Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
5.2.2 The evolving size of the public share: public social expenditure by sector
5.26 There are a number of important reasons to introduce the size and type of public expenditure on
social interventions for the SII discussion. First, how much public bodies in different countries presently
spend on social interventions can be considered an indication of the revealed willingness to invest in social
impact measures. Second, comparing spending amounts by sector can be used as a proxy for assessing the
size and priority of different social impact investment ‘markets’ (prior to factoring-in the ambitions of SII).
Third, comparing social spending across countries alongside social need can be used to highlight cost
efficiency issues in the public sector, leading to an indication of the extent of need for innovation and new
approaches, such as SII.
5.27 A number of dichotomies are important for understanding how SII, in its different forms, might
fit into public service management: large companies and SMEs, cash and service benefits, and national and
local markets and governance. Across these dichotomies there are links; with larger companies more likely
to be involved in cash investments or financial services (insurance, micro-finance) rather than services
which are more often managed at the local government level and within the potential remit of small to
medium sized enterprise.
5.2.2.1 Government spending: where the money goes
5.28 Figure 5.6 maps government expenditure in the areas of social protection, education, health
housing and public order (each linked to a social outcome area measured above) and clearly shows that
human and social services account for the majority of government expenditure across OECD countries.
The different ways in which public sector services are financed will inevitably result in different challenges
for reform. For instance, where public benefits are financed though social contribution payments,
recipients are likely to expect predefined conditions of delivery to be met (rates of payments, services
standards, or services providers themselves) years into the future. Compared to services financed through
general taxation, the contribution conditions are more likely to challenges to innovation.
5.29 Social protection alone makes up one third of total government expenditure on average, and is
over 40% of total government expenditure in France, Germany Italy and Japan. Social expenditure
includes old-age care and pensions, as well as payment to families for childcare (family allowances and
childcare, but not education), and unemployment and social assistance payments. Education and health
also make up a large part of government spending, with around 1 in every 4 dollars going to these services
across the OECD. In countries where social protection spending is relatively low, like Australia and the
United States, education and health spending is higher. Over the three sectors of social protection, heath,
and education each country spends around 60% to 70% of its budget.
5.30 Small but socially-relevant interventions of ‘housing and community amenities’ and ‘public order
and safety’ top up the expenditure on social interventions by around 5-8% of total. France stands out as a
country with relatively high housing expenditure, whereas the Anglophone countries are spending more of
total on public order and safety.
5.31 Other research has mapped the trends in government expenditure, and shows that across the
OECD as a whole, the biggest falls over the last decade came in the areas of general public services and to
a lesser extent defence. Health, social protection, and economic affairs show the biggest relative increases
(OECD, 2011b).
© OECD 2015 67