Public Safety Committee on May 15th, 2014

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

You said the programs didn't work. Did it have to do with the fact that companies didn't want to make an investment in that area or the fact that their investment didn't pay off?

[Siobhan Harty]

No. I would say that the government decided to follow suit and opted for the projects I mentioned, as opposed to the other types of projects. Nothing relating to seniors was undertaken, for example. No country has used a SIB to support that group. I don't know why. The isolation of seniors is something that could be explored, but no such project has been undertaken to date.

And that's the case for certain segments of the population. Why? It may be harder to measure outcomes in relation to those groups. That's a methodological consideration. Does the necessary data exist? The rationale may be that it might not be worth the trouble to try and save money in connection with programs that don't involve a lot of spending. Considerations of that nature may be at play.

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

You've studied what's being done internationally. I must tell you that, as far as I'm concerned, the process of selecting projects under the social finance model worries me a bit. It seems to me that the political agenda is being left in the hands of the private sector.

Is there not a risk of investors cherry-picking projects that seem to be more fruitful, thereby leaving a more marginalized part of the population out in the cold? Those people would have less access to social finance projects.

Isn't that a risk?

[Siobhan Harty]

As far as I know, governments are the ones who chose the sectors for the projects.

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

But what if no company wants to invest in those sectors?

[Siobhan Harty]

It's not companies involved, it's either the financial sector—

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

What happens if the financial sector decides it's not worthwhile to invest in that sector?

[Siobhan Harty]

So far, that hasn't been a problem.

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

Really? That's interesting.

I've heard a lot about the positive side of social finance, including what I read in the study you did and released in March 2013. I had a chance to read some of it over the past few weeks. And I didn't see any mention of drawbacks or negative impacts.

Did you identify any when you were doing the study?

[Siobhan Harty]

The projects haven't been completed yet. The first one, which was done in Peterborough, in the U.K., is nearing completion, and we are waiting for the results. All the rest are still ongoing. So we don't have any results. It could, of course, turn out to be a failure; we are dealing with social innovation. The government's desire to find innovative solutions to complex problems underlies the strategy behind this whole approach.

Innovative solutions in other sectors aren't always totally successful either. Some elements don't work and prove to be failures. That's the risk taken. Investors run the risk of losing their capital.

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

Thank you.

[The Chair, Conservative, Daryl Kramp]

Thank you very much.

Now to Mr. Richards, please, for seven minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you, Mr. Chair.

I appreciate your both being here today.

I listened to the exchange you had with the member across the way and there seemed to be a misunderstanding among the NDP. Your remarks were maybe misconstrued somewhat, I think, because there seemed to be the impression that somehow everything was going to be left to the private sector, which would not be interested in trying to help individuals. I think it is probably a really unfair view to take of the private sector, frankly, as well. On top of that, I certainly heard you indicate in your remarks that you consider this to be a complementary tool. You didn't think it would be intended to replace, completely, the current programming.

I wonder if you could you expand on that a bit. I think it would be best for the committee to hear a little more in that regard, if you could expand a bit on that and tell us about how you see this being a complementary tool, how you see this being a good addition, and why you think it would be a good addition to be able to help address social problems.

[Siobhan Harty]

Thanks.

No, the government has not signalled in any way that it intends to replace existing tools with this one. In fact, at this stage the government would only be interested in piloting some of this. We have done very little, to date. In my department, we have done only the one pilot that I mentioned in the area of literacy and essential skills. Other departments are considering this.

I would say that we're being very cautious about it, and that's because, on the one hand, some of our instruments work very well and there is absolutely no need to completely overhaul the toolkit. And I think this one, as I said in my remarks, is of interest when problems have resisted interventions to date. When there are complex challenges, we have not really been able to deal with the tales. We have been able to deal with, for instance, reducing poverty among seniors with real success in Canada.

