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Ottawa courts private-sector funding for new approach to social policy

OTTAWA - The federal government wants to tap into a "gold mine" of private-sector funding to finance its social programs.

Human Resources Minister Diane Finley launched a "call for concepts" on Thursday, asking businesses, not-for-profits and the volunteer sector to come up with fundamentally new ideas for jointly financing improvements in the lives of the needy.

The launch is a tentative step into the realm of social financing — an approach that is being tested in the United Kingdom and the United States. It invites private-sector investors to provide up-front money and then collect a return on projects that government traditionally pays for, such as homelessness or hunger.

"It's our first, official step in inviting your ideas to the table that can help shape future social policy in Canada — in a new way," Finley told a Toronto forum.

"It's time for us to unleash individual initiative so that those who are motivated can help others, and those who need help are given the opportunity to take more responsibility for themselves."

The government wants to collect ideas until the end of the year and then, if all goes well, put out a call for proposals or identify pilot projects. Eventually, Finley foresees a broader "social partnerships" strategy.

"It's really community leaders who can best understand their local challenges, identify solutions and get results," Finley said.

"This is why it is so important for us to work better with business and voluntary sectors, foundations and not-for-profit groups. That's the gold mine I'm talking about — and the one we need to tap into."

Indeed, Finley has repeatedly rebuffed pleas for a national approach to housing and poverty, arguing that the federal government is not best placed to deal with issues that often have local nuances.

But at the same time, since the federal government provides significant funding for affordable housing, homelessness initiatives and other key social programs, Ottawa is deeply implicated in social policy whether it likes it or not.

Finley suggested she was frustrated with the lack of progress in social programs, and wants to dramatically re-arrange the system so that there are incentives to deliver better results.

Social impact bonds are one approach, she said. Such bonds are backed by the government, and would raise financing for money-saving solutions for local social problems.

The theory is the private sector would provide the capital, a not-for-profit organization would do the actual work and the government would pay the bill at the end of the day. If the program's objectives are met, the government would pay a premium.

Finley said officials are now at work identifying barriers to social impact bonds, with the intent of tearing them down. They are also assessing the appetite of the private sector to bankroll such an effort.

Finley is open to other ideas as well — proposals that would see the private sector and charities providing expertise and funding for solutions that can deliver concrete returns.

"It's all part and parcel of a fundamental rethink of government delivery of social policy," said Tim Richter, president and chief executive of the Canadian Alliance to End Homelessness.

"I take it as good news and a challenge."

The formal request for concepts is the result of months of discussions Finley has held with experts both in Canada and in the United Kingdom, where Prime Minister David Cameron has embraced social financing through his "Big Society" approach to improving conditions for the needy.

So far, though, the federal government has not put any serious money on the table for social financing, saying it wants to thoroughly test the waters before plunging in.

While many an expert is keen on the notion of social financing, there is very little real experience in Canada or elsewhere to show how it works.

"Like a friend of mine told me, who is working on some of the social finance stuff, he said ... 'You know, social finance is a lot like sex in junior high because everyone is talking about it but no one has done it and no one knows what they're doing'," Richter said.

Affordable housing is crying out for such an approach, he added.

Progress on homelessness and poverty are stymied by a lack of cheap accommodation, but governments would need billions of dollars to tackle affordable housing on their own.

If the private sector comes into the picture through a social financing arrangement, not-for-profits could quickly design housing projects that would cut other government costs linked to homelessness, health care, mental health and incarceration, for example. And the private sector could collect a small and steady return for financing projects up front, he said.

But such advances won't make much of a difference unless they are done on a large scale, Richter added.

And social financing may not be good fit with every area of social policy, especially if the improvements to society are not easily quantifiable or immediate.

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