In this Clinks Guest Blog, we hear from Christine Chang at Big Society Capital who has just published a short paper reflecting on how social investment could be used to support organisations in the UK working in the Criminal Justice System and with the people it affects.

With rising prison populations, stubborn reoffending rates and widespread cuts in funding for criminal justice services, the language of ‘crisis’ is never far away. Finance for services has traditionally come from contracts and grants, but as the criminal justice landscape changes, could social investment be a useful tool for charities and social enterprises working in this area?

Our latest paper reflects on this, drawing on existing research and conversations with people who have spent many more years than us working in the sector. The output of our explorations is to highlight opportunities for social investment and specifically to outline Big Society Capital’s three priorities in the short to medium term in this area:

Proven, scalable, high capital, high impact opportunities:

Property is an area where there is a strong alignment of its potential for impact and the possibility to create revenue streams with an investment ultimately secured by an asset. For example, there is a lack of stable housing for those leaving custody which often prevents them breaking the cycle of offending; women-specific centres to address the particular and different needs of women released from custody are also crucial; and within the youth justice system, provision of secure children’s homes and secure training centres could present an opportunity for cost savings through early intervention and prevention. The Real Lettings Property Fund, developed with homelessness charity St Mungo’s Broadway, is one example of where social investment is addressing this issue, through supporting homeless people, including ex-offenders, to rent, maintain their tenancy and find a job. The model uses social investment to buy the initial properties.

There are also a growing number of sustainable business models that target employment of ex-prisoners, or through delivering services contracted by government. Examples of this include: St Giles Trust, which employ ex-prisoners as peer mentors for those on their programmes, benefitting both the mentors and the mentees; Blue Sky Development, a social enterprise which only employs ex-offenders; and Bristol Together CIC, which aim to create meaningful full-time employment for people who have been in prison. These models allow a stable platform of employment from which to break the cycle of offending, and have used repayable finance from social investors to scale up their businesses.

Enabling social investment to play a role in central and local government contracting:

Within a changing procurement and funding landscape there is a need for Big Society Capital to work with providers of social investment and policy makers to ensure charities and social enterprises can access the appropriate forms of capital to support their continuing delivery needs. This could be as part of large procurement processes (sometimes with payment by results elements as is the case in Transforming Rehabilitation (TR)). For example Beyond Youth was a Big Ventures Challenge winner and raised social investment in the form of a loan from CAF Venturesome to help develop the infrastructure and build the capacity the organisation needed to grow. Beyond Youth has launched an ambitious social franchising model to scale Chance 2 Change (C2C). The recent TR contract results will give Beyond Youth a platform as sub-contractors to roll C2C out to many more people who can benefit from it and simultaneously help the organisation achieve financial sustainability.

Supporting innovation and early intervention through outcomes-based financing:

To-date the main way that social investment has engaged with the criminal justice sector organisations has been through models that target early intervention. Often these take the form of payment by results-based contracts, for example in social impact bonds (SIBs).

The best known example is the One Service Peterborough Social Impact Bond, which was set up by Social Finance, combining the expertise of delivery organisations including St Giles Trust, Sova, Ormiston Families, YMCA and Mind to work with short-term male prisoners. Social investors provided the up-front capital to invest in service delivery, and investors are only paid back if services achieve certain levels in the reduction in reoffending. The charities delivering the services are protected from payment by results risk.

Investing upfront via SIB structures to enable services to be delivered to beneficiaries can have additional benefits for commissioners and society more broadly. This might include giving rise to an evidence base to tie interventions with (if successful), proven reductions in reoffending, serving to expand the pool of services from which commissioners can draw reliably in the future.

At Big Society Capital, we’re really keen that this paper should be seen as a tool to begin conversations with organisations already working within the Criminal Justice System, or with the people that it affects.  If you have taken on social investment, have considered taking it on, or are currently considering it – or if you just have any comments on the areas we’ve identified as opportunities for social investment, we’d like to hear from you.

Download ‘Social Investment Insights Series - January, 2015’ here

Christine Chang can be reached at cchang@bigsocietycapital.com