Select Committee Special 2

Q114 Jo Stevens: Ms Thomas, if this had been piloted, do you think that we would have avoided all the problems we have heard about today? 

Yvonne Thomas: The honest answer is that, having been on both the delivery and the receiving end of pilots in government over many years, I suspect that, if anything had been piloted, it would probably never have happened, due to the complexity of this and the frequent change of administration in the course of it. 

Chair: That is very interesting. 

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The Justice Committee will be taking more evidence this morning for their inquiry into the TR omnishambles:-

Next meeting 28 March 2017 9:45 am

Oral Evidence Session Transforming Rehabilitation

Witness(es)

Professor Paul Senior, Chair, Probation Institute
Helen Schofield, Acting Chief Executive, Probation Institute
Ian Lawrence, General Secretary, NAPO
Ben Priestly, National Officer, Unison
Gabriel Amahwe, Director of Probation, Thames Valley Community Rehabilitation Company
Mike Maiden, Chair, Achieving Real Change in Communities (ARCC)
Bronwen Elphick, CEO, Durham Tees Valley Community Rehabilitation Company 

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I think it's worth reminding ourselves what the privateers told the Committee last week during their session:-  

Examination of witnesses Witnesses: Yvonne Thomas and Rich Gansheimer. 

Q74 Chair: Good morning, both of you. Thank you very much for coming to give evidence to us. Like the other witnesses, could you introduce yourselves and your organisations, for the record? 

Yvonne Thomas: I am Yvonne Thomas. I am the managing director for justice for Interserve. 

Rich Gansheimer: I am Rich Gansheimer. I am chief executive officer for MTCnovo. 

Q75 Chair: That is very helpful to us. In terms of names people are familiar with, Interserve, in particular, deals with a number of CRCs: Manchester, Merseyside, Yorkshire and Hampshire. 

Yvonne Thomas: Yes. We have five of the CRCs and handle about a quarter of the case load nationally. 

Q76 Chair: As I recall, MTCnovo deals with London, my local CRC, and Thames valley. 

Rich Gansheimer: Yes. 

Q77 Chair: You have heard the questions that were raised before. There are challenges here, aren’t there? Things are often described as patchy, at best. Why is that? Where do you think responsibility for that and for sorting it out lies? 

Yvonne Thomas: There are challenges. This is a massive transformation programme, and it is 24 months in. The challenges that I would highlight are some that have been referred to this morning. The first is the through-the-gate service, which has not been delivering what was expected, either from the CRCs’ perspective or from the offenders’ perspective. We tend to forget them in this sometimes. There are a number of reasons for that. In our case, mobilisation took longer than expected. We use an entirely third sector delivery model for our through- the-gate services. We were mobilising 19 prisons and over 160 third sector staff, so it took longer. The service started in May 2015, a few months after the contract. It is a very bureaucratic requirement. There are lots of forms to be filled in. There is not a great deal about through-the-gate. 

Q78 Chair: Is this a requirement set down by the MOJ? 

Yvonne Thomas: Yes. We get an average of £60 for a resettlement. We pay out a lot more than that, but, by the time you have filled in all the forms, it is still not enough. We are talking about a context where you are operating in prisons. The challenges there are well understood. Getting access to prisoners to do the resettlement work is challenging enough. In some prisons, when you get access to those prisoners, they are more or less receptive to what you are trying to do. There are a number of challenges. However, a through-the-gate service has to be local. With the blessing of the MOJ, we are now working with Leeds, Styal, Risley and Winchester, because there is an empowered governor agenda. We believe that those services must be defined locally and with the prison governor, for local delivery. That makes sense to us, not more national legislation on what we should and should not be doing in Leeds or Winchester. That does not work too well. The second area is relationships with sentencers. National Probation Service advice to the courts, through pre-sentence reports, has been increasingly under pressure, with more and more oral reports. That has meant that the relationship between CRCs, the National Probation Service and sentencers has simply not matured in the way in which it needs to. 

Q79 Chair: So you do not disagree with Mr Richardson’s point. 

Yvonne Thomas: Not at all. We have seen a considerable fall in, for example, the ordering by magistrates of accredited programmes, which are one of the few very evidence-based interventions that will reduce reoffending. That set of relationships is still very immature. Finally, Dame Glenys remarked on the sustainability of the service—the commercial issues. The payment mechanism is not working as was intended. I have to question some terminology that has been used with regard to “workload” and “case load.” Since we took over the service, case loads in our five CRCs have risen by between 25% and 47%. Those are the MOJ’s figures. The technical mechanism that is used to calculate the payment, which is called a WAV, has fallen by between 14% and 34%. Our workload is going up, but our payment is going down. 

