Grayling's Secret Revolution

Apologies for not posting something this morning, but a birthday party-induced hangover precluded this and the comments thread from yesterday has become confusingly long. So, this might turn out to be Monday's post, but published early as a platform for more comments, if nothing else. 

Thanks to Mike Guilfoyle for pointing me in the direction of this blog post by Richard Johnson on the Buying Quality Performance website 'Grayling's Secret Revolution' and here are some edited highlights:-

Chris Grayling, the UK’s Secretary of State for Justice and “Tory attack dog”, is about to do what Thatcher and successive Prime Ministers (of all persuasions) were unable to achieve – throw the public sector open to total privatisation.

This is evidently and undeniably the transfer of the service from one business to another. As the Ministry of Justice stated in their original brief on this ‘rehabilitation revolution’:

“We expect that the majority of staff currently performing probation roles will transfer to new providers. These transfers will occur under statute, and in their new roles staff will have the opportunity and flexibility to work on rehabilitating offenders. We will take a sensible and managed approach to making this transition.”

As such, the employees who are shifted from an existing probation trust to a new CRC and onwards to a successful bidder might reasonably expect to be protected by TUPE, the Transfer of Undertakings and Protection of Employment (TUPE).

When a local council, for example, outsources refuse collection, looking for cost saving, TUPE is legislation that protects the outgoing employees, preventing the incoming contractor from realising savings by simply slashing the terms and conditions of the staff. They can, and invariably will, redesign the service and this will lead to redundancies. They will employ any new staff on different, cheaper terms and conditions. But those original transferring employees retain their salary levels, their right to redundancy payments and, crucially, their pension rights.

It is this last element, not political conviction or union determination, that has stood in the way of wide scale privatisation of public services. The size of the pension liability has meant there has been no market for much that could theoretically be outsourced. There has been no one – not Serco nor G4S and certainly no smaller or third sector organisation – willing or able to shoulder the risk.

Of the 139 prisons in the UK, only 14 are privately run. Of these, all but one are new build (PFI financed). If a prison is built from new, there is no transfer of existing service and therefore no staff to transfer with their public pension liability.

Grayling, however, has waved his magic wand and made this problem go away for his ‘rehabilitation revolution’. The new CRCs are not being transferred to incoming contractors – they are being sold for £1. Because this is simply, therefore, a change of the shareholder, TUPE does not apply.

Additionally, all historic pension liability is to remain with the Ministry of Justice. The ongoing cost of pension contributions becomes the responsibility of the new shareholder/owner, but at a reduced rate. Some redundancies will be made prior to the sale of the CRC and then, in the first year, the cost of further redundancies will, at least in part, be covered by the Ministry.

The outsourcing of probation may result in reduced cost and a decrease in reoffending. Virtually everyone I talk to in probation acknowledges there is considerable waste and inefficiency in the system. The professionals within the industry, and in many of the impressive charities in the sector, point at well-evidenced service revisions/extensions that could reduce recidivism.

The point is, however, that under cover of this procurement there is a secret revolution of a different sort. If this model of shareholder switch can be applied to probation, thereby creating a market where one could not exist before, then why not apply it to everything else? How soon before prisons are turned into Incarceration and Rehabilitation Companies and ‘sold’ to incoming contractors?

When coupled with price competition, it is highly likely that the organisations winning some of these probation contracts will be those that offer the worst terms and conditions for their staff. As discussed previously on this blog, this was not the case in welfare-to-work contracts such as the Employment Zones, when fixed outcome payments incentivised investment in frontline services in order to earn higher rewards from higher performance. It is always the case when cost becomes the overriding consideration – when the procurement of a service like offender rehabilitation is treated like the procurement of paperclips.

Then there is this in the Observer today by Will Hutton. Writing on the theme of 'the public sector isn't perfect, but it doesn't fleece us', he eventually gets around to our situation:-

Then there are Serco and G4S, with their litany of failures as holders of government contracts. The root of their difficulties is, whatever their original virtues, both have built a culture in which exploiting, rather than serving, the customer comes first – whether it's Serco charging the state for electronically tagging prisoners who did not exist or G4S woefully underproviding security guards for the Olympics. The same dynamic – transient, greedy owners and pay systems that over-reward short-term financial success and cutting corners – produces the same result.

Now large parts of the probation service are to be run in the same way by the same kind of company, with the justice secretary, Chris Grayling, absurdly promising more " reform" and "efficiency". He is outdone by his colleague Dan Poulter at health, selling off 80% of Plasma Resources UK, the NHS company that secures blood plasma for British patients, to Bain Capital, the private equity company built by presidential candidate Mitt Romney. Bain's sole interest is financial, constrained only by its fear of a reputational disaster if patients start dying as it cuts costs and over-rewards managers who try to fleece the NHS, as they necessarily will. Who could consign the provision of blood plasma to such custodians? Only a fool, knave or Tory politician.

The NHS takes a daily pummelling, but enter its portals and a very different culture rules. Despite all the efforts of successive New Labour and Conservative ministers intent on reproducing the private sector "disciplines" that so animate Lloyds, Bombardier, Serco, G4S et al, it still manages to combine humanity and efficiency. Its systems are not extravagant, but there is a sense, as I recently discovered with a close family member in a long spell in hospital, that the patient remains at the centre of everyone's preoccupations.

The public sector is imperfect: it is run and operated by fallible human beings. There are spectacular failings, ranging from the BBC's wasted £100m on its digital media initiative to the unfolding IT disaster over universal credit. But what it does not deserve is universal castigation because a priori it must be useless. It is accountable. It does not loot its users. It is pretty efficient. It is humane.