Social impact bond projects are the latest new ‘buy-now, pay later’, off-balance sheet schemes to increase private finance of public services and the welfare state, driven by austerity policies and neoliberal ideology.

They are a complex venture capitalist model applied to the provision of social services, health, education and other public services. Private investors provide working capital to social impact bond projects with the expectation of an annual rate of return or profit of 15% - 30% or more, dependent on the achievement of specified outcomes.

Early intervention/development and prevention are only part of a strategy to tackle the root causes of poverty and inequality. However, social impact bonds and pay-for-success are designed to deliver selective social outcomes.

The social impact bond project lobby embrace neoliberalism and a ‘government failure’ model to justify their approach, but they are in denial of market failure and the cause of the global financial crisis. The social impact bond project lobby is, however, happy to accept public money in the form of tax breaks, grants, subsidies and guarantees to extend corporate welfare. Nearly £520m of UK public money has been given to social enterprises and social impact bond projects in recent years in the form of grants and financial support.

International bodies have advanced the case for social impact bonds projects - the G8 group of countries established a Social Impact Investment Taskforce, the Organisation for Economic Development and Cooperation (OECD) and World Economic Forum (2013) extolling their virtues.

Global banks such as Bank of America Merrill Lynch, Goldman Sachs, JP Morgan Chase and Co. and Morgan Stanley, have played a key role in promoting and funding social impact bond projects in anticipation of attracting wider private investor interest and a new ‘asset class’.

There are currently 54 operational social impact bond projects in 13 countries with at least a further 23 at the planning or procurement stage. The UK is the global leader with 32 operational projects with outcome payments valued at £91m, followed by the US with 9 projects.