A think paper from Resonance.

 

Purpose

In July 2025, the Government announced the launch of the new £500m Better Futures Fund. This will invest in social outcomes partnerships across the UK over the next decade to improve the lives of vulnerable children and young people. Being led by DCMS, this ambitious initiative is the largest social outcomes fund in the world and confirms the UK as a world leader in impact investment. It is hoped that the Fund will attract a further £500m of investment from local government, social investors and philanthropists.

At the same time, the Government have also formalised a new Civil Society Covenant which highlights the essential role that civil society, philanthropy and social investment play in our national life. It is clear that the role of impact investment in the UK is set to continue growing in the coming years.

Whilst there is much detail yet to sort out in getting the Better Futures Fund up and running, we already have a lot of experience in the UK in designing and delivering social outcomes partnerships. Resonance has been part of this learning process, having facilitated such partnerships itself.  

To assist potential partners in preparing for the Better Futures Fund, this paper sets-out some important learning points. We are sharing this paper to contribute to the unfolding national conversation about how to make social outcomes partnerships deliver the greatest impact for the best value:

• National evidence - a summary of the results of an evidence review about the nature, extent and learning about outcomes contracting in the UK in the last ten years, drawing on published reports
   
• Resonance experience – some highlights from our own experience of facilitating and supporting social outcomes partnerships
   
• Future direction - our opinion on how outcomes contracting could be simplified and improved to assist its scaling up

 

Part 1 | EVIDENCE | Evidence Review of Social Outcomes Contracting in the UK

 

1.1 | Definition

Social Outcomes Contracts (SOCs) are contracts for the delivery of services to improve outcomes for people with complex needs, where some or all of the contractual payments are linked to the achievement of specified outcomes for a particular cohort of beneficiaries and where the contract relies at least partly on social investment. They are sometimes known as Social Impact Bonds (SIBs) or Social Outcomes Partnerships (SOPs).

SOCs have particular value in addressing complex social needs where innovation and flexibility in service design are required to personalise services and deliver better and faster outcomes than traditional siloed public services can achieve. There is often an element of early intervention too, reducing potential future costs for public services.

With payments predicated upon results (sometimes blended with part payments for activities) the contracts require working capital for the delivery partner, thus setting up a three-way relationship between commissioner, delivery partner and social investor (and sometimes adding others facilitating partners; investment intermediaries, technical advisors, etc). The social investor takes on the risks of non-delivery, but also shares in the rewards for successful delivery. Sometimes a Special Purpose Vehicle may be created, to manage the flows of funds in a project, but sometimes investment flows directly to the service provider.  

 

1.2 | National overview

In the decade since the first Social Impact Bond launched, nearly 100 contracts have been agreed, making the UK a global leader, accounting for nearly one third of the world’s outcomes-based contracts [1]. In the UK, over 180 commissioners from across central and local government have worked with 220 delivery partners to benefit over 55,000 people.

A comprehensive analysis of the SOCs market was undertaken in 2024 [2] for Better Society Capital (BSC). It analysed 86 SOC contracts from the last ten years and found that, up to 2023:

• £217m had been invested in these contracts by the commissioners, delivering an estimated present value of £1.8 billion (adjusting for deadweight/non-attribution) giving a benefit-cost ratio of 8.59 (i.e. every £1 spent by commissioners delivers £8.59 of present value)
   
• The total present value of £1.8 billion comprises £507m fiscal savings, £493 social value and £863m of wider economic value.
   
• The SOCs have been used in six policy sectors, with the largest sectors by value being Child and Family Welfare and Employment and Training, Homelessness was the third largest sector and Health, Criminal Justice and Education were the smallest. (See Table 1 below for a full table of values).
   
• The 21 Homelessness projects have incurred an average cost to commissioners of £2.8m and have so far achieved an adjusted benefit-cost ratio of 5.4.
   
• The level of annual social investment into SOCs has grown each year, reaching a total of £71m by 2020, drawn from housing associations, charitable foundations, local authority pension funds and high net worth individuals. BSC estimate that financial returns on its investments in SOCs will be a “low to mid single digit return”.

The number of SOCs being initiated since 2021 has stalled, suggesting that the ‘market’ is still largely driven by the availability of specialist Government funds [3]. The UK Government has so far launched ten Outcomes Funds since 2010, with a total value of £235m. The two most recent funds are the £80m Life Chances Fund (launched 2016) and the £14m Refugee Transitions Outcomes Fund (launched 2022) both of which are still operational.

