Thursday, 16 March 2017

Grayling's Secret Revolution

Well, while we wait to see if anything interesting comes along, such as comments on the new NPS E3 document, let's continue down memory lane and revist this blog post by Richard Johnson on the Buying Quality Performance website from 2014:- 


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.

Grayling’s so-called ‘rehabilitation revolution’ entails taking the existing probation service, currently sitting within relatively independent local trusts, and cutting it in two. Around 30% of services (mainly assessment of the risk posed by offenders and then management of the high risk ones) will be retained within a new, public sector, National Probation Service (NPS). The remaining 70% is hived off into wholly separate Community Rehabilitation Companies (CRCs). This split was due to take place this April, but has been delayed slightly and will come into operation around June 2014.

Meanwhile, the services delivered by those CRCs are being packaged up and contracted out. The complex competition for these contracts is ongoing, with tenders to be submitted sometime around Easter and contracts going ‘live’ towards the end of the year. Basically, on contract award, the CRC in each area will transfer to an incoming contractor; along with its staff, systems, premises, and any subcontracts with local/specialist providers. In some cases, the incoming contractor may be the CRC itself, having turned itself into a new ‘mutual’ company, raised investment and then successfully bid to take itself over. In most cases, the contract will be secured by an incoming bidder, probably from the private sector, possibly in some form of ‘partnership’ with one or more third sector organisations.

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.

Incoming contractors should be required to:

  • Accept nationally set terms and conditions for staff, including the living wage as a minimum (crucial in London);
  • Demonstrate a resourcing strategy that recruits positively (including from disadvantaged groups), grows skills, develops people;
  • Evidence their active participation in development and promotion of professional standards in the sector/industry;
  • Demonstrate proactive, positive partnership with local communities, including recruitment and development of local people.
Failure to take proper account of the people and communities caught up in public contracting means:
  • Erosion of employment quality, with a loss of motivation and increased turnover;
  • The draining away of experience and skills;
  • More services delivered by staff on lower grades;
  • Reduced investment in staff development;
  • A service that de-professionalises;
  • Disconnection of services from local needs;
  • Deepening of disadvantage in the labour market, such as that experienced by people with disabilities.
These all in turn mean an erosion of service impact. With a reduction in impact of something like probation, the real value of the service is eroded, so that what seems cheap in the short-term represents a long-term cost.

Posted by Richard Johnson on February 8, 2014


More recently, Richard had this to say when considering the replacement for the Work Programme:-


The Department for Work & Pensions (DWP) have just commenced buying the new Work and Health Programme. This will replace the existing Work Programme, which has run since the coalition government came to power. It will be the layer of services, contracted out mainly to private sector ‘welfare to work’ providers, that is intended to assist long-term unemployed people who have been signing on for two years with Jobcentre Plus and still cannot find work, plus a few with ‘health conditions or disabilities’. Unfortunately, it will be an almost total waste of its £550 million; and of thousands of lives.

Ten years ago, DWP spent about £1 billion, per annum, on outsourced ‘welfare to work’ services for people on Jobseekers Allowance. Maybe £1 billion more was spent helping people on Incapacity Benefits. In comparison, the Work and Health Programme will cost £550 million over four years, i.e. just £137 million per annum, and must cover all categories of unemployed people.