We have maybe not been able to reduce poverty across all vulnerable populations. Is it because we don't have the right interventions? Is it that there is an innovation somewhere in the country that would allow us to think in different ways about addressing a complex social challenge? I think in those cases, where there's an innovation to address something that is kind of resisting normal interventions, that would be an area where we could think about it. As I said in my previous response, this is about trying to find more innovative solutions. And the government doesn't necessarily hold those innovations.

[Blake Richards, Conservative, Wild Rose, AB]

Sure, and I appreciate your clarifying that a little bit. I think it's a little unfortunate that there was this characterization made. I've known a lot of people out there, entrepreneurial folks, who have a lot to offer. They have creative minds and they're innovative. They care about others in society and they want to try to use their talents to be able to help them. It's unfortunate that the characterization was made, but I do appreciate your clarifying that and explaining exactly where you see things heading and how you see it being complementary.

You mentioned in your first response to me that there were pilot projects, and this wasn't the only area that was being considered to test this and to see how it would work in Canada. I wonder if you can maybe just give me a bit of a sense of that. In what other policy areas, other than social policy, could you see these types of social finance tools being used?

[Siobhan Harty]

One area that I think is being considered or looked at—and certainly we had responses in multiple areas from the call for concepts—is public health. Again, we can think about some very complex public health issues that maybe need more innovative solutions. We have examples of innovation sometimes being able to tackle those kinds of issues.

As well, there are areas related to citizenship and immigration, so our colleagues at Citizenship and Immigration Canada are looking at ways to finance different aspects of their work. Could they use models—not necessarily social impact bonds but other funding models, for instance—in immigrant integration and settlement?

There is already an innovation out there related to that, a microloan program for new Canadians who are seeking to get accreditation in the country but can't necessarily afford to take all the tests that are sometimes required to do that. They bring in an accreditation from their home country. There is already a program that falls within the realm of social finance that's doing that, so that's an example.

I think there is interest among some first nations at looking at the potential of social finance to help them develop certain parts of business on reserve, housing on reserve, so those are areas we're exploring.

[Blake Richards, Conservative, Wild Rose, AB]

Great, thank you.

How much time do I have?

[The Chair, Conservative, Daryl Kramp]

You have a minute and a half.

[Blake Richards, Conservative, Wild Rose, AB]

Okay, great, thank you. Just enough time for one more question, probably, and that's great.

I want to just get a sense as to what you might see as potential risks, both for the government and for the private, charitable, or not-for-profit organizations that might be involved in using social finance. What type of risks are there?

[Siobhan Harty]

In addition to what I said, or just to reiterate, there is always the risk of failure, so that has to be considered seriously when you're embarking on these kinds of projects.

In some of our work we don't seek to measure outcomes so rigorously. When you engage in social finance and impact investment, you have to be prepared to measure outcomes, so you're holding yourself to quite a high standard in terms of trying to determine whether you're going to be successful. But you're also trying very hard to show that the investment with taxpayers' dollars is trying to achieve something. You're trying to measure outcomes, so there is a risk that you might not attain an outcome, and that's why I said that the innovation comes in, and you have to be prepared sometimes to fail when you're doing innovation.

[Blake Richards, Conservative, Wild Rose, AB]

Sorry to interrupt, but if I'm not mistaken, I think the idea is that it really encourages that outcome because, in order for the program to work and for there to be a return, it is strongly encouraged by the fact that it is outcome based.

[Siobhan Harty]

Yes, it's outcome based, but you want to use approaches that are already working at the local level. I said that in my remarks. You're using approaches that are already working in some of your communities and you're asking if there is a way to scale this up and to do this in other communities.

You might have an innovative approach to dealing with homelessness in your community. What if you could take that across the country? It's proven in your community, but you want to scale it up.

[Blake Richards, Conservative, Wild Rose, AB]

Replicating something that's successful.

[Siobhan Harty]

Yes.

[The Chair, Conservative, Daryl Kramp]

Thank you, Mr. Richards. Your time is up.

Now, Mr. Easter, please.