In the neo-liberal laboratory: Birmingham’s Children in care and Social Impact Bonds


While the options of the Victorian workhouse of making money from destitute children, from picking oakum  to selling orphan’s into apprenticeship, are not currently open to Local Councils, other and more ingenious ways of making money from 21st century vulnerable young people are in the making.

The Workhouses have closed but the cost of the ‘poor’ was and remains a political obsession, with ‘troubled families’ and ‘looked after’ children being increasingly seen as a particularly costly burden to the Council tax payer in these ‘times of austerity’.

The explicit intention of the Government’s Troubled Families Programme is to reduce the high costs these families place on the public sector each year. ‘The government is committed to working with local authorities and their partners to help 120,000 troubled families in England turn their lives around by 2015. We want to ensure the children in these families have the chance of a better life, and at the same time bring down the cost to the taxpayer.’(1)

Birmingham Council is piloting a payment by results (PbR) scheme for children entering care under the Governments Troubled Families programme, with the dual aims of cutting care costs and trialling the financing of privately provided services through Social Impact Bonds (SIBs). 9 other local authorities are involved in this national pilot. The procurement for the payment by results contract opened in the New Year with tendering due to start at the end of March.

Birmingham’s Payment by Results scheme is to be focused on the most ‘costly’ group of young people, children in care. By a recent count there were 1,937 looked after children in Birmingham. (2)
Throughout the country Local Authorities view a reduction in the number of children in their care as the key means to significantly reduce and cut their social care budgets. The previous Children’s Minister cited that there were ‘five thousand children and young people in residential care, costing £1 billion a year. This works out at an average of £200,000 per child per year.’ (3)

The aims of the Birmingham scheme are likewise to reduce the costs of children in care:

The Children in Care [CiC] Placement Budget at £71.3M is a substantial part of the budget – and as part of the Council’s budget savings plan a £6.72M saving is to be realised by maintaining control of the size of the CiC population and changing the profile of placement so that more young people are in foster care which will promote better or equal outcomes at lower cost. (4)

There are a range of opportunities for private companies to tender for, including recruiting to the pool of internal foster carers, to interventions to speed up the throughput  of some young people to get them out of care, and to provide to support children on the edge of care within their families. This initiative will potentially strengthen the already significant role that the private sector plays in the provision of residential and foster care placements to the Council.

What is new is that Birmingham’s children in care are also to be subject of an experiment in the financialisation of public services. A key component to this payment by results pilot scheme is that it is linked to finance through social impact bonds. Companies tendering should be able to access investment through SIBs.

So what are Social Impact Bonds?

‘SIBs are new funding mechanisms which were designed to address the gap in ‘working capital’ that may have prevented providers from delivering or commissioning preventative services. Most SIBs work in the following way: Investors buy bonds or other financial products in preventive programmes and the money is used to fund service delivery up front. If the provider delivering the service achieves the agreed outcomes then the bond issuer (usually a government department) repays the bond money to the investors, with interest. An intermediary will usually be in place to link commissioner, providers and investors.’ (5)

Much as Private Finance Initiatives funded by private capital, were used to re-build much of the public sector infra-structure under New Labour, this Government is exploring the means to use private capital to fund investment in social policy initiatives in the context of massive cuts in social care, Social Impact Bonds are one such initiative. Here is an evaluation of PbR by NSPCC which enthusiastically embraces the potential of SIBs:

SIBs and OBCs [Outcome-Based Contracts] therefore have the potential to provide much-needed resources for the delivery of early intervention programmes. The cost of the programmes need only be found if and when the outcomes and related cost-savings have been achieved, thus shifting risk from Government onto investors. (6)

Deploying Payments by Results funded by SIB is experimental and unproven in Children’s social care.  The success or otherwise Birmingham’s pilot will be significant for any future roll out of this approach.

Payment by results schemes are being pushed by Government Ministers across the public sector but they have a lamentable track record and limited evidence base.   The Public Affairs Committee found that Private companies providing payment by results placement’s under the Work Programme were ‘creaming and parking’ the unemployed. (7)

As a methodology of providing public services a key criticism is that they provide opportunities to Private companies  ‘game the system’,  that they reward ‘ organisations for producing data about targets; it rewards organisations for the fictions their staff are able to invent about what they have achieved; it pays people for porkies.’ (8)

While we can argue about how the outcomes for children in care are to be measured in the context of a payment by results scheme, our fundamental objection must be to oppose this further opening of the public sector and of the needs of vulnerable children to opportunities for private profit. We must also ideologically object to the definition of vulnerable young people as a costly burden on the public purse.

Public policy is being increasingly perverted and politically driven by ‘austerity’ rather than by advancing the overriding objective of promoting the welfare of all our children.



1. Taken from webpage of GOV.UK website

2. p 5. Children in Care, Payment by Results & Social Finance. Market Event  1st February 2013. Birmingham City Council

3. quoted at p30  The Shadow State – A report about outsourcing public services by Social Enterprise UK


5. p 2 NSPCC strategy unit briefing Payment by results: opportunities and challenges for improving outcomes for children

6.  ibid

7. The Third Sector online.  22nd February 2013. Public Accounts Committee calls on the government to tackle ‘creaming and parking’

8. The Guardian. 1st February 2013.  Payment by results – a ‘dangerous idiocy’ that makes staff tell lies by Toby Lowe

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