Models have become more flexible and hybridised over the last ten years with some payments for activities, not just outcomes, and a slightly more relaxed approach to performance management. Growing experience and confidence does seem to be leading to more mature and manageable contracts, although it remains a small part of the social investment sector and a minority sport for most commissioners.

 

1.3 | Benefits of SOCs

The key benefits of SOCs which are highlighted in the published evidence include the following:

• Incentivising innovation - They incentivise innovation in service design to become more effective in delivering impacts and reducing costs. By allowing flexibility of service design and focusing on outcomes rather than stipulating the method of delivery, SOCs encourage innovation and the greater personalisation of services. The added value is in overcoming traditional boundaries between public services and their funders and creating space for innovation in approaches.

One example of how this feels on the ground is from a study of how a social impact bond felt like from the inside:

“We had a group of people that were experiencing …complex and multiple needs, not having access to development support services and actually we needed to do something different to … meet their needs and this project … enabled us to look at some of the problems across the system … it gave us an opportunity to draw everybody together to … try and put something in place to try and address this complex and wicked issue ... So that is a huge positive, without that we wouldn’t have had this [project].” (Frontline worker in a homeless charity, 2021)

• Expanding public sector knowledge about ‘what works’ – the process of designing and delivering a SOC can often lead to the generation of new and robust quantified evidence about what works and what it costs to deliver, expanding the public sector’s knowledge[4].
   
• Real-time learning - The multi-year nature of the contracts gives time for some experimentation in service design and for improvements to be made during the timespan of the contract. Unlike programmes supported by payment per activity or output, they are not locked into a particular method of delivery.
   
• Risk management – SOCs transfer some of the risks away from the public sector commissioners to investors, particularly in relation to more innovative or experimental approaches to service delivery.
   
• Building public sector partnerships – A commonly reported benefit is that the close collaboration required between multiple partners to specify a service helped to build understanding and strengthen relationships between public sector partners which was of wider value to them. Many also report a stronger understanding of the value of sharper performance measurement.
   
• Delivery partner benefits – A SOC invests in the capacities and capabilities of charities and social enterprises, from management to performance measurement to financial management.

 

1.4 | Challenges of SOCs

A number of challenges are also regularly highlighted in relation to the design and implementation of SOCs:

• Joined up outcomes need joined up commissioners - It is difficult for government bodies to commission contracts where the benefits/savings may be shared across several departments or organisations, and where the uncertainty of the timing of payments does not fit into traditional public sector funding rules. To date this has been overcome by the creation of bespoke funds like the Life Chances Fund which have the necessary flexibility, but whether mainstream public funds can be brought together to achieve this outcome remains uncertain.
   
• Contracting is seen as complex and costly by many commissioners - There is still little public evidence about the extent of the time and costs for commissioners in designing and putting together contracts in advance of their operation. Many are therefore wary of the mechanism of a SOC for its perceived expense. SOCs have generally only been commissioned where a bespoke central government budget has funded the additional costs of contract design[5]. This is true even where evaluations have shown that a new approach ‘works’; there has been no subsequent replication or scaling. Indicative evidence compiled in this review suggests the contract design process can cost c4-13% of the total cost of the contract, typically £50k-£200k. Some emerging evidence of contract management itself, however, once up and running, suggests that SOC and conventional contract management costs may then be comparable [6].
   
• Gaming the system? – Some commissioners have been concerned that deliverers may ‘game’ a SOC by cherry picking the easiest beneficiaries to help and parking those deemed more difficult to help, leading to unfair service provision [7].
   
• Perverse incentives? – There is some concern that SOCs may focus on outcomes which are more easily measured and which may not necessarily be the most appropriate drivers of service design and may leave a range of desired outcomes unchanged – i.e. the mechanism delivers outcomes which are too narrow and not necessarily the most important[8] [9]. Some funders are now designing in ‘super outcomes’ to give credit to deliverers for outcomes which may not be the priority paid-for outcomes but are still highly desirable [10].
   
• Innovation is not inevitable and still needs to be resourced – Evidence shows that SOCs can enable innovation in short timescales, but only if the level of resourcing is still reasonable and proportionate to the outcomes being sought. Excessive cost cutting in the hope that innovation will square the circle can undermine the benefits of innovation as caseloads per worker increase [11].
   
• Options appraisal – there is limited evidence about the comparative cost-benefit ratios of alternative, more conventional forms of delivery.

 

1.5 | Summary of lessons learnt from design and implementation

This is a summary of the practical ‘lessons learnt’ from a range of evaluations, highlighting issues for future SOC commissioners to be aware of. These focus on the ‘how’:

• Choosing the right intervention - A SOC is most likely to be relevant and beneficial where there are individuals experiencing complex social needs which require multi-agency interventions and where a more personalised service could add value.
   