It will be a waste of this money, and these lives, for the same reasons the Troubled Families £400 million initiative failed (evaluated, in a government report, as having had “no discernible impact”) ( The outsourcing of probation services, with contracts worth around £3.75 billion, will fail to deliver in the same way (FT article).
UK probation deals are failing, say providers
Companies say they were given misleading figures when bidding for £3.7bn contracts. Almost every contract to provide probation services in England and Wales is lossmaking, according to the companies that bid for them two years ago when the system was privatised.
The government part-privatised its probation service in 2014, awarding £3.7bn of contracts to companies including Sodexo of France, MTCnovo of the US, Ingeus of Australia and Staffline, Interserve and Working Links of the UK to oversee 200,000 medium and low-risk offenders. But the companies say the contracts are lossmaking and unsustainable because their bids were based on incorrect assumptions from the Ministry of Justice. The companies complain that the contracts overstated the number of offenders they would manage, suggesting their income would be higher. The number of community-based penalties declined from 40,805 between January and March 2014 to 35,892 in the same period in 2016.
“If it is not fixed it will be a disaster,” one provider said. “It is fine for the big companies with strong balance sheets but some of the smaller players are really struggling.” Talks to renegotiate the terms between the companies and the ministry since January have stalled and at least one provider has threatened to pull out. “All our energy is going into working this out,” said one manager at a company providing probation services. “If you are 15 to 30 per cent down on business that will mean having to reduce staff and that will have a knock-on effect on our ability to reduce reoffending. To say it’s a cock-up is an understatement.”
Several companies said they plan to cut jobs and close local offices, undermining the government’s promise that the privatisation would lead to a “rehabilitation revolution”.
The failure is not a failure of outsourcing. It does not prove that contracting things out cannot deliver cost-efficiency and more effective services. It certainly does not show, as DWP appear to be arguing now, that paying providers on the basis of outcomes is a bad idea. Nor does it demonstrate that it is impossible to extend assistance to those most in need of help and to turn round their lives.

What it proves is that there are some simple, fundamental rules to effective contracting of public services, particularly when targeting those in trouble. If these rules are ignored, then it is inevitable that the service will fail.

First of all, an outcome-based contract – ‘payment by results’ – is by far the best model. It cannot be applied everywhere, but if the outcome can be clearly defined and measured, and attributable to the intervention, then outcome-based contracts can powerfully align the incentives of the service provider and the purchaser. After all, they only get paid if they give you what you want.

The mistakes really started to be made when the old Work Progamme was contracted, back in 2011. This is when two basic truths were ignored:

One: Competing contracts on price ultimately drives service quality to the cheapest bottom.

You create a ‘winner’s curse’, with the winning organisation doing so because they have undercut everyone else, probably cynically. Far better to fix a unit price, then give the contract to the organisation which can demonstrate how they will deliver the most units – compete on performance not price. This is particularly true for the outcome-based contracts, in which you surely want to incentivise the contractor to take risks, to innovate and to spend more, pursuing profit through ever better performance. If they have competed on price, their incentive is to mitigate risk, and chase profit through cost cutting.

Two: There is a relationship between what you put in and what you get out.

Behind the price the organisation agree to deliver for, there is an operating model that defines things, such as caseload sizes and frequency of contact with service users. The less money, the bigger the caseload, the less the contact, ergo, the lower the level of assistance. If the prison is cheaper, the costs will have been stripped out of somewhere, whether that’s books in the library, hours spent outside cells, or the salaries paid to the guards.

Operational reality also means that if you take a large sum of money and spread it over a large population, it becomes a very small sum per person. The Troubled Families initiative failed because all that money spread over all those households becomes no more than the price of a sticking plaster per family.

If the Work Programme ignored these basic truths, the new Work and Health Programme is rudely mocking them. It is going to mean a small concentration of services in large urban areas, with nothing in smaller towns or rural areas. Specialist services will be nonexistent. The mental and physical health of the ‘hardest to help’ individuals and communities will simply be allowed to deteriorate, their social exclusion a spiralling social (and fiscal) cost.

Unfortunately, a number of contractors will go to the wall in the inevitable consolidation of the market – two or three of the large private sector players will be left. Though they only really have themselves to blame since they were complicit in the gung ho price competition of the Work Programme. They said nothing when DWP stopped reporting on programme performance. They quietly redrew their operating models so they could focus, cheaply, on the easiest people to help and actively ignore anyone remotely complex. They made their bed, and now must lie in it. It is just a shame that so many of the people they were supposed to be helping will be left out in the cold.

Posted by Richard Johnson on November 23, 2016


Richard is a Senior Consultant for the World Bank, advising on the use of outsourcing and outcome-based contracts, as well as active labour market interventions. He has been working on employment programmes in Saudi Arabia and Oman. He is currently engaged in Afghanistan on: an outcome-funded labour migration programme and; an employment programme for school leavers. He is also exploring the potential use of Development Impact Bonds targeting women’s employment, business incubation, adult literacy and community power sources.