Q80 Chair: You are making less money than you expected. 

Yvonne Thomas: It is not sustainable. 

Q81 Chair: Are you going to continue in the business, or do you intend to withdraw from the contract? 

Yvonne Thomas: There is a technical problem here. Really, that is down to the current review by the Ministry of Justice. All that we want is that the workload is reflected in the payment mechanism. We believe that there is a technical problem with it. It needs to be fixed. 

Q82 Chair: If it is not fixed, you are out. That is the truth of it, isn’t it? 

Yvonne Thomas: It starts to get very tricky. 

Q83 Chair: All right. Mr Gansheimer? 

Rich Gansheimer: There are five challenges I would like to talk to. They may have been repeated already this morning, so it will probably not be much surprise. The first is around managing expectations of such a large reform. We, the ownership of the CRCs, are a couple of years into this. I recognise, from a policy format, that reform has been talked about and legislation has gone through for quite a while—over a number of years—but operational delivery of this reform, at the CRC level, has been over just two years. Creating stability—financially, commercial and operationally—for the CRCs to be successful is critical here. Part of that is the discussion that we have already had. 

Q84 Chair: What is the position financially as far as your CRCs are concerned? Is the workload what you expected? 

Rich Gansheimer: We have had the pay mechanism, which we refer to as a fee-for-service mechanism, built into a fixed cost base. Clearly, there is a gap. The case loads have grown by approximately the same amount over time. Obviously, the award of cases has an impact on that. It is a matter of saying, “What happens to that gap in the middle?” That is where the investment goes— 

Q85 Chair: Do you agree with Ms Thomas that it is not sustainable at the moment? 

Rich Gansheimer: Under the current format, no. I agree with that. That is why the probation service review is being undertaken currently—for us to have those discussions and to find out what is sustainable and will work. 

Q86 Chair: Without a change, your company, too, would have to consider its future. 

Rich Gansheimer: The board would certainly have to make that decision. That line has not been drawn yet. We are engaged fully with that. 

Q87 Keith Vaz: Ms Thomas, how much is the contract worth to your company? 

Yvonne Thomas: I will come back to you with the precise number, but it is of the order of £80 million to £90 million a year across the five CRCs, to run a quarter of the service. 

Q88 Keith Vaz: It is £80 million to £90 million a year. 

Yvonne Thomas: Yes. 

Q89 Keith Vaz: Mr Gansheimer, yours is an American company, but it is operating here. Rich Gansheimer: We are MTCnovo. We are a joint venture here in the UK—partly American, but also a UK joint venture. 

Q90 Keith Vaz: What is the contract worth for you? 

Rich Gansheimer: We are in the same range. It is slightly lower— between £78 million and £88 million. 

Q91 Keith Vaz: Together, you will deliver 50%. Is that right? Ms Thomas, you are 25% of the total amount that is being delivered. 

Yvonne Thomas: In case load terms, yes. 

Q92 Keith Vaz: Mr Gansheimer, you are also 25%. 

Rich Gansheimer: Yes. 

Q93 Keith Vaz: In answer to the Chair’s question, if you decide that it is not financially viable and your shareholders start revolting against the board, because you are making a loss, you will just leave. 

Rich Gansheimer: I cannot answer specifically for our board. 

Q94 Keith Vaz: No, but if that happens— 

Rich Gansheimer: Clearly, there is a point at which a decision has to be taken. That is one of the options that would be on the table for discussion. 

Q95 Keith Vaz: So, yes. 

Yvonne Thomas: We think that the review is quite positive at the moment and that the MOJ is listening. We believe that this is addressable well within the original cost envelopes that were proposed. At the moment, you are operating hugely below the cost envelopes that were allowed. It seems entirely sensible to us that the review is taking place at this point in the process. There are some technical problems with the mechanisms, without a doubt. 

Q96 Keith Vaz: Sure. Ms Thomas, whom do you blame for this? Responsibility has to be placed on an organisation or an individual. That is what would happen in the private sector, isn’t it? 

Yvonne Thomas: Having been part of the team all the way through the discussions, the procurements and so on, I have seen this from the beginning. If we look at this and say, “What should people have known?”, the answer is that this was a first generation of attempting to do something quite transformative, so I sort of understand why we do not know everything. The predictions around volumes and case loads could have been more accurate, in that the expectation that was set was much higher—and much more in line with what we actually have. However, this technical mechanism is an overcomplicated payment mechanism. That was quite obscured during the development of the bid by the MOJ. 