• Choosing the right outcomes - To be effective a SOC must clearly identify a relevant target group of people and correctly specify appropriate outcomes, taking care to focus on the most important desired outcomes and to minimise the risk of unanticipated or perverse outcomes. Involving frontline workers in specifying the best outcomes in their fields may help [12].
   
• Choosing the right support - Most public sector organisations do not have the internal capacity to design, negotiate and manage complex SOCs and so need an appropriate partner to assist them.
   
• Building good collaborative partnership relationships is as important as the contract – Building strong collaborative working relationships between partners is essential as they are often coming at the issues form different perspectives and so the process of designing and managing a contract needs to be well managed with plenty of scope for communication.
   
• Adaptive learning during delivery is essential for effective impact – It is not possible to specify everything at the start of a contract, the delivery partner needs to be capable of learning from experience, and others, during the contract and able to adapt their processes to maximise their effectiveness.
   
• Social investors are able to justify higher risks for more pioneering services – Where a SOC is tackling a service area that has not been addressed by such an approach before, it can be easier for investors to justify taking higher risks, as even if the outcomes are not delivered as intended, there should be considerable learning.

 

Part 2 | EXPERIENCE | Resonance’s experience

This section summarises the experience of Resonance’s involvement in investing in SOCs. Resonance has had direct involvement in SOCs addressing street homelessness as well as youth offending. Two partnerships are briefly described here, together with a summary of some of our learning.

 

2.1 | The Skill Mill Partnership: helping young people move away from re-offending

The Skill Mill is a social enterprise which works with young ex-offenders across a number of locations in England to support them to transition away from offending through training and employment, using real paid work experience, progress to recognised qualifications and support.

The Skill Mill were successful in securing support through the Life Chances Fund and a SOC was constructed by Social Finance. The design and delivery was initially complicated by Covid, and it took several iterations to finalise the approach, but overall, the finally agreed plan was to run a contract to:

• Deliver a £3.8m contract from 2020 – 2024
   
• Scale up to deliver across seven more local authorities - Leeds, Rochdale, Birmingham, Durham, Nottingham, Croydon and Surrey
   
• Create a new SPV to enable the scaling up and financial management
   
• Secure £1.3m of contract payments from local authorities based on payment for outcomes, £1.2m from the Life Chances Fund and earn £1m of trading revenue from employers for services delivered
   
• Secure £900k social investment working capital
   
• Support 252 ex-offenders and achieve 90% rate of no-offending after 12 months

The aim of the project was to scale up an existing and successful project – it was not seeking to innovate service design but to grow rapidly and beyond the North-East. The project was highly unusual for a SOC in that it relied quite significantly on earned revenue from trading (selling services to employers).

Resonance supported this project through a £100k unsecured loan from its West Midlands SITR Fund.  Other  social investment came through Big Issue Invest and North Star Ventures through unsecured loans and a small element of equity.

The project has been evaluated by Policy Evaluation & Research Unit of Manchester Metropolitan University as part of the wider Life Chances Fund Evaluation led by the Government Outcomes Lab. [13]

 

2.2 | Street Impact, Bristol: Transitioning from rough sleeping

The Entrenched Rough Sleepers project in Bristol was part of a nationally funded programme and was delivered on the ground by three organisations including St Mungo’s. It was commissioned for £1.25m by Bristol City Council to support 125 people out of rough sleeping.

The plan was to deliver an unsecured loan of £122.5k from the Resonance Bristol SITR Fund in 2017, as part of £273k investment into the SPV created for the project. The three charities also contributed £16k equity investments. The Resonance debt was subordinate to a CAF Venturesome loan.

 

2.3 | Learning points

From our experience of investing in SOCs in recent years, we have learned a great deal about the reality of how these partnerships operate. A summary of our learning includes these points, each of which is picked up and addressed in the final section of this paper:

• Fairness requires matching achievements to payments – One of the challenges of taking a contractual approach to service delivery is that ‘missing’ targets or falling just short of a key achievement threshold can have significant financial consequences which can leave important progress unrecognised. The design of any payments system needs to be fair and proportionate and wary of such ‘boundary issues’. Payment systems which are ‘all or nothing’ in nature can fail to give credit to substantial achievements.
   
• SOC design is too complex – One of our key takeaways from recent SOC practices is that the design of these contracts, their financing and the number of investors is often too complex and out of proportion for the modest scale of social investment. We need to find simpler and more cost-effective ways of facilitating such innovations.


