Government objectives could be achieved more efficiently by issuing bonds which could be redeemed for a fixed sum only when the goal is achieved.
The bonds could be traded on the open market at whatever prices they would fetch. For example, there could be an issue of a L10 bond that was redeemable only when unemployment went below 3 per cent for a sustained period. This L10 bond would initially be auctioned - maybe for a price as low as 10p.
The effect of issuing such bonds would be to give some of the responsibility for getting down unemployment to the bond-holders, and to take it away from cumbersome government departments; and would provide the incentive for bond-holders to take measures to hasten the reduction in unemployment - with those who knew they could do most towards the goal being the most likely to acquire the bonds.
Measures taken could include defraying recruitment costs to enterprises; supplementing prospective employees' income; finding jobs for unemployed people; and offsetting job training and transfer costs.
In the health area, indicators such a life expectancy, infant mortality and disability could be targeted.
Bond-holders would get involved in preventive medicine to try to ensure that these goals were met sooner.
The potential benefits to the disadvantaged would be significant. At present, the system is inherently cynical: the solution of a social problem by a government institution would lead to the dissolution of that institution - there is no relationship between the solution of problems and the rewards to those employed to solve them. Contracting out 'long-term' social services is not the answer; nor is privatisation, as private agencies have private objectives which may not coincide with social objectives.
Social Policy Bonds could be used for instance to target:
- The number of homeless (or the number of new approved housing units completed, or occupancy rates of the existing housing stock);
- Pollution (nationally averaged levels of water or air pollution);
- Education: target results to be achieved in basic literacy and numeracy tests taken by children.
The efficiency of these bonds could be tested initially by allocating the same sums of money as are currently allocated for a particular social objective to the redemption of Social Policy Bonds which target the identical objective. The maximum cost to the government of the issue would then be set so as not to exceed the expenditure that would anyway have been incurred in pursuit of the same objective.
Ronnie Horesh, c/o 12 George St, Chester CH1 3EQ (tel 0244 319510).