The government’s decision to adopt social impact bonds (SIBs) is an opportunity to make welfare work better for everyone. Smarter social spending, community-led innovation, and improved outcomes for vulnerable people are among the promises of this policy tool.

SIBs are outcome-based contracts that link government funding to independently verified results. They bring together government, charities, and investors to deliver measurable change—shifting the focus from services delivered to lives changed.

Betting on Better: The promise of social impact bonds examines how this model can help tackle persistent social challenges by aligning incentives, encouraging innovation, and reducing future liabilities for taxpayers.

Why this matters

New Zealand faces entrenched social challenges: long-term welfare dependency, youth offending, and intergenerational disadvantage. Traditional welfare approaches have struggled to shift the dial on perennial issues or demonstrate clear impact.

SIBs offer a different way forward. By paying for outcomes rather than service delivery, they:

• give charities and iwi the freedom to innovate
• bring innovation to social service provision
• use data to track what works and scale it
• protect taxpayers by paying only for verified results

Sir Bill English describes the paper as an important contribution to the social policy debate. “The current social delivery system has reached its limit,” he says. Betting on Better offers “a hopeful path of innovation, learning, and real accountability for changing lives.”

Key findings from the paper

With the right framework, social impact bonds can deliver meaningful change for people by:

• empowering local providers who know their communities
• enabling new, targeted interventions
• aligning incentives around long-term outcomes
• leveraging private capital to scale promising approaches

A recently completed trial by Genesis Youth Trust—the first of its kind in New Zealand—shows the value of this model. It reduced youth reoffending by 30% and delivered an estimated $142 million in social benefits, returning around $9 for every $1 invested.

Our recommendations

To give social impact bonds the best chance of success, Betting on Better recommends:

• Keep all financial risk with investors. Government underwriting weakens the discipline, innovation, and accountability that make SIBs effective.
• Evaluate SIBs as a portfolio, not project by project. Evaluations should reflect overall performance rather than individual outcomes.
• Create a pathway for secondary bond market trading. This would help investors manage risk and strengthen market signals.
• Ensure ethical and political debate remains central to policymaking. SIBs are not a replacement for democratic deliberation about social service provision.  
• Integrate Social Investment Agency (SIA) functions into existing core agencies. Avoid unnecessary agency proliferation by locating SIA’s capabilities within the Ministry of Social Development, Treasury, and Stats NZ.

Social impact bonds are not a silver bullet, but they offer a significant opportunity for community providers to scale programmes that work and deliver lasting change.

Read the paper to see how social impact bonds can deliver better outcomes.