Privatisation On The Wane

As speculation grows as to exactly what the MoJ has up its sleeve in order to fix the probation omnishambles, I've been pointed in the direction of this article on the Public Finance website from February regarding the whole vexed topic of privatisation post-Carillion:- 

Coming home: local government insourcing

The collapse of contracting giant Carillion one year ago sent shockwaves through both the private and public sectors. It was Britain’s second largest construction company, and its liquidation has been named as the “largest ever in the UK”. Creaking under the weight of £1.5bn in debts, Carillion’s demise, according to the National Audit Office, cost the public purse £148m as it picked up 420 abandoned public service contracts – in organisations ranging from schools and hospitals to prisons and the armed forces.

At the policy level, the Carillion story led to a thorough interrogation of the outsourcing model. Outsourcing had grown in popularity since being kickstarted in the 1980s by then prime minister Margaret Thatcher, when local authorities were effectively forced to open inhouse services to the private sector to cut costs. From 2010, outsourcing was championed enthusiastically by Cabinet Office minister Francis Maude, whose Open Public Services white paper set out plans for a diverse marketplace for public services.

What a difference five or six years can make. MPs on the works and pensions, business, and public administration committees all made some trenchant comments. “The failure of Carillion reflects long-term failures of government understanding about the design, letting and management of contracts and outsourcing,” said the public administration committee in its report last summer.

The Carillion crisis gave opponents of outsourcing ammunition to launch a full-scale attack, and the government has had to shift position. Current Cabinet Office minister David Lidington has reaffirmed the government’s commitment to outsourcing, but intends to bring in a raft of new regulations to improve transparency and secure social value. A ‘living wills’ pilot is testing contingency arrangements in the event of another Carillion-style collapse.

Despite this, the debate rumbles on, especially with ongoing concerns over another large government contractor, Interserve. This company’s troubles also became evident at the start of last year and it has been battling to stay afloat ever since. In December, it was seeking a second rescue deal as it struggled with £500m of debt.

Interserve has so far survived, with the government allowing it to continue to bid for public contracts, confident that it is not in the same dire financial situation as Carillion. But it will surely have spooked a local authority sector that looks like it was already starting to have second thoughts about outsourcing, as PF reported in March last year.

We highlighted Southwark council, which saved £4.35m after bringing its customer services back inhouse in 2013. Now, an exclusive PF investigation via freedom of information requests shines a light on council outsourcing over the past five financial years. It reveals a dramatic slowdown in the amount of money local authorities have been spending. Carillion’s collapse happened towards the end of the period that PF examined: was it the nail in the coffin for local government outsourcing?

FOI responses from 60 councils across England show a stark tailing off in the value of outsourced contracts. Where there was a 39% increase in the value of contracts between 2013-14 and 2014-15, this had almost flattened to just 1.6% between 2016-17 and 2017-18, with much smaller rises in the intervening years.

The most common services outsourced over the five-year period were waste management (17% of respondents), facilities maintenance and management (17%) and leisure services management (13%). A range of contracts were signed over the five-year period, from snow clearing to waste management to stray dog kennelling.

There were fewer similarities in the services councils chose to insource during that time, with authorities bringing back inhouse everything from cleaning services to highways maintenance to IT services. PF analysis finds examples of councils that have made considerable savings by bringing services back inhouse. East Riding of Yorkshire Council is one of the councils that put a figure on how much insourcing had saved it. The local authority has reduced costs by £2m since 2013 after bringing back inhouse services like staff training, occupational health, payroll, IT and print and design. The council did not respond to questions from PF on why it made these decisions.

Derby City Council has also saved more than £1m in the past two years after bringing highways maintenance – a contract previously held by Carillion – back under council control. David Kinsey, head of highways, says: “We were confident we could run things more efficiently.” He points out this was not because the council was unhappy with the service provided by the contractor. “It would be easy for me to sit here and say it was all because of the big bad contractor, but, actually, when we reflect on it, there were questions to be asked about whether we were writing the right contracts and whether we managed them effectively.”

