Governments have a number of purposes, with chief of among them being selecting a direction for a country’s focus and making life better for its citizens. From that central goal, all the other ministries, whether they be military, culture, economics, scientific research, or any of the dozens of other Minister positions that change several times per election cycle. Over time, this has led to not only a lot of government bloat as new ministries are formed and new ministers are announced, but a lot of trouble as the government tries to balance competing priorities, with their primary focus becoming finances in order to pay for the new staffing, equipment, travel, etc.
This skew in focus, becoming ever-prevalent with Europe’s insolvency and the American’s approching “fiscal cliff,” creates holes and problems in policy & implementation. As a result, new sectors begin to form as a way to fill the gap. Whether it’s a new small (to start) business, a non-profit enterprise, or a full-blown charity, a lot of operations exist because the government tried to stretch itself too thin. For a long time, the government encouraged the spread of these businesses and charities, but as the tears grew wider and the charities, which do not contribute to tax revenues, began to turn to lobbying the government for changes, the Harper Government decided to put its foot down. Through the Eyes of a Pirate (TTEOP) has spoken on this issue in the past(1). Meanwhile, as businesses turned to lobbying, the government has generally caved because if the business generates additional income, theoretically so does the government through increased GDP, thus demonstrating the increased skew of the Ministry of Finance on Governmental operations. Business lobbyists (as well as individual & group lobbyists) are now required to register with the Federal (and many Provincial & Municipal) Government, which will theoretically prevent corruption within government ranks.
With the dramatic new rules against political activism placed on charities, and the drop in government funding for non-profits, a change of purpose was already being forced upon the industry. Initial reactions were related to not-unfounded fears of the government trying to silence its opposition, but last week the Government presented a different angle. They wish to transform charities & non-profits into becoming the social service net, with aid funding coming from businesses & individuals through “Social Impact Bonds” (SIB)(2). The idea, supported by former Dragon’s Den co-star Brett Wilson(3), is for the government to form a contract with the receiving NPO or business with certain criteria to supply services. The NPO or business raises the funds on its own and gets the project off the ground. Once the criteria are met, the charity/NPO/business cash out their “social impact bonds”, regaining their investment plus 10-20 percent. If the service fails to pan out or meet the criteria, the government pays nothing and bond-holders are left footing the bill without any direct return on investment from tax-payers.
Corporate Social Responsibility (CSR) has been on the rise in Canada for quite some time, and this move seeks to regulate how that comes into effect. The Royal Bank already uses its own social impact investment fund, which has a pool of $10-million for funds and businesses(4). So far, CSR has patchwork in its implementation, changing within organizations as those in charge change. The Government Social Impact Bonds seem to try to channel CSR into the area they think has merit. As interesting a proposal as this is, there are a lot of concerns associated with it. For example, if the criteria is to provide meals for 10,000 homeless within X-timeframe, and the venture provides meals for 9,999 because one less person made their way into the shelter, not only does the NPO/business not get reimbursed, but it also gets a black mark against it in the SIB-program ledgers which will negatively affect its chances of securing another contract. Additionally, there is a fear that many of the services currently provided by the government may be cut off and spun out to NPOs & businesses to run, with failures or financial downturns like 2008 resulting in a lobotomizing of the social safety net.
Whether the fears concerning the implementation of Social Impact Bonds are ever realized, the idea that businesses should help develop a community is vital. The idea of CSR, although not necessarily as focussed as it should be, contributes greatly to the development of our society and has been shown to generate additional revenue for the business involved. Whether the Government’s attempt to channel that effort to give back into running elements of Government Social Programs will be successful remains to be seen, but is certainly a good avenue to try. If the program is a success, and the “fear” of off-loading social services is realized, the fear would prove unfounded. After all, if everything is being handled successfully (maybe even profitably), that’s a good thing. The main catch with this program will be its transparency for the taxpayer, something the Harper Government has consistently flunked. But even with that, it’s worth a shot.
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