Pay-for-success welfare

December 28, 2018 11:04
NGOs, activists and academics are exploring ways to help welfare services keep pace with changing social needs while ensuring that resources are used to maximum effect. Photo: HKCSS

Hong Kong's total recurrent spending on welfare for this financial year is some HK$73 billion. This funds a variety of programs aimed at family and children, social security, the elderly and other groups.

Much of these funds are distributed in the form of direct cash payments to the less well-off, or in voucher schemes. But a lot of it goes into running institutions and services – from children’s homes to rehabilitation services to programs for the homeless. Many of these services are run by non-government bodies, which receive lump sums and other subsidies.

The system works fairly smoothly. Government provides funding, while specialist agencies deliver welfare services. Officials work closely with the agencies on an individual basis. The agencies also coordinate and communicate through a representative umbrella group – the Hong Kong Council for Social Service, of which I am the chairperson.

For many programs, resources are stretched. And forecasts suggest that in the long run, demographic trends – the aging society – will put government finances under more pressure.

Many NGOs, activists and academics are exploring ways to help welfare services keep pace with changing social needs while ensuring that resources are used to maximum effect. The HKCSS, for example, is actively bringing different sectors together to promote the use of technology to enable the elderly to live independent and productive lives.

Some researchers are looking into developing new policy approaches concerning the funding and management of welfare programs.

The Our Hong Kong Foundation (OHKF) think tank produced a policy research report on what is called a “pay for success” system for social services. This approach – already used in some Western countries – is interesting food for thought.

This research encourages us to ask basic questions about the whole role of social service providers.

Currently, the government – indeed, the community as a whole – tends to think about welfare as fixing problems. It would not be fair to say no-one thinks about prevention, but the emphasis is largely on helping people after they find themselves in some sort of need.

We also tend to think of welfare services as organizations that deliver particular outputs. The government usually has a funding and service agreement with each social service agency that it subsidizes, and this focuses on performance standards. Agencies in effect take part in a tendering process on this basis.

A “pay for success” approach would do things a bit differently.

This approach has been tried in the UK and the US, where it might be called a social impact bond or social benefit bond. In those countries, where governments have serious budget shortfalls, the aim is very much to cut the costs of dealing with social problems. In the US in particular, some programs aim to attract private investment, and will even reward investors if targets are met.

From Hong Kong’s point of view, the performance targets themselves are the interesting part of “pay for success”.

Some examples can illustrate the idea – which is essentially about giving incentives to focus on prevention rather than cure.

In one US program, the service provider (an NGO) worked with incarcerated youths, giving them counseling, training and other help. The performance targets focused on reducing readmission rates to prison. In short, the funding was tied to kids not getting back in jail. Another example concerned pre-schooling among disadvantaged children. The funding was tied to reducing the number of years of remedial education such children previously needed. In the UK, the approach has been used to reduce youth unemployment and homelessness.

I am not saying these programs would be directly applicable to Hong Kong. The OHKF researchers themselves point out that the contracts involved in the US and UK are complex, and the fiscal (and perhaps social) challenges are greater than in Hong Kong. We also have little tradition of involving private-sector investment in welfare services in this way – I expect the idea of such risk-sharing or “collusion” would be controversial if it were on a large scale.

But the idea of greater stress on outcome-based evaluation, with a view to preventing or reducing social problems, is surely worth a look. At the moment, the performance monitoring largely tracks things like the number of clients enrolled in a program, the number of hours’ training provided, and clients’ own feedback. The system does use outcome-based performance requirements on a small scale. It is worth seeing if there is scope for expanding the idea.

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Executive Council member and former legislator; Hong Kong delegate to the National People’s Congress