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  1. Wealth
October 22, 2012

With Prison Plans, Chris Grayling Heralds Social Enterprise Revolution

By Spear's

By making social enterprises a larger part of how it expects services to be delivered, it is making exactly the right move for the next century

Good news this morning as I lazed in my bathtub at the Soho Hotel (read my review in the next Spear’s): from the sturdy pink radio in my suite’s bathroom came the voice of Justice secretary Chris Grayling talking about increasing the government’s use of payment by results for the rehabilitation of prisoners. This may sound dull, but is at the leading edge of a twenty-first century revolution.
In practical terms, this measure means that if non-governmental agencies can reduce recidivism, the government pays them – but less than it would cost if the criminals had gone back to crime, ie the public is safer, the social enterprise does good and makes money, investors in the enterprise get a return and the government saves money. Win-win-win-win.
The story of the Peterborough Social Impact Bond, where this was tried, is now well-worn. In fact, it has been one of the few examples and it is vital the government gets on with some new schemes, lest it seem like a one-off. The frequency with which its success is related has made its tale both iconic and somewhat desperate. (You can read about its progress here.)
Chris Grayling told Today that he was sufficiently ‘encouraged’ by the Peterborough project to let the scheme run nationwide. Mr Grayling explained his enthusiasm:
‘Payment-by-results is an approach we’ve brought to bear for the support for the long-term unemployed. It’s a principle we want to try and bring in to the criminal justice system, and it’s based around a very simple premise: you do what it takes to help stop somebody from reoffending; we’ll pay you when you’re successful.
‘And what that does is it enables us to capture the skills of the most experienced people out there, the most innovative people out there, people who’ve got new ideas about how to solve this problem.’
This is an excellent summary. Now, the government has not always got its outsourcing right (hello, G4S and A4E – hmm, perhaps it’s something in the alphanumerical name-sandwich), but by making social enterprises a larger part of how it expects services to be delivered, it is making exactly the right move for the next century.
As governments in the Western world are forced to retrench because of financial constraints, and as Eastern governments choose to expand what they offer their citizens without taking on the burden themselves, private enterprises will be a vital part of the future.
There are many questions to be asked about how the government writes proper contracts, including sufficient risk and reward for the social enterprise, and social enterprises need to be thoughtful businesses, rather than just avaricious capitalists, but if those things can be done well, we will see plenty of ambitious, successful and innovative firms proving that the private sector can play a vital role in the state.

Read more by Josh Spero

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