Public Safety Committee on June 10th, 2014

[Gordon Hogg]

It's a community contribution company. A community interest corporation is the English model. They have close to 5,000 in that.

So yes, we have passed the legislation. We've given it royal assent and it is in place. We don't have the flow-through tax credit yet.

[LaVar Payne, Conservative, Medicine Hat, AB]

In terms of the model that you now have in place, would you require a separate business for each application, as you have for the aboriginal friendship centres? Or does that fall under that particular model?

[Gordon Hogg]

The community contribution company is basically.... If you have a non-profit society that's providing services and you want to incorporate your service provider as a non-profit society, you can do that. Under our model you can also choose to incorporate as a community contribution company. You have two choices. With the non-profit side, you get a tax credit, or you get a tax writeoff if you invest in it and make a donation to a non-profit site. That does not happen with a community contribution company. It's intended to blend some of the business model with the service provider model, in that fashion.

How do we start using some of the principles of business that have made us successful in a lot of ways as a society, technologically, and in creating wealth? How do we use some of these principles in those organizations that have been really good at providing social programs, and balancing that? I keep asking myself, how do we take care of each other in this society? What are the things we do to take care of each other? What's the principle behind that? What am I doing to help take care of the people I work with?

Business has a wonderful way of providing money for a number of other social programs. What are the things societies can do in terms of that? What are the things we can all do in creating legislation or creating opportunity for those people who seem to have some significant challenges?

If I can just be a little bit tangential, not that I haven't been already, some of the studies being done now.... Clyde Hertzman and Fraser Mustard developed the early childhood educational development index in B.C., which has now gone international. They were looking at how prepared children at four and five were to enter school. The disparity across the province of British Columbia was incredible in terms of their preparedness.

Clyde, unfortunately, passed away in the last year, but he came to me once and said, “Gord, if you guys can spend only $1.5 billion a year, we can reduce all the future costs. Things will be way better.” I said, “That's great, Clyde. Can you prove that?” He said, “Absolutely.” I said, “Can you prove that to the benefit of those people who'd like to invest in it?” It became a little bit more difficult.

As I was saying, if you want to try to do that.... We don't have the money to do it, but if you're able to show us that and we can pay at the end of it, then that's great.

There's also the CRACOW instrument, which is now being developed by a number of criminologists. They're looking at four different cohorts. They're looking at the impact of being able to predict who is going to become a burden to society in one way or another. They're looking at the first cohort as conception, the whole prenatal period to birth. Then it's birth to five, five to twelve, and twelve to eighteen. They're looking at a number of variables within that.

In the last conversation I had with one of the lead authors of that, he said that they can predict with up to 90% predictability those people who will be needing a number of government services. They're able to predict that by age five.

If we're looking at macro interventions in terms of providing opportunities for some of these people to actually flourish, to have an opportunity like so many of the rest of us have had, then that seems to be a good place to be putting some of our investments over the long term.

[LaVar Payne, Conservative, Medicine Hat, AB]

Yes. I also find that you can sell shares in these things.

[Gordon Hogg]

That's right. Sorry, I wandered off. I'm ADD.

[LaVar Payne, Conservative, Medicine Hat, AB]

Dividends: you can give, what was it, 30% in dividends?

[Gordon Hogg]

Yes. That's under our orders in council, the regulations, we have allowed them to pay up to 30%. Yes.

[LaVar Payne, Conservative, Medicine Hat, AB]

That's quite amazing.

Another important piece is that if the unit winds up, then would whatever funds are left go back to the organization that was requiring the services?

[Gordon Hogg]

Yes. Whatever their incorporation as a community contribution, whatever their social good was, any of their assets will be required to go back to that social good. Our registrar of companies will make a determination as to how that will happen and where it will go.

[The Chair, Conservative, Daryl Kramp]

Thank you, Mr. Payne.

[LaVar Payne, Conservative, Medicine Hat, AB]

I had one really important question.

[The Chair, Conservative, Daryl Kramp]

You might have another opportunity, but right now we are going to Mr. Norlock.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you for coming today.

I keep going on the same theme. In our society I believe in innovation. I love incubators, because that's been the success story in many businesses.

I guess some of my questions.... I think I know the answers. If you could be succinct, we'll let you sink your teeth into something different.

Would I be correct in saying that you believe people should judge government's commitment to any program on how successful they are at addressing the program goals rather than by the amount of money they throw at it or percentage of increase?

[Gordon Hogg]

I think governments should be judged on impact. We've used outcome and goals as measures.

I just spent some time with Jonathan Lewis, who is a wonderful social innovator out of the States, and he funded a number of social ventures that allowed wells to be drilled in, I think, Kenya. They wanted these three wells drilled, and they did that. He said that was the outcome. They got their three wells, but they didn't understand the cultural nuances of that community and nobody used them. The impact would have been getting water to people, but when you put a contract together, they wanted the three wells, and they assumed that part of it.