Q97 Keith Vaz: Mr Gansheimer, you are obviously a very big company. You operate in America and here. Is it done better somewhere else? 

Rich Gansheimer: As far as the commissioning or the contract is concerned? 

Q98 Keith Vaz: Or whatever. Has somebody else got the secret of how this works? 

Rich Gansheimer: There is a lot of variation in how it works, in my experience, and I have been around a lot of different contracts. What I have found works best is that the work is clearly defined, the standards are clearly laid out, the expectations are clearly put to the providers and we are held to account to meet those expectations. 

Q99 Keith Vaz: None of that is happening here. 

Rich Gansheimer: I will not say that none of that is happening. I echo what Yvonne, my colleague from Interserve, has said about what was put out for bid and what we purchased in reality. It is not for me or MTCnovo to say, “Absolutely, that is the person to blame.” 

Q100 Keith Vaz: You were very clear on the five issues that you have just outlined. Would you have liked that clarity? 

Rich Gansheimer: Yes—clarity and stability around that being delivered. 

Q101 Keith Vaz: Which is lacking in this case. 

Rich Gansheimer: That is where the probation service comes in—to go back to the table and have that discussion. I also echo the point that, as this is a first-generation outsource, there are complexities around the commerciality of it, what needs to be delivered and so on. 

Q102 Mr Hanson: Did either of you do due diligence on the Ministry of Justice? It seems to me that, if you were entering into this sort of contract, you would expect the expectations that were put on you to have been thought through by the MOJ. Did you do any due diligence? 

Rich Gansheimer: That is a fair question. Yes, absolutely. The issue is when you go in and see the data that are presented. We had no reason to doubt the data that were being put in. That is what we were expected to bid to. 

Q103 Mr Hanson: You have been sold a pup, haven’t you? 

Rich Gansheimer: What has come to fruition from what we purchased has not happened, in terms of the volumes and some of the capability of some services. 

Q104 Mr Hanson: What would you say to those who say that you just saw pound and dollar signs yourselves and thought, “We will have a bit of that,” without thinking it through? 

Rich Gansheimer: No. When you bid for a service, particularly in the government sector, you always bid at a level of risk. This has certainly gone beyond the level of risk that we could have expected or imagined would happen so quickly. 

Q105 Mr Hanson: The question we have been talking about is, was any of this foreseeable beforehand? Did you anticipate that there was a risk of failure on your part, based on the terms that were set by the MOJ in 2012, 2013 and 2014? 

Rich Gansheimer: Let me be clear about your point. What was the question? 

Q106 Mr Hanson: Did you sense that there was an opportunity for you, but also a risk of failure, based on the terms that were set, or did you just see it as something that you could achieve because it was going to be dealt with by the MOJ on the terms that it had set? 

Rich Gansheimer: Based on what was laid out by the MOJ and what we felt we could accomplish, we felt that this was an opportunity that was worth pursuing. 

Q107 Mr Hanson: If this all goes belly up at some point, do you have any contractual liabilities towards the MOJ where you see it as not having met its part of the deal? 

Rich Gansheimer: There would certainly be discussions around that, in terms of what was known, what was not known and how that was presented at the time. 

Q108 Mr Hanson: The bottom-line question is, did you anticipate these difficulties when you signed the contracts in 2014? 

Rich Gansheimer: Not to the extent that they have occurred. As I said earlier, you certainly expect a level of risk to come into these contracts. That is not uncommon, especially with a first-generation contract. However, I do not think that we could have anticipated in any way the extent to which it has gone. 

Q109 Mr Hanson: Yvonne, do you differ from any of that? 

Yvonne Thomas: No. When we have been in discussion with the Ministry of Justice, all providers have expressed the view, to a greater or lesser extent, that if anyone did not do their due diligence, all eight did not. That is unlikely. The statistical basis for the contracts was very well laid out. We have to trust the customer—any provider does. If that is the expectation that is set, that is what you bid against. That is what we did. As Rich said, there is always risk, but there is risk that you know how to manage. That is why we enter this business. It is really important to say that, from the commercial perspective, the only way to make a decent return on these contracts is to reduce reoffending. That was a very attractive thing. You have to address the core problem in order to make these contracts worth running. 

Q110 Mr Hanson: How long does the MOJ have to sort this out before you walk? 

Yvonne Thomas: I do not think that there is any talk of walking at the moment. We are not at that stage. We are in a process of quite positive engagement. 

Q111 Mr Hanson: How long does the MOJ have? 

