K'jipuktuk (Halifax) -- There was an easily overlooked one-sentence statement in the provincial Throne Speech announcing that Nova Scotia will become the first Canadian jurisdiction to use Social Impact Bonds as a vehicle to address social issues.

For many people, this innocuous announcement brings back memories of the private-public partnerships that previous governments engaged in, with dubious benefits and at considerable cost to the taxpayer.

Social Impact Bonds use money raised by private investors to deliver social services that more typically are funded by governments. For example, a bank or a foundation, in partnership with a not-for-profit organization, invests in a project that stops kids from dropping out of high school, or reduces recidivism among people recently released from jail. If at the conclusion of the project predefined targets are met, the government pays the investors a nice return. If the project fails, the government does not pay a penny.

For Maureen MacDonald, minister of finance, the benefits are clear. “I thought it would be interesting to explore whether or not this might be a vehicle to get some things done that wouldn't otherwise get done on the prevention side of issues,”says MacDonald. She tells the Halifax Media Co-op that a pilot will be initiated this year, and $1-million has been set aside over four years to support the initiative.

The evaluation of the pilot project will include representatives of the social justice community, including some critics of this approach, MacDonald promises.

MacDonald is vague on the details.”Broadly speaking the focus will be on children and youths and it will be around issues like school completion, staying in school. There may possibly be a health focus,” MacDonald adds.

So what makes Social Impact Bonds so attractive? In government it is always difficult to find money, and especially for projects that deal with prevention, MacDonald explains. So if financiers can be found who will put money down, what is there not to like? “If we can bring a little more out to see some concrete benefits for people then I am not going to get bogged down on some kind of ideological debate,” says MacDonald.

And it's not just funding. MacDonald believes that these privately funded initiatives will be more innovative than projects run by government and its partners, programs that are “kind of hamstrung sometimes by bureaucratic requirements that maybe are not very innovative.”

Danny Cavanagh, President of CUPE Nova Scotia, is not pleased. "Why can't we provide these services ourselves?" Cavanagh wonders. "Instead of handing somebody a profit, we can probably do more, and do a better job, rather than line somebody's pockets and keep shareholders happy."

"It's privatizing social services through the backdoor,” Cavanagh argues. “It's an opportunity for a bank or a huge multinational corporation to get through the door.”

John Loxley is a professor at the University of Manitoba who has written extensively on public-private partnerships. Loxley agrees when asked about the labour assertion that Social Impact Bonds are nothing but privatization in disguise. “That is a possibility. It may well be that the innovation takes the form of cheaper workers,” says Loxley.

Loxley believes that the jury is still out on how successful Social Impact Bonds will be. Social Impact Bonds are a very new phenomenon, first introduced in Britain by the Conservative-Liberal coalition in 2010, and now taking root in the USA (where Goldman Sachs is a big player), and Canada. The Harper government embraced Social Impact Bonds just last year. No such initiative anywhere has reached completion.

“The immediate attraction for government is that they don't need any money up front,” says Loxley. “And the second attraction would be that government doesn't pay out unless they get results which are measurable.”

According to Loxley, that's also where some of the problems start. He doesn't believe that in reality projects will be allowed to fail, since that would quickly stifle private investors' appetite.

“Increasingly it looks like governments are putting together piles of money to attract these intermediaries and financial people to get them involved,” says Loxley, pointing to Britain as an example. “Essentially what they are doing is reducing the risk of the intermediary and the financial agency. So you are not transferring all the risk that you claim you are transferring,” Loxley argues.

Critics, Loxley among them, have raised other concerns as well. Reflecting Social Impact Bonds in the government books will be an accounting nightmare, much like P3 initiatives in the past, they say.

As well, such privately financed projects will go after the low-hanging fruit, and after results that are easy to measure. In contrast, truly successful approaches are multidimensional and typically require cooperation among many agencies.

At the same time, Loxley believes many not-for-profit organizations will be thoroughly tempted to seek partnerships with financial institutions. Five to seven years of steady funding and an ability to manage initiatives independently would be obvious attractions, “especially with budget uncertainty being rife at this point in time,” says Loxley.

And what about the minister's claim that privately funded initiatives will be more creative?

Loxley doesn't buy it. “This is playing into the widespread notion that the public sector is not efficient and not innovative, that the public sector cannot deliver. I think this is entirely wrong. There is no reason why the public service would not be more demanding in terms of outcomes,” says Loxley. “No wonder the unions are worried about this: it denigrates what they are doing,” Loxley argues.

And CUPE Nova Scotia President Cavanagh dismisses the minister's argument about red tape and bureaucracy out of hand. “This government, more than any government, can make these bold moves and introduce any kind of legislation they want at the stroke of a pen,” says Cavanagh. “There is nothing stopping this government from taking these bold moves, rather than doing things that are typically seen as kind of right- wing agenda items that the federal government has done,” Cavanagh adds.

“Government is not a business”, says Cavanagh. “Government provides public services and a social safety net to ensure that people can live properly. Minister MacDonald should reconsider, given the fact that government can borrow money so much more cheaply and can actually provide superior services.”