CAF responds to PM's announcement on payment-by-results contracts

23 October 2012

Responding to the announcement by the Prime Minister that the Government will extend payment by results contracts for charities and private sector providers working to reduce reoffending rates, Rhodri Davies, policy manager at the Charities Aid Foundation (CAF), said:

“The Prime Minister is right that payment by results contracts have potential to help charities use their expertise to tackle intractable social problems such as reoffending.

“But Ministers need to improve the way these contracts are designed so charities are not simply squeezed out in favour of large private sector providers. Most charities simply cannot afford to take on contracts to tackle social problems without up-front funding because they are not allowed to carry large financial reserves and have limited access to capital compared to for-profit businesses.

“There are socially-motivated investors who are eager to help charities and non-profit organisations to overcome these difficulties and get involved in public service delivery, but the system is currently making it very difficult for these investors to back payment by results schemes.

“These problems need to be addressed, as the potential prize is huge. By working closely with beneficiaries whose needs they understand very well, civil society organisations are well placed to maximise the social impact of public funding and reduce waste.”

CAF, which promotes charitable giving and provides financial services and social finance to not-for-profit organisations, published a report last month highlighting the need to reform payment by results contracts to help charities put their expertise to work in delivering public services.

Download the report 'Funding good outcomes - Using social investment to support payment by results'.

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