Profit not a motive behind social investment approach

1News

18-05-2025

The head of the Government's Social Investment Agency says he can't rule out commissioning for-profit social service providers in future, but that it isn't the focus.
Andrew Coster, the former police commissioner turned Social Investment Agency (SIA) chief executive, spoke to Q+A shortly after the Government announced an additional $279 million over the next four years for its social investment strategy.
The package, with more details expected in this week's Budget, included $190 million for a fund that will invest in at least 20 social service initiatives over the next year.
It's anticipated the SIA would oversee the fund's establishment and use until mid-2026, with ministerial guidance about general priorities but not specific funding decisions.
In future, the Government envisioned the fund's commissioning function would move into communities. A Cabinet paper released this month also proposed the fund could eventually "attract investment from private and philanthropic organisations".
Coster said the changes around social investment the Government wanted to introduce was significant for agencies used to working within their own departments.
"The reason why we are launching into something fairly disruptive and, frankly, reasonably risky in terms of being able to pull it off is because we need to embed it and prove it."
When asked if the fund could commission for-profit social service providers, Coster said: "I won't say we're not, but this model is not focused on that."
"Whereas in [the] health [sector] you have a lot of for profit service provision, in social services more broadly you see a lot of NGOs."
The plan is the centrepiece of a four-year, $275m plan the Finance Minister says is meant to fix how social services are delivered. (Source: 1News)
An earlier iteration of the social investment model under the previous National government included some use of social investment bonds.
It's proposed the bonds could see a private funder or investor give up-front funding to an intermediary, which would then use the money to contract social service providers to achieve certain outcomes.
Investors would then receive a return if those outcomes are reached. Coster said the rate of success with a previous iteration of social investment bonds was mixed.
"They're quite a complex instrument with a lot of reporting involved," he said.
"There's a reasonable debate to have about the idea of private equity profiting from a social good, so it's not where we've started.
"There is so much opportunity within government funding already being allocated out there to organisations that we want to get our own house in order."
National proposed using social impact bonds for social housing in the last election.
Coster said the keys to the social investment approach were the use of data to measure whether a contracted provider of social services was actually making a difference.
"So much of government activity at the moment is tracked through outputs. By that, we mean the activities, the things that are happening every day. The widgets, if you like."
For example, a provider may be contracted to deliver a certain number of counselling sessions instead of delivering the outcome of improved mental health.
The social investment model would flip this around by measuring a social programme's effectiveness through tools like Stats NZ's integrated data infrastructure (IDI).
The IDI is a large, anonymised data base of Kiwis' information sourced from Government agencies, surveys, and NGOs.
Coster said this data could then underpin funding decisions because the IDI could be used to find "comparable cohorts within the population".
The SIA would then see if, after their use of certain social service providers, there was a difference in measures like school attendance or the number of interactions with police.
The idea would then be to continue funding programmes that were demonstrably successful, he said.
"The purpose of social investment is to get the best value in the broadest sense, which means the best outcomes for people, the best outcomes for the community, and the best use of funding in order to achieve that."
When asked if the approach encouraged the state to value a life only in economic terms, Coster said there was "no misalignment between the desire to get good value for taxpayer money and the delivering of positive impacts for people in their lives".
"In fact, it's incumbent on us to get good value because that demonstrates and delivers best outcomes."
Q+A with Jack Tame is made with the support of New Zealand On Air