Bank to make a killing by cutting crime

AP | August 04, 2012

GOLDMAN Sachs will invest almost $US10 million ($9.5m) in a New York City jail program that will allow the investment firm to profit if it can reduce recidivism rates.

The move makes New York the first US city to test "social impact bonds" that enlist private entities to help save governments money over the long term.

Inmates aged 16 to 18 will receive education, training and counselling intended to reduce the likelihood of reoffending after their release.

"New York City is continually seeking innovative new ways to tackle the most entrenched problems, and helping young people who land in jail stay out of trouble when they return home is one of the most difficult - and important - challenges we face," Mayor Michael Bloomberg said.

"As the first city in the nation to launch a social impact bond, we are taking our efforts to new levels and we are eager to see the outcome of this initiative."

City officials said Goldman would provide a $US9.6m loan to pay for the program at the Rikers Island jail complex.

If recidivism drops by 10 per cent, the firm will get back the $US9.6m. If it drops even more, Goldman could make as much as $US2.1m in profit. If recidivism doesn't drop by at least 10 per cent, Goldman will lose as much as $US2.4m.

Nearly half of the adolescents who leave city jails return within one year. Social impact bonds were first used in Britain and are being explored in Australia and elsewhere in the US.

NSW to run 'social impact bond' pilot

RN Breakfast | 6 September 2011

The NSW Government will hand down its first budget today - describing it as 'deliberately ambitious'. The government will launch a pilot tender process dubbed 'social benefit bonds' where private investors are encouraged to fund social programs such as reducing demand for foster care and lowering re-offending rates among former prisoners.

Listen to Fran Kelly's interview with Peter Shergold, Chancellor of the University of Western Sydney and professorial chair at the Centre for Social Impact at the University of NSW.

Key probation services to be put out to tender

Alan Travis | The Guardian | 12 July 2011

Core work, including supervising offenders and writing pre-sentence reports, to be taken out of the public sector.

Core probation services, including the supervision of criminals, are to be put out to competition, in the most arresting example yet of the impact of the "big society" drive on the criminal justice system.

The 35 chief officers of probation have been told they need to examine the "potential for core probation services" to be put up for competition.

Michael Spurr, the chief executive of the National Offender Management Service, has written to chief probation officers telling them: "We intend to examine a range of possible options for service improvements and different models of delivering offender services within the community.

"The aim is to create a long-term direction for probation which is consistent with the government's key objective for reform."

He said it was hoped the competition process would also ensure that those probation functions remaining in the public sector were delivered with clear benefits in terms of costs, efficiency, quality and risk management.

It is not thought that entire probation areas would be turned over to the private or voluntary sector.

It is, however, highly likely that chunks of key probation work – such as supervising offenders in the community and prisoners on release, and writing pre-sentence reports for the courts, including recommendations of what should happen on conviction – will be taken out of the public sector.

So far, the electronic tagging of offenders and the management of bail hostels and other probation support services have been put out to tender, but core probation services have been left untouched.

The Community Justice Partnership – which includes the charities Working Links and Nacro, and the private security company Sodexo Justice Services – immediately said it would be bidding for some of the work.

"This is unprecedented in the justice sector and may be the shape of things to come, as private and charitable bodies come together to provide the scope and scale to successfully deliver end-to-end services in large geographical areas," said Debbie Ryan of Working Links, which works with the long-term unemployed.

Harry Fletcher of Napo, the probation union, said: "Probation services do not lend themselves to the normal laws of supply and demand, it is unclear who the customer is. The government has little if any understanding of how complex work with offenders is and how demanding supervision can be," he said.

"Privatisation so far has been a disaster. Cleaning and maintenance of probation premises was put out to tender several years ago and has hardly been a success story. The privatisation of bail beds was so poor that the contract had to be taken away."

He predicted that selling off the work to the lowest bidder for profit would not raise standards. "Indeed the reverse is the case. The quality of the work will fall and public protection will be compromised," he said.

Boris Johnson calls for end to 'soft justice'

Hélène Mulholland | The Guardian | 20 June 2011

London mayor attacks Ken Clarke's proposals to offer reduced jail terms to offenders who submit early guilty pleas

Boris Johnson, the Conservative London mayor, has attacked justice secretary Kenneth Clarke's plans to offer shorter sentences to criminals, insisting that rehabilitation should take place behind bars.

In an article in Monday's Sun newspaper, Johnson also called on local authorities to introduce a "payment by results" scheme which would see agencies paid to keep former offenders "on the straight and narrow" after they leave jail.

Johnson, who has made cutting crime in the capital a cornerstone of his mayoralty, waded in as David Cameron and Clarke consider the future of a proposal to halve sentences for most offenders who plead guilty at the first opportunity.

"Soft is the perfect way to enjoy French cheese but not how we should approach punishing criminals," Johnson wrote: "It's time to stop offering shorter sentences and get-out clauses".

Clarke was forced to drop paedophiles and rapists from his sentencingplans following a public backlash earlier this month.

He is expected exclude other categories of serious crime but is keen to retain the discount offer as part of his overall sentencing package to stabilise the prison population, which has reached a record 85,000 in England and Wales.

While Downing Street has made clear that Cameron would like to see the whole sentencing proposal dropped, tearing the heart out of Clarke's plans.

NSW premier announces social bonds plan

From SMH, 6 March 2011 (AAP):

NSW Premier Kristina Keneally says her government will invest $25 million in social bonds, in an investment pilot to pay for non-government early intervention programs, if re-elected.

Speaking to reporters in Newcastle on the eve of a three-day bus tour of the Hunter, Ms Keneally said the government would chip in $25 million to provide confidence to investors in the scheme, inspired by a similar UK bond.

Under the Labor pledge, which she says would be an Australia-first program, $10 million would go to preventative programs that help keep young people out of juvenile detention.

Another $10 million would go to help families at risk, while $5 million has already been allocated to the Department of Ageing, Disability and Home Care to develop bonds for disability services.

"The government will kick off with $25 million, and we'll do that, one, to provide confidence to investors that this is a program that will work. We'll have our own skin in the game," she told reporters in Newcastle on Sunday night.

"And also to provide that seed funding."

The bonds are not financial instruments like those seen in the traditional bond market, but allow private investors to invest in non-government community service programs.

If the services meet agreed targets and deliver public sector savings - making a measurable social difference - then investors would receive a return on their investment.

"Social Impact Bonds increase the amount of money available to governments to invest in early intervention without having to cut services they are already delivering," Ms Keneally said.

"Social Impact Bonds will complement, not replace, government support for community services."

The Potential of Social Impact Bonds

Dr Peter Shergold, the CEO of the Centre for Social Impact, discusses the idea of Social Impact Bonds with their developer, Sir Ronald Cohen, director of Social Finance Ltd, a social investment bank in London, here.

Put simply, a social impact bond allows the private sector to invest in areas of traditionally government-funded service delivery, and receive scaled returns, paid by the government, upon target social outcomes being achieved.  These returns are funded by the savings to government achieved by the improved social outcomes, for example, a reduction in the re-offending rate of a group of prisoners, which reduces future public expense on police, courts and prisons.

To find out more about Social Impact Bonds, see a paper by Social Finance entitled "Towards a New Social Economy"