• By Dartington SRU
  • Posted on Thursday 07th July, 2011

Second Allen Review: Pooling resources for the poor

In the Victorian era public health challenges such as cholera and other diseases caused by poor sanitation were dealt with by local and national government uniting with philanthropists and private investors to make the long-term investments needed to create cleaner and healthier cities. “Will we match the Victorians?” is the question posed by Graham Allen, Labour MP for Nottingham North, at the beginning of his second independent report to the UK Government on early intervention.His first report articulated the message that we must invest now in neglected children to improve their lives and avoid future costs to society for government. It is, Allen suggested, “a simple, deeply moral and economically sound” argument. That may well explain why it attracted widespread support. But, he warns in this follow-up report, “We now get to the sharp end”.All three of the main party political leaders support the argument for early intervention, 27 local authorities want to “Early Intervention Places”, and investment banks and social investors are enthusiastic about investing for social and financial return. There is, suggests Allen, “a coalition of the willing” – the challenge is how to turn this support into practical action.This new report, therefore, focuses on how to finance an expansion of early intervention through better use of public resources and using other ways to attract additional investment. In these economically straitened times, how can taxpayer money be used more efficiently, and how can additional money from private investors be secured? Allen has three answers.First, he makes the case for a new, national, Early Intervention Foundation. This is the bedrock of a new early investment culture. Without it, programmes will falter, outcomes won’t be achieved, and investors will melt away.The foundation should improve the evidence base so that investment is targeted at what works. It should also work to improve the fidelity with which evidence-based programmes are delivered, to help programmes develop and to advise on social investment. Or as Allen puts it, it should “help build a new, scaled, fully functioning marketplace in early intervention” – more interventions, more competent providers, more local agencies taking part, and more sources of finance. Allen is particularly anxious to set the bar high in terms of standards of evidence: this is what will give investors the confidence to part with their money.Second, he wants to see more agencies contracting on a payment-by-results basis. He maintains that outcome-based contracts will make for better provision. This will only work, however, if they are set up so that they only pay a return on delivery of successful outcomes. Where money can be saved must be identified or, at the very least, levels of unmet need must be reduced.Other provisos are attached. It is not acceptable under payment-by-results for providers to be allowed to take the easy route of delivering outputs. And there must be a clear link between the intervention and outcomes, which is likely to require greater use of experimental evaluation. Third, Allen explores various options for financing early intervention and giving an incentive to investors. As he puts it, “The public purse is stretched and so more intelligent public and private investment options are also needed”.A wide variety of options are presented. One is a Junior Individual Savings Account that links parents’ investment in their own children with investment in less advantaged children. In the first instance, though, Allen argues that the most practical option is an Early Intervention Fund.In this arrangement, local and central government contract with an intermediary to provide outcomes for a price. The intermediary chooses the providers. It holds a fund containing money raised from external investors. This fund is used to pay providers the cost of their services costs and according to performance. “If the outcomes are achieved, investors are paid by local and central government. If the outcomes are not met, there is no return” explains Allen. Allen wants this fund to raise £200 million eventually but sets his eyes on £27 million in the first instance – £1 million for each Early Intervention Place. In order for this to happen he recognises that private investors will need incentive to invest – typically in the form of tax breaks.Allen acknowledges that much of the report is highly technical and will leave many who lack a financial head struggling to keep up. It will also attract criticism: already one respected liberal columnist in a national newspaper has dismissed the arguments as a search for fool’s gold [See: Who's in the market for sub-prime behaviour bonds?. Allen is undeterred. He wants nothing less than cultural change:“It is now time for clear leadership to change early intervention from a philosophy to a funded, sustained practical programme of investment and returns, which when taken to scale will transform the social and economic potential of a generation of babies, children and young people”.Allen, G. (2011) Early Intervention: Smart Investment, Massive Savings. London: HM Government.See Also: Launch of the Allen Review on Early Intervention for Children

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