Public Safety Committee on June 5th, 2014

[Adam Jagelewski]

Somebody needs to. We have a very small team. We're a burgeoning group trying to figure out how to make this work in the Canadian context. I think, increasingly, there are going to be those types of organizations that are patching together the organizations like you're describing, like I'm describing. That's our intent as a centre, to be focused on those types of partnerships.

[The Chair, Conservative, Daryl Kramp]

Thank you, Mr. Rousseau.

Mr. Maguire, please, you have seven minutes.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thank you, Mr. Chairman.

Thank you for your presentation. You've given us a really good background in the whole area of the impact bonds and fighting crime with these new programs.

You talked about the new forms of partnerships. We've also heard there are concrete metrics for success. I wonder if you can outline them, through the benchmarks you've had, and expand on them. Can you comment on the need and the value of actually providing evidence for the programming in these areas, programming that would show the outcomes as being successful and preventing crimes?

[Sarah Doyle]

The need for the evidence I think is clear. At the moment, governments are spending a lot of money through grants and contributions programs, and typically, I think, the evaluations are tracking short-term outputs, such as how many people came through the door, how many people stayed throughout the duration of the program, how many desks you bought, and that kind of thing.

Part of the move towards social finance and social impact bonds is also a move towards measuring outcomes that tend to be longer-term outcomes and essentially the things governments and people care about. I would say that we haven't been doing enough of that. Part of the value of these tools is that they provoke a renewed focus on tracking and measuring outcomes. I think that can cause really important feedback loops in terms of our learning about what works. Once we use these tools, we can look at what happened at the end, and say, okay, this is a program that should be scaled up or continued in the future. There's a lot of value to that.

In terms of how we go about measuring these outcomes, I think it's really going to depend on the particular challenge and the particular intervention at hand. For a social impact bond, for example, you're ideally going to want to look for an outcome that is binary, that either did happen or didn't happen, given that a payment is going to hinge on that outcome. That's not necessarily something that you can do in every case.

Certainly there are challenges with measurement, but there are also an increasing number of organizations globally and within Canada that are developing different types of metrics for measuring the social impact of social services and programs, and for measuring the social impact of enterprises in this space.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thank you.

I agree with Mr. Norlock's comments in regard to the outcomes. You talked about three areas: diabetes, hypertension, and homeless groups as well. There are others. Another outcome is that you impact people's lives. I mean, they come out of crime. This is a part of the goal, obviously, to get them back on the street and get them back working. I think that's one of the biggest outcomes that we can possibly push for in this.

Ms. Doyle, you mentioned mental health just a minute ago in your comments in answer to another question. We have many scenarios here. I'm wondering if you could expand on how we could see progress made through these kinds of programs with those in perhaps mental health areas.

[Sarah Doyle]

I can start, and then I'll pass it over to Adam.

A study that I'm sure you're all familiar with is the At Home/Chez Soi study, which looked at housing and homelessness but also had a focus on mental health issues. That's something we've been looking at in some detail in the context of a social impact bond feasibility study.

Now, I think an intervention in that area is not overtly about crime prevention, but if you tackle some of these problems at that inception point, if you will, the impacts clearly will be much greater than if you wait for the crime to happen and then start worrying about it.

I think that's one area where there's real potential. The evidence that came out of the At Home/Chez Soi study was really strong. It provided us with enough data to start looking at the benefits of the intervention in terms of its impact on the people involved and the communities they live in, and also the cost savings to government from those types of interventions.

We're seeing that there is certainly room for a social impact bond to be considered in that space. I think that would have a lot of really positive impacts, including in the reduction of crime, but also in the areas of health and labour force attachment, for instance.

Adam could speak to that in more detail.

[Adam Jagelewski]

I think that was great, Sarah.

Those were the three areas where it could have implications: health and justice, as well as employment down the road.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thank you.

One of the areas that I think possibly has one of the most impacted groups in this whole social finance area we're looking at could be aboriginals in Canada. I wonder if you could comment on the potential capital this could unleash for the at-risk youth in that area, and perhaps in that whole community, and how it may be extremely beneficial to our aboriginal community.