Notably, not all contracts brought back under council control have been successful. Maidstone Borough Council brought a cafeteria within council property back inhouse at a cost of £220,000 between 2016 and 2018, but subsequently decided to re-outsource the management. Laurence Tricker, programme and projects manager at Maidstone, explains: “The decision was made based on a period of trading by the council during which losses were made. Since being contracted out, the café provides rental income and we have reduced our overall management costs.”

The membership organisation the Association for Public Service Excellence surveyed 208 senior local government officers in 2017, before the Carillion collapse. It found that 73% had or were in the process of considering insourcing a service, with 45% having already completed the process. APSE’s head of communications, Mo Baines, says it was austerity that had driven “an increased need for efficiencies and improvements to service quality”. She adds: “While major contract failures like the collapse of Carillion have focused minds, its contribution to the volume of insourcing in local government is of less significance than those contracts already being insourced by local councils.”

Mayor of Hackney Philip Glanville says his council has been on a 10-year journey to bring services back inhouse. “There has not been an example that I am aware of where we have brought something inhouse and it has not cost us less to deliver that service,” he tells PF. “We have seen that at almost every step you get a more coordinated response, save money, create better services and improve terms and conditions for the workforce.” Between 2010 and 2014, the council brought back inhouse its recycling services, saving £600,000. It also took back control of its housing management service, reducing its costs by £300,000.

Matt Dykes, senior policy officer at the TUC, believes outsourcing has had its day. “There has been a growing trend for taking services back inhouse,” he explains. “Someone might suggest that we have reached peak outsourcing – there’s not much else now that can be externalised, and councils are down to core services only.” Colin Haslam, professor of accounting and finance at Queen Mary University of London, agrees that local authority outsourcing has reached its peak. Many councils had already started the process of “remunicipalisation” as he calls it – the localised provision of services.

Haslam believes the Carillion collapse is likely to mean more local authorities will bring services back inhouse, because of “an increasing risk in relation to the large corporate outsourcers, like Capita, Serco, G4S and Carillion”. Outsourcing commentator John Tizard also agrees that Carillion’s legacy is likely to be muted local authority interest in outsourcing. “There have been some very high-profile failures in outsourcing, which has made many in the public sector – not least local government – question [its] usefulness.”

Tizard tells PF that the backslide in outsourcing is partly because of the lack of financial flexibility the model offers. “In a period of tightening budgets, austerity and uncertainty, it is increasingly recognised that long-term contracts, which lock up sizable parts of your budget, further reduce financial flexibility and consequently the ability to protect frontline services that are not outsourced,” he explains.

A survey by the New Local Government Network from October last year suggests that Carillion has “dented public confidence in partnership arrangements”. NLGN’s poll of nearly 200 council leaders found that 39% wanted to outsource less over the next two years, compared with 15% who were looking to outsource more.

Jessica Studdert, deputy director of NLGN, echoes Tizard. “To cope with financial and demand pressures, councils are increasingly finding they need more flexibility and direct control over services – outsourced contracts tend to be long-term and can be unresponsive to changing circumstances,” she tells PF.

With no sign of financial pressures on councils easing, it could be easy to see why long-term and costly contracts with third parties would appear less attractive. It is not just the local government sector’s views on outsourcing that might have been damaged over the past year. Haslam claims private providers have become “increasingly defensive about taking on any further contracts, and are even handing them back”. Private contractors often view government contracts as too “onerous”, pushing them into loss-making positions, he suggests.

Tizard agrees that the private sector, too, is re-evaluating its position in a post-Carillion world. “The likelihood is that they will increase their risk premium in their charges – I think many contractors will now be looking for a better return and therefore higher charges,” he predicts.

Kerry Hallard, chief executive of the Global Sourcing Association, an industry group, believes local government outsourcing should continue and that Carillion’s failure was not a result of this method of service provision. “Carillion wasn’t an outsourcing failure. Carillion was a corporate governance failure,” she tells PF.

Hallard expresses disdain for the “anti-outsourcing rhetoric” that followed Carillion’s liquidation, including government comments. “There’s no positive communication that comes from government, it is just obsessed with kicking rather than applauding its service providers,” she says. But Hallard concedes that outsourcing is not always effective and that there is scope for change. “Outsourcing shouldn’t be focused just on driving out cost any more – that’s old school,” she claims. Instead, she believes greater efforts should be made to bring SMEs into the fold, with fewer contracts going to the small number of big players.