• SITR supported key investments – The Social Investment Tax Relief helped to attract social investment into programmes which others may have considered too risky. By providing an important cushion, it reassured investors that even if some achievements may fall short, the investment capital, and even some returns, would not be entirely lost.
   
• Scaling up is not as easy as it looks – Much of the focus in SOCs is on innovation in service design. Scaling up an existing successful project can seem to be an easier prospect. Our experience suggests that scaling up a service is at least as challenging as the initial innovation and needs to be treated as such in its execution and management of risks. The UK, famously, has a good track record for start-ups and innovation but still has much to learn about scaling up successful enterprises and projects. Scaling up effective services requires well-designed and sufficiently patient capital.

 

Part 3 | PROPOSAL | Building on Resonance’s experience

This third part of the paper sets out a new and revised approach to designing and delivering SOCs in the UK, drawing on our review of the evidence base as well as our own experience of assisting in SOC delivery. We are putting forward new ideas for how the Better Futures Fund could be designed to deliver more effective partnerships.

 

3.1 | Potential not realised

Resonance’s own involvement with SOCs has shown us first-hand the enormous potential of this style of approach. SOCs, done well, can deliver joined up services and innovation which can transform lives – whether it is reducing the re-offending rates of young people or supporting homeless people to once again live independent lives in their own home. SOCs can deliver outcomes that are elusive to more conventional modes of delivery. They have an important contribution to make to public service delivery.

And yet.

It is quite clear after a decade of practice that the current approach is too complex, too costly and too challenging for too many public sector commissioners. When the national programmes of commissioner subsidies stop, so do the SOCs. The approach is not gaining momentum nor scaling up, simply waiting for the next subsidy, stuck in a frustrating cycle where the approach delivers good outcomes but never progresses to a stage of scaling up. We think this is a missed opportunity.

It is our contention that until significant changes are made to the approach of SOCs, they will never achieve their full potential, nor scale up and always be reliant on substantial public subsidies.

We set out here our own thoughts on how to break this logjam.

This third part of the paper sets out a new and revised approach to designing and delivering SOCs in the UK, drawing on our review of the evidence base as well as our own experience of assisting in SOC delivery. We are putting forward new ideas for how the Better Futures Fund could be designed to deliver more effective partnerships.

 

3.2 | Key design principles for a new approach

The core challenges for the current approach to SOCs can be summarised as follows:

• The complexity and cost of designing a bespoke contract between delivery partner, funder and social investors, usually involving a newly created SPV
   
• A lack of transparency about the costs of contracting (ie the money paid to a third-party advisor) and also the social investment and its financial returns

These two issues have proved off-putting to potential public sector commissioners and also make the SOC approach a somewhat expensive cost to the public sector. It can also deter social investors from considering SOCs as a route for social impact.

Key design principles for a better approach must therefore include:

1) A simplified and more replicable approach to the three-way contracting between commissioner, delivery partner and social investor, preferably without the requirement to create an SPV

2) Simplified routes to investment for social investors

3)Transparency about the costs of contracting for external advisors

4)Transparency about the nature, amount and returns of social investment

 

3.3 | Proposing a new approach

We propose a new approach to SOCs for piloting. It would embody five key features, addressing the major weaknesses identified in the approach so far:

• Contract not SPV – A much simpler model would be to use, as standard, a tripartite delivery contract between commissioner, delivery partner and social investors, instead of creating a bespoke parallel organisation like a Special Purpose Vehicle to manage the relationship. This would significantly reduce complexities, communication issues and costs.
   
• Template contracts – A small number of robust, standard template SOC contracts could be developed and made available nationally by an appropriate body. There may well still be a need for some technical input for commissioners in calculating unit costs for the outcomes being delivered, so an element of subsidy will still be required in the short term for SOCs, but we believe that this revised approach would help to drive down the costs and complexity quite substantially.
   
• Transparent contracts – All SOC contracts should be published once agreed, creating transparency about all costs and returns to all parties. In public services, this is surely the only way forward if the approach is to deliver at scale and to build confidence amongst commissioners.
   
• Expanding the use of CITR for SOCs – Our experience of using the now-closed Social Investment Tax Relief (SITR) is that it was an effective route for bringing social investors into SOCs for the first time and providing a degree of protection against risk in what is still a relatively new model of financing. We believe that the existing Community Investment Tax Relief (CITR) could also play a key role in drawing new social investors into SOCs and expanding the quantum of social investment available. This potential would be more readily achieved if the regulatory pathway for social investors to use CITR for SOCs was clearly affirmed and simplified.
   
