Social bonds, the future of public funding?

With coverage of Ken Clarke’s justice speech yesterday focussing on prison Vs community sentencing, there was one interesting political issue that was overlooked.

Despite various characters on the left and right getting huffy about sentencing, Clarke’s suggestion of using more community orders is actually pretty old hat.

The far more radical proposal was the increased use of ‘social impact bonds’ to raise funds to pay for offender rehabilitation.

This is where a private investor pays a sum to buy a bond. That money is then used to pay for a scheme designed to stop people re-offending.

When less people then re-offend, the Government saves money as a result (in not having to pay for courts and prisons etc). Some of the savings are then used to repay the private investor with interest.

So the private sector gets a profit, crime falls and yet the tax-payer doesn’t spend a penny – too good to be true? We’ll see.

Bonds are being explored by Clarke because there is little public money and because he thinks prisons are too expensive.

The thing is Nottingham North MP Graham Allen, a Labour member, has been calling for the use of these bonds to pay for policy to tackle deprivation for a long time.

While Allen thinks the bonds a good idea because of an instinct towards social policy, Clarke thinks they’re good because he’s economically pragmatic i.e. a Tory.

That the bonds can appeal to both Tory and Labour sentiment in that way is interesting enough in itself to make them worth looking at.