In Hackney, Glanville agrees there needs to be greater consideration of SMEs in the government’s portfolio of contractors. “Too often, big companies are going through the motions and delivering poor-quality services,” he tells PF.

Walter Akers, partner at consultancy RSM UK, explains why local authorities might prefer larger contractors: “There is a bias towards larger organisations, because they score better on risk and in the procurement process because they’ve got scale, they’ve got strong balance sheets – they’ve got experience.” He also believes Carillion should be a wake-up call for councils when entering into contracts with large private organisations. “Councils think they can continue operating the way they always have after they’ve signed these big commercial deals, and experience shows they can’t. That’s where they end up spending more money longer term than if they kept services inhouse,” he tells PF. Councils should be more savvy in their contract management, he explains.

Akers also points out that, often, local authorities outsource a service to a large organisation that does not necessarily have better skills. “Why was Carillion – primarily a construction firm – running libraries and providing school meals? It’s like going to an Italian restaurant and ordering a curry,” he suggests.

At the TUC, Dykes predicts that more council insourcing is to come. “It won’t change quickly, because you have had 30 years of this mindset and culture, and there will be long-term contracts that may be very difficult to get out of,” he says. “But things are changing already.”

Tizard tells PF: “The current Conservative government has said it sees outsourcing as the principal model for service delivery, but local government is perhaps more sophisticated, and local authorities led by Tories and Labour are all questioning outsourcing,” he says.

PF’s FOI research shows that 60 councils in 2017-18 still contracted out £588m of services. But Studdert says confidence in outsourcing has been shaken and notes a declining appetite among councils. She adds: “That doesn’t mean an end to the role of the private sector in public provision altogether. It means that future partnerships need to be much more clearly built around the overriding imperative to drive deep social impact with public spend. If partnerships are built on a greater sense of shared endeavour and long-term value creation, this should recognise the innate strengths of each and absolute clarity of roles.”

Back to the source

Margaret Thatcher started an increase in public sector outsourcing when she brought in compulsory competitive tendering in 1980. This effectively forced local authorities to open up inhouse services to private competition in an effort to cut costs. It was initially introduced for construction, maintenance and highways work by the 1980 Local Government, Planning and Land Act.

The policy was subsequently repackaged under New Labour. After winning the 1997 election, Tony Blair’s government replaced CCT with best value, forcing councils to look at outsourcing services, although the policy was also intended to consider quality alongside cost. Further outsourcing was encouraged in the 2011 Open Public Services white paper introduced by the coalition government. This suggested that public services should be open to a range of providers – public, private and third sector – with control decentralised to the lowest possible level.

Latest From Napo 177

Here we have the latest blog post from Napo General Secretary Ian Lawrence:- 

Inside the 'Marketisation' Event 

The report of how Napo managed to lobby the participants prior to one of last week’s ‘Probation Marketisation’ events, sets out clearly what we think of the whole exercise. Anyone who believes that the announcement of an eight-week consultation period on the ‘Strengthening Probation, Building Confidence’ blueprint is going to be taken notice of by this Government will be disappointed.

If there were any lingering doubts about the Government’s intention to continue with their ideologically driven privatisation programme they would have been easily dispelled by the proceedings.

Fantasy land

I have to give it to the Tories in one respect, and that’s their capacity to carry on day by day in Government without so much as an occasional acknowledgement of the litany of failures they have presided over when it comes to opening services up to the market. Rail Franchises, Carillion, and PFI projects in schools and hospitals that our grandkids and their children will still be paying for by the next century.

That, as well as avoiding a Parliamentary debate into the lack of a structured response to the Justice Select Committee report into the Transforming Rehabilitation programme, means that they could swan off into the summer hoping that nobody would notice the fact that half a billion pounds has been spent on a failed social experiment known as Transforming Rehabilitation.

