Written By: mickysavage - Date published: 9:15 am, June 1st, 2015 - 92 comments

Categories: Abuse of power, accountability, capitalism, class war, health, john key, national, Politics, Public Private Partnerships, same old national - Tags:

This is the sort of thing that only a Merchant Banker would think was a good idea. The Government is planning to issue “Social Bonds” to corporations and individuals investing in social services with the expectation that market forces will produce a superior result.

One News has reported:

Private investors are about be given the opportunity to invest in and make money from the provision of social services. ONE News understands that this week the Government will announce plans to issue New Zealand’s first ever social bond for the provision of some mental health services. Social bonds, like financial market bonds, are essentially an I-O-U which pays interest. With a social bond the Government contracts out some social services work with set timelines and agreed performance targets attached to those services. A non-government organisation will then provide the services. It does so though using money put up by investors. The mechanism by which investors provide this money is through buying the social bonds that are issued. Investors could range from banks through to private individuals. If the agreed performance targets for the services are met, the Government will then pay back the investors their principal on the bond, and a percentage return.

No doubt the discussion will be dominated by claims that the programme will incentivise success and produce superior results and can’t people just think about the kids? And so without any evidence that such a programme has worked ever the Government will be committing our money to enriching investors rather than dealing with the actual problems.

This belief that the invisible hand of the market will always deliver verges on cultism. It will also ensure that existing levels of inequality will only get worse. Perhaps that is the real motivation.

Of course Serco’s running of Auckland Prisons will be offered up as an example of what can be achieved. The introduction of brand new state of the art facilities has seen prison conditions improve but they are measuring the wrong things in determining if Serco is succeeding. They should be measuring recidivism rates five years after people leave jail, rather than how many on site assaults have been prevented.

And Serco’s corporate behaviour leaves something to be desired. Reports of its having to pay back the UK Government after overcharging and botching hospital sterilisation work in Australia do not fill me with confidence.

The basic problem with the proposal is that a series of limited essentially artificial targets will be proposed and the funded organisations will do their best to meet these artificial targets rather than address the wellness of the people they are meant to help. Corporations are great at meeting three monthly KPIs, they are terrible at addressing humanity’s largest problems. And why should the investors be paid if the KPIs are met? The Government treats the social sector entirely differently and punishes rather than cajoles if targets are currently not met.

It makes you wonder if the Government’s letting Relationships Aotearoa fail is related. With a modicum of support Relationships Aotearoa could have survived and continued the good work it has achieved over many decades. Now with a fractured and fearful social services sector this sort of reform will be easier to achieve.

And if it does not work? Some investors get a bit of a hit to their portfolios and someone else’s life is wrecked.

Coming soon to your neighbourhood a McDonalds provider of mental health services where everyone’s fries will have just the right amount of salt and difficult customers will be moved on.

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