I think that impact is the important measurement in that, and I think impact is important. Tied into that, I think the last poll I saw said that 70% of Canadians don't believe that we, as elected representatives, understand the issues that are most important to them. That I think has grown about 11% in the last five years. I think these innovations and these collaborative, coordinated, cooperative ventures with the community, with the business community, show us another way of being able to develop that relationship.

The Treasury Board in the United Kingdom ran a policy development model around some of that stuff. I think they found at the end that a small percentage didn't like it because they didn't get the outcome they wanted. The majority of people said they didn't know exactly what they wanted, but they understood why government did what they did. They understood how government worked in that sense. I think that was an important venture in that respect.

I have a submission that I've given to our chief of staff in Victoria, and I'd be happy to share some of that stuff with you as well at some point.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much.

I understand how impacts go. As an anecdotal aside, My Rotary Club partnered with a Rotary Club from Texas to help an indigenous group in Mexico, and it had a similar outcome. They drilled wells, but were using the wrong kinds of seeds. When we worked with the University of Mexico, we found that by using traditional seeds, we increased productivity. Some indigenous people there became nurses. Infant mortality went down, and their quality of life improved. I understand the difference in giving somebody something, and the impact....

As naive as it may sound, would I be correct in saying, knowing that this is in its infancy, if this current government, using the same amount of the money they have available for crime prevention, were to channel a portion of that to innovate, whether it be social impact bonds or social financing—in that sphere or in that range of things, it doesn't matter what type of program—would you recommend that we do that? Would you have some suggestions as to what organizations currently existing in Canada might help shepherd that through the maze of financial institutions? Some of them we may want to be wary of, I don't know, but I'm just throwing that out to you for some suggestions.

[The Chair, Conservative, Daryl Kramp]

Please give a brief response.

[Gordon Hogg]

First, yes, I would recommend that you look at being able to redirect some of your funds toward social impact bonds, social innovation. One of the ways to do that would be to look at having the colla-petition model, the BC Ideas model that we had, a request for proposals. There are lots of people out there. In Ontario you have MaRS, which has a lot of expertise in being able to look at that. We have some experts in British Columbia on the financial side, who look at layered financing and all kinds of models that are much more complex than I could ever grasp.

[The Chair, Conservative, Daryl Kramp]

That's fine.

Thank you very much, Mr. Norlock.

Now we'll go to Ms. James, please.

[Roxanne James, Conservative, Scarborough Centre, ON]

Thank you for coming to committee today.

This is going back to your opening remarks. You talked about why you, as the B.C. government, were moving into social finance and looking at it with regard to infrastructure development. You talked about mobilizing private capital for public good.

We've had a number of witnesses talk about the wide array of the public sector, corporations, community organizations, and so forth that are willing to do just that: do public good, and invest capital to make a difference in their communities. From your experience in B.C., have you also seen that to be the case, that there is widespread interest in this area from investors?

[Gordon Hogg]

Yes, there has been.

I've met with a number of stockbrokers who have an interest in this. Of course, one can always question the motivation with respect to the financial institutions, as some people have already. My experience has been that they are indeed interested in looking at having some social impact. They have a social conscience around that.

[Roxanne James, Conservative, Scarborough Centre, ON]

Is it because they have a personal vested interest in that particular community or that issue, or is it that they're looking for somewhere to get a return on investment?

[Gordon Hogg]

I don't know the answer in terms of that judgment, but if it is controlled, I don't much care which one it is. If there is a social good that comes out of it and it is managed in terms of the quality and the amount of return, then if there is a benefit that comes to society, I'm all for that.

[Roxanne James, Conservative, Scarborough Centre, ON]

You referenced the B.C. approach and doing a request for proposals. There has been some concern on this committee that under-represented areas, or areas where there may not be large corporations or organizations that have the capital to invest, might be left behind.

Is it true that a government, when they do their requests for proposals, can specify areas where proposals should be directed so there is some direction from the government as to where social finance models should be applied? Is that correct?

[Gordon Hogg]

Absolutely. Governments can put in whatever conditions they want.

With our BC Ideas, that was a concern that I had. But we had some proposals from Skidegate and Haida Gwaii, so there was some uptake and interest in very small communities around that.

[Roxanne James, Conservative, Scarborough Centre, ON]

It might have been in your opening remarks or maybe in answer to another question, that you mentioned there are five or six other provinces that have either looked into social impact bonds or have started to implement some of these through their programming.

Do you know offhand which provinces they are, and are they as far along...? It seems that B.C. has done a lot of work on this and has some solid success stories to talk about. Do you know which other provinces have also gone in this direction and would also have success stories to share?