[Adam Jagelewski]

In a previous life I did some work on aboriginals. I think there's a real opportunity to focus on real outcomes in this area. I would love to do more studies on how we can channel new sources of capital and how we can align interest among different parties to improve outcomes for aboriginals.

We know that aboriginal children are overrepresented in care. We know we can improve health issues and that might apply to aboriginals. We also know that women are overrepresented in the criminal justice system. These are all areas that have very significant costs associated with them and have very significant implications from a social standpoint in those individuals' lives. It's an area where I believe further exploration is required.

On your question in terms of how much investment this could unlock, I wouldn't be able to provide a figure, but I can tell you that in our conversations with investors, they are increasingly passionate about the space and would like to find ways to contribute their financial acumen as well as some of their business acumen to solve some of these issues.

[The Chair, Conservative, Daryl Kramp]

Thank you, Mr. Maguire. Thank you to our guests.

Now we'll move to Mr. Easter, please.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Welcome, folks.

Mr. Chair, if Mr. Norlock is considered a lefty, I'm worried about where some of the rest of us are on the scale.

[The Chair, Conservative, Daryl Kramp]

The only response the chair would give at this point is this. A number of people around the table are grey-haired. A number have no hair. In many cases, that's deemed to be “sage”. I think our guests here today are of a different generation and are dispelling that myth quite clearly.

You still have the floor, Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

I certainly will say that I really like your enthusiasm. I think it provokes ideas of where we could go with some of these new concepts.

I think you have had no experience with social impact bonds as it relates to crime prevention, but a lot of experience, from what I gather, as it relates to other fields of social finance.

Sarah, you said we have to start with the problem and find the tool. Where do you see that level being? Is it perhaps related to the prison system itself? Is it getting to prevention of crime with young people?

[Sarah Doyle]

I think crime prevention and reducing recidivism rates are clearly the places to start. That's not narrowing it down all that much. The social impact bond or the social finance tool is applicable in that relatively narrow range of interventions that focus on prevention.

We're not talking about an overhaul of core service delivery. We're talking about the places where governments intervene to prevent negative outcomes. These are the places these tools could be applicable.

I think one of the ways we could make this tool available in the tool box is through an outcomes payment fund. I don't know if you're familiar with the Department for Work and Pensions innovation fund in the United Kingdom. Essentially they established the priorities they had as a government and the prices they were willing to pay for these outcomes, what these problems were currently costing them, and what they were willing to pay for them. They had a fund set up that would pay on the basis of those outcomes being achieved, and they let the market respond with solutions.

I think that's one really interesting way to find a good match between the tool and the problem.

[Wayne Easter, Liberal, Malpeque, PE]

I guess where I'm going on this is that the focus in the previous two presentations, and many others we've had, seemed to be on reducing recidivism, but I really think where we have to be at is reducing crime in the first place. If you look at the cost of having someone in prison, to say nothing of the damage that was done to put him or her there, and if you look at the cost within the prison system including from the point of view of lost productivity in the economy, then preventing crime in the first place is the best way to go.

Do you see areas where social finance would be important in that area? We talked earlier with the other group about some of the early learning programs, which we did have in place actually with a signed agreement in 1996 for early learning that got tossed out. Do you see those areas as important places to go, using social financing to get there?

[Adam Jagelewski]

I would just echo Sarah's statements about how governments can increasingly look at a range of different tools to deploy. Increasingly there is going to be a need to have grant or philanthropic money being used to fund innovative programs, and that may be where you would like to focus on early-age crime prevention or aggressive behaviour programs.

There might be a social enterprise that's out there working on an interesting technology. I don't know what that technology is right now, but there might be somebody out there designing some technology that would help in that regard. That might be a role for an investment opportunity.

There is the outcomes fund that Sarah described, and we're happy to provide more information on that.

What I would suggest is not to get too carried away. There are interventions and programs out there that already exist off which we could build. One program that I'm aware of, which I know is funded by NCPC, is the SNAP program for early childhood detection of aggressive behaviour. The focus on tackling the root cause, tackling it early, and supporting programs that do that, is a very thoughtful way to approach what you're calling prevention of crime, rather than treating the remedial.

[Wayne Easter, Liberal, Malpeque, PE]

In the areas where you have experience in social financing with regard to diabetes, hypertension, or whatever, can you explain how that process works in that area? We may be able to apply it to other areas, but give us the concept of how that works in those two areas.