Rich Gansheimer: I would echo that response. As I said earlier, the line in the sand has not been drawn. We have not had that discussion. As long as we are engaged and are looking forward to a successful probation service review outcome, there is no reason to have that broader discussion at this point. As you can see, we are optimistic about the review. We have been very transparent throughout it. They have been engaged as well, as Yvonne said earlier. It has been a good process to work through these very challenging issues—no question. 

Yvonne Thomas: There is no reason why this mechanism cannot be fixed, if there is a will to do it. It will not cost the public purse any more, and it will address the issues. If that is the case, I am sure that it is not beyond us and the MOJ to fix it. 

Q112 Chair: Some potential providers pulled out at quite an early stage because they did not think that the contracts were viable. That was not the assessment that you made. 

Rich Gansheimer: I cannot say why they pulled out; I have no idea. I am aware that some did. 

Q113 Chair: Obviously, viability is an issue that you would all consider. 

Yvonne Thomas: My understanding is that one provider pulled out because it won a singleton contract. It expected to get more. 

Q114 Jo Stevens: Ms Thomas, if this had been piloted, do you think that we would have avoided all the problems we have heard about today? 

Yvonne Thomas: The honest answer is that, having been on both the delivery and the receiving end of pilots in government over many years, I suspect that, if anything had been piloted, it would probably never have happened, due to the complexity of this and the frequent change of administration in the course of it. 

Chair: That is very interesting.

Q115 Alex Chalk: Can I make sure that I understand? Some of the criticisms that have been made, including by Dame Glenys, are that the innovation that we were all hoping to see by CRCs is not really being delivered, which is a bit disappointing. Do you accept that? Whether it is your fault or not does not really matter. Do you accept that there is not the innovation that we might have hoped to see? 

Rich Gansheimer: I accept the criticism regarding innovation. At the same time, there is investment going into innovation. A lot of it sits in the ICT we talked about earlier. 

Q116 Alex Chalk: Forgive me; I do not mean to cut across you. Leave aside the investment for a moment. Do you think that it is delivering the innovation that we hoped to see? 

Rich Gansheimer: Yes. I think that there is a level of innovation. The challenges have been to bring it through. One of the big innovations is around case management—getting a single case management system that is pretty whizzy, in terms of being able to identify the needs of service users and offenders very quickly, to make referrals to the appropriate interventions and to make sure that we get that captured. As you have probably seen in numerous reports, the current system does not allow that. It is very clunky; we heard some previous testimony about that. We have continued to invest in further innovation around programmes. Has there been a pullback on some of that? Clearly, when the financials are not adding up, you have to make some financial decisions about what stays and what goes. As we talked about earlier, you have to work to a baseline to deliver these contracts, particularly around service levels. 

Q117 Alex Chalk: Very simply, the point is, “Less money, less innovation.” Is that fair? 

Yvonne Thomas: To an extent. I would not underestimate the level of innovation that is happening out there. In due course, as the inspectorate inspects more of the CRCs and wider case loads, it will start to see that. For example, there has never been a national service for the very chaotic, very complex people we deal with. That has now been completely invented and delivered across our five CRCs. That could never have happened under the old regime, and it is making a difference. On women’s services, we have everything from pop-up services to new collaborations between local authorities, PCCs and ourselves. There is a lot going on out there, and it is quite exciting. The frustration is that we talk about “the CRCs.” There are eight different providers, with many different models. All of them are doing some good things, and all of them are facing some challenges. You cannot take the worst of everything or the best of everything. 

Alex Chalk: That is fine. Understood. 

Q118 Kate Green: You have talked about the workload, which seems to be very heavy for you. What is not getting done? 

Yvonne Thomas: At the moment, because we were very cautious about our staffing numbers, everything that needs to be done around public protection, breaching and risk—the basics of running the service against the 102 probation instructions we are governed by—is being discharged pretty well. Case load ratios are starting to move up, which is worrying. We also have about 210 staff from the voluntary sector, who are providing a lot of the rehabilitative interventions. At the moment, we are holding it steady, but if these case loads continue to move and the payments continue to diminish, the first thing that we will do—as Richard will—is look at the discretionary spend. In our case, that is about £10 million a year. After that, you have to start saying, “If we can’t deliver this service safely, we shouldn’t deliver it at all.” We are a way away from that, but that is the inevitable consequence of the situation we are in. 

Q119 Kate Green: Are you sliding towards that? 

Yvonne Thomas: It is very difficult to say. This is not going to happen next week, next month or in three months. 

Q120 Kate Green: If the MOJ manages to renegotiate to your satisfaction to halt that trend, how quickly will that negotiation need to be complete for you to be able to make this viable? 

