Outcomes-Based Financing: Solving the UKs Youth and Fiscal Challenge
For policymakers, the economic case for inaction has collapsed. The UK is grappling with a dual crisis: an overwhelming fiscal burden on public services and a profound social challenge in the form of youth unemployment and escalating mental health problems. Our current global health system, which dedicates roughly 97% of spending to treating illness and a mere ~3% to prevention, is financially unsustainable and fails to address the root causes of ill health.
The evidence is stark: ill health is estimated to cost around 7% of the UK’s GDP. The toll of mental health issues alone results in a $1 trillion annual loss in global productivity. To reverse this trend, we must heed the call to reframe health as an economic investment priority, not a cost.
The Policy Imperative: Investing in the Next Generation A critical area for systemic intervention is the future of the UK’s youth. The national challenge of integrating the over 1 million young people Not in Education, Employment, or Training (NEET) into the workforce is a direct economic and social imperative.
The World Health Innovation Summit (WHIS) and our partners, including Social Impact Scotland****(SIS) and Powering Futures, are demonstrating a proven pathway for turning this liability into an asset. This collaboration is working on a place-based model that aims to support young people who are not pursuing university by finding alternative career pathways and helping them into employment or further education.
The Economic Case for Prevention By shifting resources upstream, these prevention-focused models generate immense public value. Evidence shows that:
- Social prescribing interventions can deliver a £4 return for every £1 invested in the UK.
- Early modeling of the WHIS Cities place-based model, which integrates health, education, employment, and housing, suggests the potential to deliver up to £36 in social and economic value for every £1 invested.
- Globally, the care economy is projected by the International Labour Organization to create up to 300 million new jobs. Investing in prevention and well-being strengthens community resilience, creates local jobs, and reduces the long-term strain on acute and emergency services.
The Systemic Shift: Unlocking Private Capital for Public Good The biggest hurdle for policymakers is not identifying what works, but how to fund it at the scale required for national impact. The benefits of models like social prescribing cross multiple departmental boundaries health, education, and employability which often leads to fragmented, unsustainable funding through short-term grants.
To move from small pilots to large-scale system change, policymakers must champion Outcomes-Based Financing (OBF) and Social Impact Bonds (SIBs). This mechanism creates structural funding by:
- Transferring Risk: Institutional investors (including banks, pension funds, and Sovereign Wealth Funds) provide the upfront capital to fund proven preventative programmes.
- Paying for Results: The government or public sector only makes an outcome payment when measurable social results such as a reduction in NEET figures, improved youth mental health, or fewer hospital visits are independently achieved and verified.
- Achieving Scale: To attract the large institutional investment required, projects must be bankable and substantial. For example, in Scotland, a conceptual model has been discussed for pooling social value payments from public infrastructure projects into a national wealth fund to underwrite these large social impact initiatives. This model forces a critical systemic alignment, ensuring that funding is directed towards successful outcomes and shared ownership of health is established across all sectors.
A Call to Action The window for decisive action is open. To establish resilient economies and deliver on the promise of better health for all, we urge global parliaments and policymakers to enact the following three policy levers:
- Rebalance Investment: Prioritize a systemic shift toward prevention and early intervention, moving away from reactive “sick care”.
- Adopt New Financing Models: Secure structural funding commitments by embracing Outcomes-Based Financing (SIBs) and blended finance, thereby paying for results, not activity.
- Integrate Systems: Build local, community-led systems that integrate health with education, employment, and housing acknowledging that this cross-sector collaboration is essential for sustainable outcomes. The UK has established the Office for the Impact Economy, which is overseen by the Cabinet Office and all parties are engaging to ensure we bring these opportunities to fruition.
Financing health differently is no longer