• Expanding pension-fund investment into SOCs – Significant work is currently being done to make it easier for UK pension funds to invest in projects which contribute to the UK’s economic growth. Now may also be the right time to explore how longer-term place-based impact investment funds could be created which would pool investments from pension funds, including those from local government (LGPS), and make them available for SOCs. This may require SOCs to operate over longer time periods, or such funds to operate on a revolving basis, but the potential is significant.

We set out these thoughts and proposals for discussion and further exploration. They are intended as a contribution to the ongoing national debate about SOCs and their place within public service delivery.  

 

__________________________________________________________________

References

[1] Number taken from the Impact Bond Dataset, Government Outcomes Lab | Access here: https://golab.bsg.ox.ac.uk/knowledge-bank/indigo/impact-bond-dataset-v2/
 

[2] Hickman, E & Stanworth, N (2024) The value created by social outcomes contracts in the UK – updated analysis and report | Access: https://www.atqconsultants.co.uk/wp-content/uploads/2024/06/VF-SOC-Social-value-report-update.pdf
 

[3] Data taken from: Anastasiu, A, Carter, E & Airoldi, M (2024) The Evolution of Social Outcomes Partnerships in the UK: Distilling fifteen years of experience from Peterborough to Kirklees, Government Outcomes Lab | Access: https://golab.bsg.ox.ac.uk/knowledge-bank/resource-library/peterborough-to-kirklees/
 

[4] Fraser, A., Tan, S., Boaz, A., & Mays, N. (2020). Backing what works? Social Impact Bonds and evidence-informed policy and practice, Public Money & Management, 40(3), 195–204 | Access: https://doi.org/10.1080/09540962.2020.1714303
 

[5] Stanworth, N (2019) A study into the challenges and benefits of commissioning Social Impact Bonds in the UK, and the potential for replication and scaling: Final Report, DCMS | Access: https://assets.publishing.service.gov.uk/media/60177d3b8fa8f53fbf42bde4/A_study_into_the_challenges_and_benefits_of_the_SIB_commissioning_process._Final_Report_V2.pdf
 

[6] A, Levitt et al (2023) Blog: How much does ‘it’ cost? Developing an understanding of transaction costs for impact bonds and social outcome contracts, Government Outcomes Lab | Access: https://golab.bsg.ox.ac.uk/community/blogs/how-much-does-it-cost-transaction-costs-impact-bonds/
 

[7] Outcomes Based Contracting, Web Article by: Government Outcomes Lab, Blavatnik School of Government, University of Oxford | Access: https://golab.bsg.ox.ac.uk/the-basics/outcomes-based-contracting/#the-evidence
 

[8] For a highly sceptical view, see: Lowe, T (2023) Seven things to know about outcomes-based contracting, Blog article, Centre for Public Impact BCG | Access: https://centreforpublicimpact.org/resource-hub/seven-things-to-know-about-outcomes-based-contracting/
 

[9] Tomkinson, E (2016) Outcome-based contracting for human services, Evidence Base Issue 1, The Australia and New Zealand School of Government | Access: https://www.humanlearning.systems/uploads/Outcomes-Based%20Contracting%20for%20human%20services%20-%20Tomkinson.pdf
 

[10] P18, Big Issue Invest, Outcomes Investment Fund Impact Report 2022/23 | Access: https://wordpress.bigissue.com/wp-content/uploads/2023/10/OIF_report-v4.pdf
 

[11] Carter, E., Rosenbach, F., Domingos, F., & van Lier, F. A. (2024). Contracting ‘person-centred’ working by results: street-level managers and frontline experiences in an outcomes-based contract, Public Management Review, 1–19 | Access: https://doi.org/10.1080/14719037.2024.2342398
 

[12] George, Thomas; Rogers, Jim; Roberts, Amanda (2020) Social Impact Bonds in the UK homeless sector: Perspectives of front-line link workers, Housing Care & Support, | Access:  https://repository.lincoln.ac.uk/articles/journal_contribution/Social_impact_bonds_in_the_UK_homeless_sector_perspectives_of_front-line_link_workers/24387667
 

[13] Banes, S, Webster, R, Fox, C, Armitage, H. with additional input from Lepik, K-L (2025).  Final Evaluation of the Skill Mill SIB, Policy Evaluation & Research Unit (PERU) | Access: https://golab.bsg.ox.ac.uk/knowledge-bank/resource-library/Final-Evaluation-of-the-Skill-Mill-SIB/