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UK: Investors to Pay for Prisoner Rehabilitation

19th March 2010

In an article in the Guardian, Peter Walker reports on a new initiative which will see private investors pay for a project to rehabilitate prisoners and receive a return on their money if reoffending rates drop.

The pilot scheme for the so-called social impact bonds will see investors pay £5m towards intensive education and support for short-term prisoners leaving Peterborough prison in Cambridgeshire. A total of 3,000 will be helped over six years by the St Giles Trust, which specialises in working with ex-offenders.

Under the deal between the Ministry of Justice and Social Finance, a private organisation set up by a group of City grandees in 2007, investors will make a profit if reoffending rates fall by 7.5% or more. Profits will increase according to how much money the government saves on not having to prosecute and jail recidivists, up to a maximum return of 13%.

"Ideally, if you carry out a scheme like this on a large enough scale, then you wouldn't need to build the next prison. That's a big saving for a government," said David Hutchison, chief executive of Social Finance, who previously spent 25 years in investment banking.

The bonds are based on "early intervention", a concept pioneered in the US: it is socially and financially more effective to target intensive help at social problems before they happen, rather than reacting to them later. An increasingly popular pre-election buzzword for all three main political parties, the strategy is often directed at children and young people from problem families.

The pilot focuses on prisoners freed from short jail sentences, because of their high reoffending rates – around 75% commit another crimes within two years of release – and the proven effectiveness of schemes to help them return to the community.

According to the St Giles Trust, a recent economic evaluation of its Through the Gates scheme for ex-prisoners reduced re-offending by 40%, saving the government £10 for every pound invested.

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