[Adam Jagelewski]

Sure. Really, there are probably two current ways that people can go about developing a social impact bond or some sort of social finance arrangement. There could be what we call the top-down approach where you know that the SNAP program works, but you may not have the money that's required to scale that program up across the country so you're looking for private investment to come in and do that. You could go sole-source RFP to them and have them describe how they would scale this out. You would have either SNAP having the capacity or you would have an intermediary organization working with them to find that investment, to negotiate what the outcomes look like, to raise the capital to do that scale, or it can be more of a bottom-up approach.

You could have an organization that is looking to diversity their revenue sources approach an intermediary organization to say, we know we're achieving x outcome and we would like to find a way to generate more revenue to do this, and you analyze the costs and benefits to government and have the proposal explain what the costs and benefits are to government. Either way, you're going to have to come up with an outcome price and a way to pay for that outcome through some sort of mechanism.

[The Chair, Conservative, Daryl Kramp]

Thank you very much, Mr. Jagelewski.

Now we go to Madam Doré Lefebvre.

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

Thank you very much, Mr. Chair.

Ms. Doyle and Mr. Jagelewski, thank you for being here today.

I have a question for you that I ask almost every witness who testifies before the committee.

There is something that comes up often in the presentations on social finance by the various witnesses. Most people think that we can use social finance in some places, but that it is better not to use it in others.

Do you think social finance can be used in all government programs? Are there programs in which we should not use social finance? And are there others where we really should use it?

[Sarah Doyle]

As I mentioned earlier, I think the most useful thing to look at, in terms of issues that would respond well to a social finance tool, is prevention. I wouldn't suggest you could turn the running of a hospital over to a social finance type of tool. There may be people who think you could, but I wouldn't propose that.

I would say that prevention is really where this stuff has the most potential because the focus is on long-term outcomes and that's what prevention programs are interested in affecting.

I think that in the work of probably almost every government department there is some aspect related to prevention. I don't think any policy area is off the table. But I think some people have raised concerns about social finance being a code word for “privatization” or another way of covering reduction in overall social expenditure on the part of government. I don't think those are fair criticisms of the tool. Whether they're also in the air at the same time you're talking about the tools is another story, I suppose.

I think the idea behind social finance is not that government takes a step back from social service delivery but that increasingly there are multi-sectoral partnerships that help to deliver better value for government money, and that through a focus on outcomes, everybody in that scenario wins. You have a better chance of achieving outcomes that matter to the people being served, which, ultimately, government and the public dollar are seeking to pay for.

I don't know if that answers your question, but I think I would take core service delivery off the table. I don't think this is going to replace welfare cheques. I don't think it's going to replace hospitals or schools, but it could help to keep kids in school and lower dropout rates. It won't replace the running of prisons, but it could help to reduce the number of people who end up in prison. So I think it's really that prevention area that we need to focus on when we're looking at these tools.

[Adam Jagelewski]

I think because the model is so new, there are a lot of ideas floating around, whether within governments or in the social sector generally.

Ideas are great, but I think at some point we have to get to the point where we can prove or disprove the model's utility. For us, we're going through these feasibility studies and if we get to the point where the feasibility study shows that it's not going to work, we're actually not going to be that disappointed about it, because we're going to be able to share with the sector that this model does not work in issue area X. So we can shorten that list or increase that list depending on that type of study.

Sarah spoke to the government side of things, but we have to remember there is another stakeholder in a social impact bond, and that is the investor. It's of importance or it's interesting to them to figure out where they would like to invest their money. If they're not interested in a specific issue area, then it's going to be very difficult for anybody to raise money in that area.

Something that is one of the benefits is also a limiting function of the social impact bond, and that is that there has to be agreement from all three sides of the equation.

[The Chair, Conservative, Daryl Kramp]

Thank you very much.

Go ahead, very briefly.

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

I will be very brief, Mr. Chair.

I would simply like to mention that it is extremely refreshing to see young people on the other side of the table. I feel very supported. It is good to see intelligent young people testify before the committee.

That's all. Thank you.

[The Chair, Conservative, Daryl Kramp]

Thank you.

Mr. Richards, go ahead, please.