Private investors are being encouraged to buy social impact bonds – part of a pilot scheme to help lift families out of poverty and deprivation.

The minister for civil society, Nick Hurd, launched four pilot schemes last week in Hammersmith and Fulham, Westminster, Birmingham and Leicestershire to raise £40m to support local families affected by issues such as anti-social behaviour, crime, addiction and poor education.

Investors will be able to buy bonds, which will then fund interventions. If these are judged to be successful and the families are lifted out of deprivation, then the Government will repay the investments with a ‘decent’ return.

The first bonds are expected to be up and running by spring 2012.

‘Family intervention demonstrates that the lives of children and young people can be turned around when their families, who often have many complex problems, are targeted intensively,’ said children’s minister, Tim Loughton.

‘This is also a more efficient way for local authorities to work, as evidence shows that fewer children are taken into care or excluded from school,’ he added.

The chief executive of 4Children, Anne Longfield, said the bonds would provide ‘much needed’ investment.

‘The Government’s clear backing shows its huge confidence in the scheme, and we now need the financial sector to get behind the approach,’ added Ms Longfield.

‘The economic and social gains for all those involved will be enormous.’

The National Council for Voluntary Organisation’s (NCVO) policy manager, James Allen, said the idea of social bonds had potential and he was pleased the Government was piloting the four schemes.

Mr Allen said the NCVO was monitoring a pilot bond scheme in Peterborough, which aimed to reduce ex-prisoners re-offending, but said it was too early to tell whether it had been a success.