In the UK, he is Chair of the boards of two Social Impact Bonds, using social finance (including from Bridges Ventures, Big Issue Invest and Big Society Capital) to enable third sector delivery. These are: the Teens & Toddlers programme in Greater Manchester, putting troubled teenagers on work experience in local day nurseries in order to improve their school attendance and attainment, and; Local Solutions in Liverpool, deploying Intensive Mentors to reach young homeless people with very chaotic lives.

Richard worked with ACEVO (the Association of Chief Executives of Voluntary Organisations) to help third sector organisations respond to the outsourcing of probation/offender rehabilitation. He advised a London Borough on how to stem the rapidly rising deprivation resulting from the economic crisis and exacerbated by central and local government spending cuts – leading to the creation of a team of ‘Service Navigators’. He was Specialist Adviser to the Work and Pensions Select Committee during their enquiry into the Work Programme.

Richard was Managing Director of Serco Welfare to Work from 2007 to 2011, building the business from scratch to a turnover of just under £100m. He created and implemented Serco’s innovative new prime contractor model for welfare to work, delivering Flexible New Deal through local networks of 75 public, private and third sector providers. With Serco delivering no frontline services themselves, there was a clear separation between the prime and the provision, mitigating the risks of creaming and parking, and increasing service impact through the organisation and management of the networks.

Previously Richard had set up one of the first Employment Zones, in Brent, and also ran the EZ in Tower Hamlets – the first large scale outcome-funded outsourced contracts. Richard then established WorkDirections (now called Ingeus) in the UK and grew the business from 3 people to 300 over a five-year period, building a reputation for service innovation and integrity.

Richard had an early career in international education: teaching at a prep school in Khartoum; lecturing at a university in Northern Cyprus; academic director for a chain of language schools in Athens; designing the first children’s examination in English as a Foreign Language, now taken worldwide; and running ESOL and EFL at a College of Further Education.

Richard studied Philosophy and Psychology at Oxford, and Applied Linguistics at Exeter.


  1. I wonder out of how many of the CRC's bid model is actually showing to be working effectively or even implemented. IT failures, staff redundancies, contractual deadlines not met, CRC fines for breaches, manipulation of stats and process to tick contractual boxes. And somewhere in all this chaos they claim the service user is at the heart of the model. What a load of shite. Would like to get the stats on this lot from around the country, how about it Jim ?
    As a starter I heard Seetec model isn't working and as soon as they are contractually able they intend to change it. Would you credit it, Seetec model actually came from an ex NAPO vice chair Nigel Bennett leading Seetec bid team. The 'offender journey' separated into 3 functions of assessment, rehab and resettlement. Originally Sarah Billiald Kent probation Trust Chief was bidding as a social enterprise then pulled out claiming morality issues. Its been chaos for over 2 years and what do you know Seetec will be putting rehab and assessment back together. How many other ex NAPO officers or officials have 'souled' out? In September 2015 the Independent wrote “Revolution is a potent word the Government may regret using to describe its reforms to rehabilitation. After two years these are far from complete and there remain serious risks to achieving the performance levels expected by the end of 2017.”

    How many models continue to fail or never got off the ground and failing. How many ex officios will regret getting blood on their hands from this mess ?

    1. Manchester's interchange model is not being applied so its failed. Or more appropriately its not fit to be applied as are all the other CRC's models.

    2. First I've heard of Nigel Bennett ever having been a Napo Vice Chair. You must mean of a Branch? He used to work as an SPO in Lancs and wasnt VC here. Where was it?

  2. 'They made their bed, and now must lie in it. It is just a shame that so many of the people they were supposed to be helping will be left out in the cold.' THIS.IS.UNNACEPTABLE. Reads like, 'Bit of a fuck up old chap. Ah well, must do better next time contracts are awarded to get it right.' Sad thing, I think it is precisely what will happen.

