment to succeed where governments often fail. But they need finance too. They can get it from socially minded investors. So we need social investment markets, social investment bonds and social investment banks.”

Last year, the Council of Canadians joined with labour and community allies to express our opposition to the introduction of social impact bonds by the Conservative provincial government in Manitoba.

CUPE Manitoba President Terry Egan says, “There was a time when the private sector would simply make philanthropic donations as part of their corporate responsibility to the community. Social Impact Bonds take that corporate philanthropy and turn it into a private money‑making scheme. SIBs are like P3s, for social services.”