Thursday, 14 February 2013

Squaring the Circle

Payment by Results is the new wonder solution for funding public services and lies at the absolute heart of the government's agenda for privatising the Probation Service. The totally-unproven methodology is a gift to politicians of all hues because it promises the Holy Grail of providing more for less and it's simple to understand. A contractor only gets paid if they deliver. Should be a doddle to sort out.

When first introduced into the criminal justice arena at HMP Peterborough by the last Labour administration but with cross-party support, I was enthusiastic. The scheme was accessing new money by novel means and targeting short-term prisoners who were not subject to any statutory support. But things have moved on. Even before there has been any definitive evidence that the scheme has been successful, further pilot projects have been cancelled by the government and the decision taken instead to roll out PbR as the basis for privatising 70% of core probation work.

One of the key supporters of PbR is Policy Exchange, a think tank of the right and according to Wikipedia:- 

"The New Statesman named it as David Cameron's "favourite think tank", a view shared by the Political Editor of the Evening Standard Joe Murphy, who referred to it as "the intellectual boot camp of the Tory modernisers."

So we know where they're coming from and for that reason alone their recent report 'Expanding payment by results - Strategic choices and recommendations' should be treated with a degree of scepticism. The synopsis states:- 

Prison bosses should be paid bonuses for meeting reoffending targets if the government's planned 'rehabilitation revolution' is to be a success.
Expanding Payment-by-Results argues that Justice Secretary Chris Grayling's plans to privatise the probation service, underpinned by a ‘payment-by-results’ mechanism, will only work if the prisons system is wrapped into the reforms and prison governors are directly incentivised to cooperate with the new private and voluntary providers who are due to take over probation services.
The report says that Grayling was correct to abandon the Ministry of Justice’s previous payment-by-results pilot programme as the scheme would not have delivered any results until 2017 at the earliest, was reliant on new sources of funding and measured success based on a badly drawn out model which focused almost entirely on working with offenders serving short term prison sentences of under 12 months. Allowing the existing pilot scheme to continue would have jeopardized the entire payment-by-results model. 

As the government consults on plans to roll-out payment-by-results across the whole of the criminal  justice system, the report makes key recommendations about reforming both the measure used to determine success in reducing reoffending, and the payment mechanism used to reward providers. 
It recommends:
  • The creation of prison league tables so that the public can judge the relative performance of different jails in cutting reoffending.
  • Abandoning the government’s preferred measure of reoffending: The ‘binary measure’ of reoffending, measuring the proportion of offenders in a cohort who reoffend, must be abandoned. It commands almost no sector support and is not the best measure of reoffending in a PbR system for either reducing crime or reducing costs.
  • Introducing a higher tariff for the most hardened criminals: Though there are a range of potential replacement options for the binary measure, the report recommends a simple system of differential pricing whereby providers would be paid a higher tariff for rehabilitating those offenders who are hardest to help. This will both cut crime and costs, and command sector support. It will also alleviate fears about ‘parking’ of hard cases and the ‘creaming’ of those who are easier to help.

You will notice that one of the key recommendations of the report concerns the method of payment and the need to move away from a 'binary measure'. In simple terms, if offenders reoffend, the contractor doesn't get paid - the very essence of the payment by results wonder solution. So why does the report say that such a method must be abandoned and that it 'commands almost no sector support?' Well the answer of course is that contractors are concerned that they won't make any money!  
Now this poses quite a problem for the civil servants currently beavering away trying to design a scheme for privatising the Probation Service. Politicians are basically simple people who like simple solutions. This is because they understand the public, who also like simple solutions. The 'binary measure' is very simple to understand being 'black and white' and is therefore very popular with politicians.
Unfortunately the big contracting boys, G4S, Serco, Amey etc all hate it. So how can the circle be squared? How can the contractors be reassured that they can make lots of money without fiddling the payment measure? It will be interesting to see. I notice that even Russell Webster has his doubts and he's normally pretty enthusiastic about PbR. 

Sign the No 10 petition here.


  1. Having done quite a bit of work on PBR policy related to the VCS and criminal justice I would endorse the scepticism expressed about its efficacy for either the private, public or voluntary sector. The original appeal of PBR was that the only measure of effectiveness was the achievement of the desired result (eg getting a job, achieving sobriety, etc.) and not the method by which an organisation achieved the outcome. This supposedly supported innovation and a return to professional discretion and judgment in managing cases. The attraction of the Peterborough PBR model was that the financing removed the risk from the provider and placed it on the 'investor'. In other words, private investors (charitable trusts in this case)agree a price with government to achieve an agreed outcome in relation to a group of offenders. If the outcome is achieved (eg 7% reduction in re-offending) the government repays the investors all of the money plus an agreed percentage on top (eg 5%). If the outcome is not achieved then the investors are not repaid. Meanwhile, the providers (St. Giles Trust and partners in this case) just get on and try to successfully resettle the offenders with the funding from the investors.

    1. Thanks for that. When writing a post about things you don't know a great deal about, there is always the danger that you are writing rubbish. To be honest I tend to be driven more by emotion than science, so contributions from experts such as yourself are always more than welcome.