Imagine if your financial advisor, to whom you had entrusted with your life’s savings, turned around and told you one day that actually, they didn’t really know what they were doing; that you were probably in a better position than them to make decisions; but they invested your money anyway, just to prove they are doing their job.

You probably wouldn’t be too pleased that a trusted authority could be so reckless with your hard-earned money. So why don’t we hold the government accountable to the same standard?

For too long, successive governments have been judged and extoled simply for giving things a go (spending money), rather than what they actually achieve. Or worse, they are castigated for investing in something new and promising (for instance, charter schools) before there is proof of outcomes. And as Bill English himself has admitted, “Too often Government is flying blind. You let us get away with getting up and saying 'we spent $20 million on a problem that shows we care’.”

One way to shift the focus back to measurable results, while still allowing an element of risk, is through the implementation of social bonds.

Social bonds are a new means of financing and providing social services. A pilot is currently being developed by the Ministry of Health, and could well be a component of the Government’s recently announced plans to widen its investment-led approach from welfare to other areas.

Essentially, social bonds allow private investors and organisations (often charities and NGOs) to partner up to fund and deliver services to achieve a specific social outcome. If – and only if – upon completion of their contract, they achieve certain agreed-upon results, the government will pay back investors the original amount, as well as a return on investment.

In many ways, social bonds can achieve what traditional social service provision cannot.

Because financial risk is shifted from taxpayers to the private sector, the public sector only pays for successful results. But more importantly, it creates a space for the kind of entrepreneurship and innovation often confined to private enterprise. Social service providers are entrusted with the freedom and power to implement their programme, flexibility to experiment and adjust it, and are rewarded for what works. We can even imagine crowd-funded investment solutions.

The New Zealand Initiative has recently started research in this area, and we will be discussing social bonds in greater depth and complexity over the coming months.

Social bonds provide a mechanism to move the “investment” role out of the government’s hands and into the hands of those who have better information, and the most to gain or lose.