‘Warming the Market’

The event convinced me that the decision to sell off new probation contracts had already been made and that the consultation on whether this is the right thing to do will be a sham. The full implications of what we are facing soon became very clear as a posse of MoJ and HMPPS officials set out their stall to entice the assembled audience of privateers and Third Sector representatives to seriously consider bids for the proposed new 5-7 year contracts that will be on offer post 2020.

Use of terms such as ‘Warming the Market’ in response to how bidders were to be encouraged to come forward was quite frankly insidious to listen to, and gave the impression that every colour of carpet will be laid out for the private sector to get their noses into the trough. Perhaps someone on the organiser’s side might reflect on the fact that it is people’s jobs and careers that are going to be impacted upon, yet sadly there was little sign that this was fully appreciated by those engaged in this circus.

Suffice to say it was not a pleasant experience. Firstly, it was quite surreal to see so many people almost gleefully talk about ‘learning the lessons’ and how they were listening to the criticisms and were moving swiftly to make things right this time. Presumably, the representatives from G4S and SERCO would have lapped this up given that they have used up more lives than my Cat in terms of their scandalous history of running outsourced contracts.

It was a more positive experience to speak with a number of Third Sector representatives, the majority of whom were equally unimpressed with what TR had not delivered for them and who remained sceptical that things would be much different post 2020. They did however have a real inclination to contribute positively to reform, and in that respect I found their company altogether more pleasant than some others I rubbed shoulders with. This link reflects much of the sectors hoped for direction of travel:

Anyway, the upshot to the afternoon went something like this: Probation spending has undershot which is why its’ been possible to waive the penalties on CRC shortcomings, shove more money into failure and throw in another £22m a year to improve ‘Through the Gate’ services, and rebadge all this in a glossy brochure marked ‘Strengthening Probation and Building Confidence.’

It was not one of those occasions where I had an opportunity to make a withering critique of what has gone on and what is being proposed next, but I was able to find out that the next generation outsourced contracts will be of 5-7 years duration and that nobody quite has a clue exactly what a Professional Register will do and who will run it.

Two things struck me most about this event. Firstly the complete denial as to the shambles that has taken place, and secondly the fact that quite a few people there seemed oblivious to the reality that any new contracts will need to take into account the outcome of a an NPS pay reform settlement that we all hope will flow from the negotiations which start in a couple of weeks.

Those contracts will have to be of sufficient size financially to make any prospective bidder bother to complete the application. That remains to be seen, but as far as Napo is concerned I did make it clear to all assembled that a Probation underspend means there is obviously money out there to treat properly with staff who have not only had the indignity of TR to contend with but who have not had a salary rise in seven years.

Probation 'Now An Embarrassment'

I see the plight probation finds itself in has once more attracted the attention of the FT no less:- 

Probation ‘mess’ casts shadow over government outsourcing

Bailouts of £500m to private sector, with some offenders only monitored electronically

• £3.7bn privatisation of probation services seen as ‘mess’ and ‘disaster’ 
• Private providers complained contracts were lossmaking and ‘unsustainable’ 
• Questions remain about government plans for new private-sector contracts 

James Alderson joined the National Probation Service a decade ago to help offenders stay out of prison. But when a large part of the service was privatised in 2015, he found that staff cutbacks and piles of paperwork meant he had less contact with the people he wanted to help. 

Privatisation was meant to bring innovation and cost discipline to the service, and cut stubbornly high re-offending rates in England and Wales — where more than half of people with previous convictions go on to commit another crime within a year of being released. But Mr Alderson, whose name has been changed, said “the entire process has been a disaster”. MPs on the Commons justice select committee have reached a similar conclusion, saying in June that privatisation had been a “mess”, with private companies making “little difference” to offenders’ future prospects. 

Last month, justice secretary David Gauke agreed to end the private sector contracts in 2020, two years earlier than originally planned. The government has not disclosed the cost of the experiment, but the Ministry of Justice has been forced to agree bailouts totalling at least £500m to the private sector. The fallout has revived questions about private-sector involvement in delivering key government services, especially after the government contractor Carillion collapsed earlier this year.

“It’s another example of the doctrinaire assumption by politicians that the private sector will always deliver better results,” said Julian Le Vay, a former finance director of HM Prison Service. “Probation wasn’t broken,” he said. “There was room for improvement but we could just have had a more efficient public-sector organisation, without affecting the quality of service.” 

