Social impact bonds: boldly going towards a Star Trek economy?

 

All this talk of space travel got me thinking about something I once read about ‘Star Trek economics’. In the film Star Trek: First Contact, Starship Enterprise captain Jean-Luc Picard says: ‘The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity.’

 

Star Trek creator Gene Roddenberry has envisaged a 24th century future where people’s basic needs such as food, healthcare and shelter have already been taken care of, leaving them free to behave in a selfless way. Money is redundant.

 

So are social impact bonds a sci fi creation? Are they the final frontier of financial instruments?

 

Well, they’re a significant innovation, but they’re not rocket science. Let’s take a look at them in a down-to-earth, 21st century context.

 

Using a healthcare example, imagine that public service commissioners agree to pay social investors to deliver the outcome ‘fewer people with type 2 diabetes’.

 

To launch the project, the investors would fund third sector providers of early interventions to prevent people developing type 2 diabetes. When the outcome is delivered, and fewer people in the population have type 2 diabetes, the commissioners will pay the investors. And as with the typical Vulcan greeting, people will ‘live long and prosper’.

 

If the deal is structured correctly, it will save the commissioners money because the fees paid to the investors will work out less than the cost of treating the type 2 diabetes sufferers who would have been walking the earth were it not for the early interventions.

 

Not only that, but the ultimate payment to investors will be made as the savings from having fewer diabetes sufferers are taking effect. It’s definitely futuristic.

 

Social impact bonds will boldly go where no financial instrument has gone before, resulting in a triple set of benefits:

 

• Getting investors involved in projects that contribute real social value.

• Giving third sector healthcare providers much-needed funding to do what they already do best.

• Allowing commissioners to fund the interventions that lead to our citizens benefiting from healthier and happier lives.

 

So, do social impact bonds take us a step closer to a Star Trek economy, where the acquisition of wealth is no longer so important?

 

In a way they do, because they are all about investing in the betterment of humanity. In the UK, they’re a much-needed innovation for funding the healthcare system, given the twin pressures of an ageing population (although we’re actually quite young compared with the Vulcans) and challenging economic constraints.

 

So far, so sci fi. But unlike in Roddenberry’s futuristic vision, investors in social impact bonds will still be looking for a financial return. They may have a social conscience, but they still want to increase their personal wealth through their investments.

 

Public service commissioners are also motivated by the financial bottom line. They need to know that the outcomes delivered will lead to savings in the future, without needing to time travel to see the benefits.

 

And charities and social enterprise providers will want to be paid a fair price for what they do, using good old 21st century money.

 

We’re not yet living in the 24th century, and money still matters, so we should welcome social impact bonds as a means to an end – a way to deal with some of the most pressing social and health issues of our time. In the words of Captain Picard, let’s ‘engage and make it so’.

 

Social impact bonds will allow us to move at something closer to warp speed and deliver positive results without the expensive and time-intensive structural changes in the healthcare system that we’ve seen in recent years.

 

In Star Trek IV: The Voyage Home, Spock travelled back in time to the 20th century. He observed: ‘They’re still using money,’ adding, ‘we need to get some.’