The Big Lottery Fund (BIG) is today allocating up to £11.25 million in Lottery good cause money for a landmark social investment initiative - the Social Impact Bond (SIB).

The funding from BIG will be used by the social investment organisation Social Finance to pilot the first ever SIB and also develop SIBs as a tool for preventing social problems across the UK.

The SIB model has been developed by Social Finance and presents a new way to tackle social problems and lessen their impact on society and ultimately the public purse.

It gives investors the opportunity to put their money into schemes that work to solve specific social problems and achieve a social as well as financial return on their investment.

Areas where SIBs can bring about effective intervention include reducing re-offending, preventative health measures and supporting children in care.

As well as the benefits to society, SIBs have the potential to lessen the burden of these problems on the Voluntary and Community Sector, freeing up more money for others in need of support.

£6.25million of today’s Big Lottery Fund investment will be used to support the first ever SIB – a pilot at Peterborough Prison, where experienced social sector organisations, such as Ormiston Trust, YMCA and St Giles Trust, will work to reduce reoffending rates in the area.

On average it costs £50,000 to keep a male offender for a year in a local prison and of the 40,200 adults on short term sentences, an estimated 60% will go on to reoffend within a year of release.

The Peterborough pilot will see intensive support provided to 3,000 prisoners on short-term sentences over a six-year period - both inside prison and after release to help with resettlement and to curb the destructive cycle of reoffending.

Under the terms of a SIB, investors can expect to receive a return on their original investment which reflects the success of the scheme in achieving its outcomes.

The returns reflect a proportion of the long-term savings, arising from the positive social outcomes, delivered by the scheme and investors may choose to reinvest any return they receive.

Investors in the first Social Impact Bond include the Barrow Cadbury Charitable Trust, Friends Provident Foundation, The Henry Smith Charity, Johansson Family Foundation, LankellyChase Foundation, The Monument Trust, Panahpur Charitable Trust, Paul Hamlyn Foundation and the Tudor Trust

Alan Bookbinder, director, Sainsbury Family Charitable Trusts said: “The Monument Trust is delighted to be an investor in the first Social Impact Bond.

"The Trustees believe this is an exciting opportunity to bring real improvement to the lives of ex-offenders and to reduce reoffending whilst creating a new way in which Foundations and social investors can work with Government to develop fresh solutions to old, entrenched problems.”

The further £5million of BIG funding will be used by Social Finance to develop a further package of pilots to address a number of deep rooted social issues, raise awareness of Social Impact Bonds among policy makers and statutory agencies and create a broad base of potential investors.

Peter Wanless, chief executive of the Big Lottery Fund, said: “The Big Lottery Fund’s aim is to be an intelligent and innovative funder and it is our aspiration to seek out new ways to bring improvements to communities.

“At a time of tight public finances, Social Impact Bonds represent a new and innovative way of attracting investment from outside the public sector and by funding Social Finance’s work we are hoping to pave the way for many more similar projects across the UK – this is a very exciting project for BIG.

“Prevention is better and cheaper than cure and there is a growing body of evidence that if preventative interventions are effective, we can all spend less money on services such as prisons, acute medical care and drug rehabilitation.”

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