By: Sean Barrett, Head of the Origin Foundation
The Commonwealth Government currently spends $154 billion annually on social services. That is forecast to rise to $227 billion over the next decade. That is an extraordinary increase at a time of budget deficits.
Philanthropy, in its broadest definition, is estimated to contribute $11 billion a year towards solving social issues.
It is clear that with already eight out of ten income tax payers going to work every day to ensure that Commonwealth social services funding is in place there needs to be a different approach. Solutions to social challenges will have to include the current players: Government and philanthropy. But in addition there is a role for business.
This tripartite approach was the subject of much discussion at 'Philanthropy Meets Parliament', an event organised by Philanthropy Australia and held in Canberra. Remarkably, this was the first such forum.
Scott Morrison, the [former] Minister for Social Services was the most prominent politician present. From philanthropy there was the full gamut of venerable long-standing philanthropists such as the Vincent Fairfax Family Foundation, newer funders such as entrepreneur Craig Winkler, and corporate givers such as the AMP Foundation. Approximately 200 organisations were represented.
The most promising tool of a new tripartite approach is the social impact bond. This brings together those organisations delivering solutions to social issues with private investors who fund the work. If it is successful, the government pays the investors their capital and interest which is recouped from the savings to the state. There are variants of the scheme. Issues addressed include homelessness, recidivism, and unemployment.
Examples include Good Start which was salvaged from the ruins of ABC Learning and is now successfully providing hundreds of early childhood centres. It paid its investors a 12% return.
Minister Morrison quoted another example:
“The Benevolent Society is partnering with Westpac and the Commonwealth Bank to strengthen families and reduce the need for foster care. Social Ventures Australia raised $7 million from investors to support UnitingCare Children, Young People and Families to expand the existing New Parent and Infant Network programme commonly known as Newpin. This resulted in funding for four extra Newpin Centres.
The first results are encouraging; with reports suggesting that 66 children have been returned to their families from foster care. A further 35 children have been kept out of out of home care altogether. As a result of the program’s above average restoration rate, investors have received an interest rate of 8.9 per cent – that’s a good deal for the first year of the bond.
The program will be expanded with the government’s savings estimated to be in the order of $80 million. I think we can all agree that this sort of return is a very attractive investment option. But the true value of such success cannot be measured in dollars alone.”
Joseph Skrzynski, a philanthropist, member of Philanthropy Australia’s Council, and better known in the business world as a founder of CHAMP Private Equity, saw the opportunity for collaborative funding – which could involve co-investment or co-funding approaches involving government and philanthropic funding. Even if the Commonwealth Government put in a fraction of one per cent of the increased social services budget towards such collaborative approaches there would be $300 million available for investment alongside philanthropy.
It is clear that the approaches being discussed were not just about bringing more business funders to the table but changing the way Government and philanthropy give and use commercial concepts and measures to improve results and social outcomes. The future cannot be about giving more, it has to be about giving smarter if there is to be systemic change to some of Australia’s social problems.
Sep. 16, 2015
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