When incentives cut across long-term, preventive activity, Social Impact Bonds can play a vital role in strengthening links between finance and better social outcomes. This working paper explores their compelling rationale, describes how they can and should be structured, addresses practical concerns of measurement and efficacy, and explores the areas where we expect them to be most popular.

The Young Foundation's latest working paper entitled, Financing social value: implementing Social Impact Bonds, describes an innovative approach to financing the creation of future social value. There is growing enthusiasm for instruments of this kind, as evidenced in the recent white paper by the Government, which suggests pilot implementation in 2010.

In addition, Prime Minister Gordon Brown in his 7 December 2009 Speech on Smarter Government highlighted social impact bonds. In his speech Prime Minister Gordon Brown stated, "Civic society will have a crucial role to play in this third generation of public services... Early intervention aimed at prevention helps families in crisis more effectively and is less costly in the long run. So we will pilot a new way of funding the third sector to provide such services. What we call social impact bonds- money paid out now to deal at root with the causes not the symptoms of a problem- will reward social investors for work which reduces future social costs, for example, in seeking to lower the reoffending rate of those coming out of prison."