‘It was a big bang’ 

The grounds for privatisation were laid in the 2007 Offender Management Act, which was brought in by a Labour government. But it was Conservative Chris Grayling who, as justice secretary, launched the “rehabilitation revolution” in 2014. He cancelled his predecessor Ken Clarke’s pilot programmes for privatisation, pushing through a more ambitious set of reforms in just over a year.

“It was a big bang that completely reorganised the world, and if it didn’t work there was no easy route back,” said Mr Le Vay. Before Mr Grayling’s reforms, public-sector trusts supervised around 200,000 ex-offenders each year. But Mr Grayling broke up the system, giving eight private firms, including Sodexo, MTCnovo, and Ingeus, £3.7bn worth of contracts to run 21 “community rehabilitation companies” providing supervision and support to “low-to-medium-risk” offenders. 

The community rehabilitation companies were also given the job of working with 45,000 prisoners who had been in jail for less than 12 months, who had previously received no support after release but had a high reoffending rate, with nearly two-thirds committing another crime within a year. Cases involving “high-risk” offenders remained within the National Probation Service, which is now part of the civil service. 

Lossmaking contracts were ‘unsustainable’ 

But after the overhaul, private-sector companies were not getting the level of referrals expected, in part because of errors in Ministry of Justice forecasting. The MoJ had projected that private sector providers would handle 70 per cent of the cases. But in reality, the private providers only handled about 40 per cent of cases. The courts who assigned probation cases had little faith in the private providers, none of whom had any previous experience in the field. 

It also proved difficult to classify ex-offenders, because a change in circumstances, such as eviction, an alcohol problem or family conflict, could easily change their risk category from “low” to “high”. Probation staff were also divided arbitrarily between the public and private providers, even though in some cases they continued to share offices. 

By 2016, the private providers were complaining that the contracts were lossmaking and “unsustainable”. As a result, they axed jobs and closed offices, making it more difficult for offenders to attend appointments. Some contractors, such as Sodexo, monitored offenders using unmanned electronic kiosks. Two out of five offenders monitored by the private providers are now supervised by telephone, with calls every six weeks, rather than in person, according to the chief inspector of probation. 

‘Now we are an embarrassment’ 

The government is now consulting for a new round of contracts, with different financial terms and minimum requirements for the number of face-to-face meetings held with ex-offenders among other changes. The new contracts would also align the community rehabilitation companies with the National Probation Service’s regional operations. MTCnovo has said it is committed to the service and would bid for future contracts.

But few believe that privatisation of the probation system can work, even with the changes. The Welsh government has already decided to use devolved regional powers to take its own probation service back in-house, giving control to the National Probation Service. 

Robert Neill, the Conservative MP who chairs the Commons justice select committee, has questioned whether a privatised system “will ever deliver the kind of probation service we need”. Mr Alderson said: “Other criminal justice systems used to look at us as a model for offender intervention,” he says. “Now we are an embarrassment.”

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I notice the article generated a couple of responses on Facebook:-

The FT is still a relatively influential newspaper despite its comparatively small circulation. It has an excellent international reputation for well sourced and evidenced financial journalism that is mainly aimed at looking after business interests rather than having an overtly political axe to grind. Those with power money and influence read it and form their opinions as a result. In other words those who can make a difference read it, including overseas investors in the so called UK 'justice market', and will undoubtedly now be more cautious particularly if they do some research and find a number of articles across the media warning of a mess. This article takes up the best part of page 3 along with a smaller article regarding Grayling failing to take advice regarding Heathrow. The final three paragraphs are particularly telling 'But few believe that privatisation of the probation system can work, even with the changes'.

The Welsh government has already decided to use devolved regional powers to take its own probation service back in-house, giving control to the National Probation Service. Robert Neill, the Conservative MP who chairs the Commons justice select committee, has questioned whether a privatised system “will ever deliver the kind of probation service we need”.' I detect a groundswell of opinion that runs counter to the MoJs proposals that are clearly not brave enough given the scale of the problems faced. Yes to end of CRC contracts. Yes to reunification of core probation services. Yes to both English and Welsh probation services returning to public ownership.

