Social Finance and Peterborough Prison
Peterborough Prison, a category B male prison in Cambridgeshire, England, became the site of a groundbreaking experiment in social finance. In 2010, it launched the world’s first Social Impact Bond (SIB) focused on reducing re-offending rates. The initiative, a collaboration between the Ministry of Justice, Social Finance Ltd, and various third-sector organizations, aimed to demonstrate that targeted interventions, funded by private investors, could deliver better social outcomes than traditional approaches.
The core problem addressed was the persistently high rate of re-offending among short-sentence prisoners. These individuals, often struggling with issues such as homelessness, substance abuse, and lack of employment skills, frequently cycle in and out of the criminal justice system. The SIB was designed to provide intensive support to approximately 3,000 prisoners serving sentences of less than 12 months, both during their time in prison and for a year after release.
The structure of the Peterborough SIB was innovative. Investors, primarily charitable foundations and high-net-worth individuals, provided upfront capital to fund a consortium of service providers, led by One Service. This consortium delivered a range of services, including mentoring, housing support, addiction treatment, and employment training. The objective was to address the complex and interconnected needs of offenders, giving them a better chance of successfully reintegrating into society.
The Ministry of Justice, acting as the outcome payer, agreed to repay investors only if the SIB achieved pre-defined targets for reducing re-offending. Specifically, the bond aimed to reduce re-offending by at least 7.5% compared to a historical baseline. An independent evaluator rigorously tracked re-offending rates using data from the Police National Computer. If the target was met or exceeded, investors would receive their initial investment back, plus a return. Conversely, if the target was not met, investors would lose some or all of their capital.
The initial results of the Peterborough SIB were mixed. The first cohort did not meet the target reduction in re-offending. However, subsequent cohorts showed more promising results. Ultimately, the SIB did achieve its overall target, demonstrating a statistically significant reduction in re-offending rates. This led to the Ministry of Justice repaying investors, proving the feasibility of the SIB model in principle.
The Peterborough SIB provided valuable lessons for the development of social finance. It highlighted the importance of robust data collection and evaluation, as well as the challenges of working with complex social issues. It also demonstrated the potential for private capital to be mobilized to address social problems, provided that clear outcomes are defined and rigorously measured. While the model isn’t a panacea, the Peterborough Prison SIB paved the way for the expansion of social impact bonds and other innovative financing mechanisms in the criminal justice sector and beyond, encouraging a shift towards outcome-based commissioning and preventative interventions.
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