Essex head of finance on Social Impact Bonds
0Margaret Lee has been at Essex County Council for 25 years. She started out making tea in the finance department and subsequently trained as an accountant with Essex. She has been head of finance for social services and corporate and is now director for finance. Her duties include legal services, procurement, governance, audit, risk management and performance.
Room 151: How did your Social Impact Bond come about?
Margaret Lee: We were first looking at the preventative work that we needed to do in children’s services with the care for older children and how we could improve their outcomes. We wanted to look at how we could stop older children going into care. Social Impact Bonds were in the ether in that they had been discussed at central government and there was a Social Impact Bond project in Peterborough with offenders and so we talked to government about the possibilities in terms of a payment by results financing stream.
Government were very keen to explore that with us and we started down that path last Summer.
We are looking at providing Multi-Systemic Therapy which is an intensive therapy for children in their family-setting to do everything we can to keep them out of care. The bond works by saying if these children are kept out of care the bond providers will receive payment.
The county council has a statutory responsibility to assess childrens’ needs and provide the right support. Within the framework of the SIB we have had to spend a lot of time looking at where the decision making and control sits – making sure our responsibilities still lie with us. Because we were the first to do this for this type of project we spent a lot of time looking at those sorts of issues.
R151: How much is the bond worth?
ML: The money is paid per child and the business case built on an expected volume of children so it depends on the children that we have and whether they are suitable for this type of therapy. Taking children into care is expensive so there is a financial benefit to us but the primary reason to do this is to keep the children out of care. In the end it is less cost to the whole public purse.
R151: Who are the investors?
ML: We have to go out for procurement for this so we don’t know who the investors are yet. Because the government are supporting Social Impact Bonds the government have worked with us and the sector to find interested parties, social investors. Of course they want a return for their money because they are taking a risk. They will only get paid on results. That’s why we have to very carefully assess that the children we put through the therapy will benefit from it.
R151: What interest do your investors receive?
ML: We haven’t done the final procurement so we haven’t got the final figures. It’s not a guaranteed return but would be a standard return for a risk-based investment. It is currently one contract that we will go out for so it’s one batch of investors. That’s not to say that if it’s very successful we wouldn’t do it again. As a concept we find payment by results quite an exciting one; it’s what we should be doing. We will be looking to see whether it can be applied to other work we do. It’s about transferring risk and accepting that when you transfer risk you pay for it but you don’t then pay for failure.
R151: What do you offer investors to show that this is an investment worth making?
ML: The investors that this would invest are already in this field. They will have a lot of background and knowledge of childrens’ care. Some people invest in gold, some people invest in stocks and some people invest in social impact. They’re looking for a return to reinvest somewhere else.
R151: Do you have to sell in your capabilities as a county council to entice investors?
ML: No, we’re going out to tender so people will come to us and say they’re interested. We will have discussions with them about Essex but how it works is that when people say yes, we’re interested in investing, we then go and source the Multi-Systemic Therapy, setting up a social finance arrangement to do that. We don’t have to say ‘here’s our team, this is what they do’ – we’ll go out and buy the therapy, which is a recognised brand, if you like. It has a record. Investors will know or easily be able to find out what MST is about, what it does and who it is applicable to. We will provide information on that as well.
R151: How much work has it taken to get to this point?
ML: It has been a reasonable piece of work. We had a project team with a project manager, a couple of experts in social care, an accountant, a lawyer so we worked reasonably intensively for a couple of months if you add it all up. It took three months to really pull the thing together working with central government – they had a natural interest in the project which was very helpful.
R151: Moving on to another headline of your recent budget, how does the £20m rolling investment fund work?
ML: This is in our capital programme. We have worked with our district council partners for at least 18 months to look at infrastructure in Essex and the projects that we really need to support our communities and help local economies to grow, even in these difficult times.
We came up with a string of investment projects, prioritised them and we’ve said we are prepared to put in £20m over five years to help the projects get underway, but we would like it to be a rolling investment fund in that as these projects come to fruitition and deliver benefit we expect payback on our investment so that we can put the money into the next project.
The benefits are things like putting in a road or doing work around a railway station. The developer would bring money to the table which would come back to Essex to repay our investment and be used for the next thing. We’re trying to get things moving a little quicker by investing upfront and taking the payback down the line a little.
It’s a bit like TIF but whereas the benefits there come through business rates here they’re not necessarily rates, they could be Section 106 contributions and that sort of thing but it’s the same sort of thing.
The real interesting thing here is we have our Integrated County Strategy where the projects are gathered and it has helped us to focus with our Local Enterprise Partnership with Kent and East Sussex on a strategy which is a really good framework to focus our investment on.
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