******
Hats off Mr Alderson, whoever you are. I have a feeling that there is all to play for now, and the biggest hurdle and risk in the path of serious positive progress is the devastating effect of TR on probation people. There used to be a fashion in management theory for drawing analogies between organisations and individual psychology/pathology. Any psychology/psychiatry/etc practitioner would have a their hands full with Probation as a client. If you were to diagnose Probation as a group collective, what would it be? PTSD? Stockholm Syndrome?

Contradictory Signals?

Earlier this week, Prisons and Probation minister Rory Stewart was giving evidence to the Justice Select Committee and made some surprising statements, including an aspiration to end prison sentences of less than 12 months. This in the Guardian:- 

Prison minister calls for more money to build jails in England and Wales

The minister for prisons has said that he would like the prison population to go down but is instead calling for more money to spend on increasing numbers because he does not believe his view enjoys sufficient support. In a candid appearance before the justice select committee, Rory Stewart said it was time to stop hoping the prison population would fall, adding that he would plead with the Treasury in next year’s spending review for more money to build and sustain prisons in England and Wales.

Stewart said there was not enough will among the public and parliament to do what was necessary to reduce the prison population, despite suggesting he thought that that was the right course of action to take. He added that the number of those in jail was likely to hit 93,000 by 2022, from its current level of about 83,000, as he confirmed two new prisons – including a privately financed one – had been given the go-ahead.

The minister also revealed that collapsed outsourcing giant Carillion underbid for its contract to provide maintenance work to prisons by £15m a year. The revelation will heap more pressure on the under-fire cabinet minister, Chris Grayling, who signed off the contract during his time as justice secretary. He told the committee: “I don’t feel, I’m afraid, even though ideally I’d like the prison population to go down, that’s very likely to happen because I’m not sure there’s the will among the public and the will amongst parliament to take the measures to reduce that population, in which case we need to increase our baseline and we need more money. And that’s the argument I’ll be making in spending review.”

Stewart’s comments came a day before the Ministry of Justice revealed it had scrapped plans to build five new community prisons for women as part of its new female offender strategy. The department is to trial “residential women’s centres”, which would provide supported accommodation to women as they completed community sentences, in a bid to reduce the number of women in custody. As of 15 June, the women’s prison population was 3,867, accounting for 4.7% of the prison population. Female prisoners are more than twice as likely as male prisoners to report needing help for mental health problems. The reoffending rate for women released from a custodial sentence of fewer than 12 months in April-June 2016 was 71%.

Stewart said that when Kenneth Clarke was justice secretary he entered negotiations with the Treasury for support in reducing the prison population to 65,000. But Clarke was “let down” and did not get the political support, Stewart said. “We just have to be practical,” he said. “My fear is for the last 20, 30 years, governments have been funding for lower numbers and never got the legislation through. I’m afraid - let’s stop thinking like that. We’ve got to just be realistic. The likelihood at the moment, unless something astonishing changes, is our prison population is going up to 92,000 or 93,000 and we need to have the money to pay for that.”

Stewart announced to the committee that a publicly funded prison in Wellingborough and a privately financed jail at Glen Parva in Leicestershire were to go ahead, with work starting in Wellingborough at the end of the year. The two prisons together will provide a further 4,000 places and should be part of a programme of six new prisons designed to provide space for a further 10,000 people.

The announcement of a new private prison was met with criticism from the Labour party. Richard Burgon, shadow justice secretary, said: “From the crisis in prisons maintenance to the failings of our probation services, the Tories’ obsession with privatisation and outsourcing has caused widespread damage to our justice system – and it’s the public who’ve had to foot the bill. “With a Labour government, there will be no new private prisons and no public-sector prisons will be privatised. Labour will bring all the outsourced prison maintenance contracts back in house at the earliest possible opportunity. The Tories must abandon this failed experiment of prison privatisation.”