Yvonne Thomas: We would like to think that enough ground has been covered between the MOJ and the various providers to start getting something sensible in place during April or May. 

Q121 Chair: Were staffing reductions factored into your original bids? 

Yvonne Thomas: Yes. We took out quite a considerable number of management and administrative staff. We all have different views on, and different models for, front-line staff. We took about 160 people out of the original 2,000, but they were management and admin. 

Q122 Chair: That is the level that you had anticipated. It has not been more or less than you had anticipated. 

Yvonne Thomas: We have not taken out the level that we had anticipated. We just cannot at the moment, due to a combination of the lack of technology that was talked about earlier, which is quite a barrier, and the fact that the case loads are rising. 

Q123 Chair: What about your company’s operations, Mr Gansheimer? 

Rich Gansheimer: It is very similar. We have not been able to see the reductions through fully. We have one contract that is struggling with some of the basics. We have had to go back to the basics, to retrain and to do things of that kind. That has certainly not been reduced to where we would expect it to be. That is where some of the investment goes. We have another contract that we have been able to work to those numbers. We are doing pretty well in that area. 

Q124 Richard Arkless: Clearly, you have issues with the payment mechanism, which is causing you some alarm. Some of the things that you have been saying are quite alarming to us. On that basis, you will welcome the new review of TR. One of the things that you will hope it will assess is the payment mechanisms and how they work for you. However, what we are interested in is transforming rehabilitation for offenders. Clearly, you have financial concerns. Beyond that, in relation to the meat of the issue, which is transforming people’s lives, what would you like to see the review include or exclude? What action would you like to see come out of the review specifically in relation to transforming rehabilitation? 

Rich Gansheimer: I will allow Yvonne to answer for her company. For us, it is about the outcome and performance-based measures. As was mentioned previously, right now the service-level measures are a tick box; in other words, you are working to a specific service-level measure, so that you do not incur service credits. We want to be measured on the outcome—what we produce. Ultimately, what we have committed to is reduced reoffending. We want to be judged on what happens from the beginning to the end of the system, not on all the stuff that happens in the middle, where we incur high service credits if something does not go in exactly the way in which it should have gone, according to that service level. We want to be based and reviewed on the outcomes. That goes along with what Dame Glenys said earlier. 

Q125 Richard Arkless: How are those outcomes? If you were assessed just now, would they be positive? 

Rich Gansheimer: Obviously, we are measuring that right now. One of the payment mechanisms is payment by results. We have to have sight of that and are measuring it. We are using our data to measure where we think we are on that. It is still pretty early, because the final outcomes will come later in the year. We always put a caveat around our data on reducing reoffending, but we see good signs of it. 

Yvonne Thomas: What we are hoping for out of the review, apart from discussions about the sustainability of the service, which is central, is that the through-the-gate proposals will embrace the empowered governor and local need. We want this service to become more local and to represent its communities. We want to be incentivised to build on the innovation and some of the early results that we are seeing, particularly in respect of services to young men under 25, women and black and minority ethnic communities, supporting those with the most complex needs. We would welcome further and higher bars on those things, although we think that we are already achieving some of them. On the issue of what we want to be measured for, as I said to Mr Hanson earlier, this service does not work either as a service or commercially unless you reduce reoffending. We have now had the first six months of data from the Ministry of Justice. If we look at our own five, by the end of this year, 2,000 people who would have offended will not offend, if the current trends continue. The service is beginning to work. It needs to be given a chance and a little more support, for the sake of our staff, who are out there doing a difficult job. That is all that we want—to reduce reoffending. 

Q126 Chair: How do you square this reduction in bureaucracy with the aspiration of the chief inspector that there should be greater specification of standards? 

Yvonne Thomas: One hundred and two probation instructions are quite a lot. Maybe the existing standards could be better orientated. There could certainly be fewer of them that were more appropriate and more strictly enforced. 

Q127 Chair: Is that something that you want to have covered in the review? 

Yvonne Thomas: That would be helpful as an ongoing piece of work between the NPS, the CRCs and the inspectorate. 

Q128 Chair: It has been suggested, of course, that the way in which the payment structure works is an incentive for you not to report breach. Is that a fair observation? 

Rich Gansheimer: I do not think that that is something we have ever talked about. Clearly, we want to ensure the integrity of the system. We want to make sure that we do not automatically breach or recall and that we have worked with service users and offenders to make sure that we have maximised everything we can, to ensure that they have no arguments. 

Yvonne Thomas: Yes—not in front of me. [Interruption.] 

Chair: The House is just sitting; that is what the bell is for. It is a good time to conclude our evidence session. Thank you both for your time.