Last week we saw Western Australia’s AA+ credit rating downgraded from stable to negative. The requisite “belt tightening” is underway, and sadly, community based preventative services are often the first to go. The cut to financial counselling services, at a time when more and more households are finding themselves in financial difficulties, is just one example.
Although cutting preventative services is likely to cost Government more in the long run, these services are vulnerable because Government spending is tied up in acute services, such as prisons.
In an environment of shrinking budgets and increasing need, there are some important questions we must ask as a state: How do we make sure funding flows to the most effective programs? How do we know they are working? And how do we catalyse a transition from acute to preventative spending?
One promising new approach is to use Social Impact Bonds (SIBs) to leverage private investment to pay for social programs. SIBs are designed to separate the payment for the delivery of services (funded upfront by private investors) with payment for the success of those interventions; where Government pays if, and only if, the desired outcomes are achieved. By doing so, SIBs enable Governments to trial innovative, preventative services and then pay for those services out of the savings generated. Social impact bonds are already operating in NSW, and with several other State Governments actively pursuing SIB development we think they warrant a closer look in WA.
We also need to consider innovative models of philanthropic giving to maximise social impact. Social Ventures Australia recently launched the WA Venture Philanthropy Fund to connect strategic philanthropists with high impact organisations tackling some of the most complex issues facing WA. As tax time approaches it’s an important time for people to think strategically about how they are giving and whether their giving is having the most impact it can.
As WA moves into more austere times we need to consider innovative funding models that make better use of our scarce resources. If there is going to be a silver lining to a downturn in the WA economy, my hope is that it catalyses a cross sectoral conversation about innovative ways of funding social change.