    1. - very interesting article on Interserve - concerns however how / where they're going to re coup their lack of finances from.
      As I've previously said in the blog yes we all agree the GGM Interchange model is failing because it's ineffective - however why should that bother the powers that be as they plan to relaunch it !!! I think with the hope that as staff " we get it " second time round ( bloody highly unlikely me thinks )


    3. With a debt burden 1.3 times the market capitalisation, Interserve PLC’s (LON:IRV) new boss will have a lot of repairs to do, Peel Hunt says.

      Debbie White will replace Adrian Ringrose as chief executive on 1 September.

      Given her support services/finance background – Peel Hunt declared itself impressed by her 13 years at French facilities management giant Sodexo – she might be tempted to radically refocus the group.

      However, given the continuing risks from the Waste to Energy money pit plus the growing debt mountain, the window for proactive change is limited, the broker reckons.

      On the other hand, ‘steady as she goes’ is not really an option, and the new boss needs to perform some drastic surgery to strengthen the balance sheet and position the construction and support services firm for higher quality earnings growth.

      “Debbie’s inevitable strategic review must surely place Equipment Services back on the potential disposal roster and also give consideration to the positioning of the UK and Middle East Construction activities,” Peel Hunt postulates.

      “The principal earnings/balance sheet risk still rests with the Energy from Waste contracts (principally Glasgow and Derby). The £160mln provision, still a “best estimate”, relies on certain recoveries and assumes the ‘process’ technologies will work,” Peel Hunt notes.

      “We believe that it could be at least 12-18 months before any real clarity can be provided on the provision, but our experience would suggest that there is still a risk of material increases,” it added, as it moved from ‘hold’ to ‘reduce’.

      The target price has been cut from 250p to 200p, some 24p below the current share price, which was down 4.3% following the downgrade.

      “Following the suspension of the dividend, there is no yield support and realistically then little likelihood of any pay-out before 2019. Interserve remains a high risk investment proposition and the incoming CEO has some big decisions to make,” the broker opined.

      “Too many risks for us,” it concluded.

    4. STAFF at a major employer in the region have told how cuts to contracted hours and increased workloads have seen them stretched to breaking point and in fear of their jobs.

      Sodexo, an international firm supplying catering, cleaning and retail contracts, employs hundreds of staff in Catterick Garrison, mainly in roles supporting the Army.

      In September last year, The Northern Echo reported on fears expressed by some of the then 850-strong workforce who had been told about planned restructuring to make efficiencies within the business, which is involved in a competitive tender process to maintain its garrison contracts.

      An employee who works in one of the Army kitchens said after a consultation with staff which finished at the end of February, many chose to take voluntary redundancy rather than see their contracted hours cut to an extent they could not afford to remain.

      The employee, who asked not to be identified, said: “In my kitchen there used to be seven chefs and now there are just two, and the contacted hours have also been reduced.

      “So there are less people to do the work, and less hours to do the work in – there is no room to manoeuvre so if anyone is sick, or on holiday, there is no one to fill the gaps.”

      He said he wrote to management last year to warn that staff were being cut to dangerous levels but nothing was done.

      “At the same time Sodexo was cutting hours, they also introduced a new menu system which involved a lot more preparation – it is madness.

      “In our kitchen, the management have underestimated our workload by around 3,000 meals in a week.

      “We are open from 6.30am to 6.30pm seven days a week, providing three meals a day. But what has not been taken into account is the daily extras including making hundreds of pack lunches and container hot meals for soldiers.

      “We have just been told to get on with it.”

      He revealed that staff were already taking time off work due to stress and depression.

      “We are being stretched like elastic bands – at some point we are going to snap.”

      Sodexo did not respond when asked how many staff were currently employed at the garrison.

      A spokeswoman said: “We always welcome feedback and we urge customers to raise any issues in our customer feedback books. We also encourage our staff to raise any concerns they have about their roles with their manager so that they can be addressed.”

  3. Problem is this government will refuse to acknowledge or accept the failures, someone or something will be the scapegoat never the idealised 'privatisation' or 'transforming rehabilitation agenda'. The stats will be fiddled and real impact to staff and service users never fully reported.