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The business of social investment

We spend a lot on welfare. According to recent Treasury figures, of the $92.2 billion the Government spends, $50.5 billion flows into welfare, health and education. The thing is, this spending doesn’t necessarily translate into transformed lives. In what I’ve heard wryly described as “trickle-down social policy,” sometimes our most vulnerable don’t actually get the help they desperately need. 

This lack of results combined with a shortage of money has seen wider adoption of a concept traditionally associated with the business world: investment. We can’t afford to just spend more and hope; we must invest and see results.

The Ministry of Social Development has been using and promoting what it calls an “investment approach” for the last few years, based on a model usually used by insurance companies. The model calculates predicted costs for individuals over time, resulting in “greater attention where there is greater potential to make a significant difference.” This process informs the Government’s Better Public Service targets for reducing long-term welfare dependence and supporting vulnerable children.

Advocates in the social sector are also on the investment bandwagon, albeit in a slightly different way. The Office of the Children’s Commissioner (OCC) and the academics behind the recently-published book Child Poverty in New Zealand both refer to investing in our kids. The OCC’s most recent paper argues how investing more in our young and disadvantaged children will, in the long run: “address skilled labour shortages in the face of aging population trends, improve productivity and economic growth, and reduce expenditure on the costs of child poverty.”

Investing in this sense isn’t enough though; we need to innovate as well so there are transformative solutions to invest in. We have a Ministry with innovation in its name that focuses on R&D, but again this is limited to business. There is some light across the Pacific however, shining from the Obama administration’s Social Innovation Fund. The Fund gives money to philanthropic groups that will both match the government contribution and offer support to evaluate and grow social organisations that show potential for up-scaling their good work.

The current Government is dabbling in this area, funding an initiative promoting the “innovative use of social media technology to improve youth mental health and emotional wellbeing.” It is also trialing Social Impact Bonds, which Bill English described as “one new way to involve investors and private or not-for-profit organisations in improving social outcomes, while achieving value for taxpayers.” 

This is not to say there aren’t any risks with either of these ideas – they are fraught with them. But the fact is, we can’t afford to continue in a “she’ll be right” fashion hoping the dollars are indeed trickling down. The days of hulking bureaucracies delivering bulky one-size-fits-all solutions are over. As a recent OECD report says, “new investment approaches are needed for addressing social and economic challenges, including new models of public and private partnership which can fund, deliver and scale innovative solutions from the ground up.” 

Sounds like a good investment to me.

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