On the collapsed outsourcing giant, Stewart said: “Carillion was proposing to try to save the taxpayer £15m a year by underbidding and trying to take on work, which cost Carillion £15m more a year to deliver than they were receiving from the taxpayer. The taxpayer is now paying a more realistic cost. “What effectively happened there is that we had a contractor come in to us – and this is a vulnerability with all private sector contractors – who effectively offered at their own risk to do our maintenance for considerably less money than it would cost us to do. £15m less.

“We signed up to that. In retrospect, more weight should have been given to the factors saying, ‘wait a second, what on earth is Carillion proposing here? They’re basically proposing to do this and lose £15m a year, is that really sustainable or are we going to end up in a situation where we are paying for it?’ “It turned out what Carillion was proposing to us was completely unsustainable to their finances.”

Last week Grayling faced a vote of no confidence in his capability to carry out his current role as transport secretary. In the same week he faced a damning report from the justice committee on the impact of his broadly criticised reforms to the probation sector.

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By coincidence the minister was speaking on the same day as the Bill McWilliams Lecture and Rob Allen was in the audience:-  

Reducing Short Sentences for Women and Petty Offenders: Willing the Means as Well as the End.

At his excellent Bill McWilliams Memorial Lecture in Cambridge yesterday, Professor Rob Canton invited us to consider the case of Rita, a defendant with a long record of theft offences - described indeed by the prosecutor as a professional thief. Rita is a victim too, seemingly trapped in a series of violent relationships with men, with a strong suggestion that she is relieved of her ill-gotten gains by her current partner. Why Punish? was the lecture’s title and by the end, in respect of Rita and many people like her there seemed no convincing answer. Yes, her behaviour should have consequences but imprisonment, or even an alternative such as a curfew with electronic monitoring look wholly inappropriate in the context of her life.

Almost all of yesterday’s audience will I imagine have been pleased to hear today’s announcement that the government want to see fewer women in prison for short sentences. There will be a welcome too for the Justice Secretary’s view that “Offenders are part of our society and we must take steps to understand and address the underlying causes of offending, if we are to improve the lives of victims and support offenders to turn their own lives around”. There may even be cautious optimism that the policy of reducing short sentences should apply to male offenders too. Prison Minister Rory Stewart said as much to the Justice Committee yesterday.

Where there may be more scepticism is about the means to the end. The £5 million earmarked for “intensive residential support options” which will act as alternatives for women is clearly not enough. Much more of the funds originally set aside for the thankfully abandoned community prisons should be reinvested to provide more comprehensive coverage.

But there will also need to be measures to ensure courts make proper use of community based alternatives. The Female Offender Strategy is very weak on sentencing, promising only that the “MoJ will work with judges to develop our understanding of what more might be done to ensure that the particular risks and needs of female offenders are addressed effectively in the court, and to ensure that courts receive all necessary information to inform the sentencing process”.

Extraordinarily there’s no mention of the Sentencing Council which makes Guidelines for courts. Lord Phillips, who chaired its predecessor body wishes he had prepared a comprehensive set of gender specific guidelines. The current Council should rectify his oversight. As well, they will surely need to look again at their forthcoming guideline on sentencing for breach offences which could lead to more rather than fewer short sentences. More fundamentally I’d like to see the law changed so that previous convictions do not automatically make offences more serious. That’s the only way of keeping petty persistent offenders the right side of the custody threshold.

Will this be done? I have my doubts after Rory Stewart's puzzling remarks in Parliament yesterday. He told MP's he'd like the prison population to go down but it was time to be realistic and accept that was not going to happen because of lack of public support. Instead he's planning for a prison population of 93,000 by 2022. This is far in excess of the 88,000 currently projected - an estimate that doesn't take account of recent falls.

Why did he say that? Maybe he know something we don't and some ugly sentencing reforms are in the pipeline for serious offences. Maybe he wants to persuade the Treasury to let him keep the prison building money to give some headroom in the system to eliminate overcrowding. This is a plan the Conservatives had before the 2010 election before the Crash intervened. Or perhaps Stewart wanted a get-tough headline in advance of the women’s strategy today. The Daily Mail’s “Green Light for Criminals" headline, based on his comments about short term prisoners, hasn’t obliged.

Either way Stewart shouldn't give up on reducing prison numbers. There are lots more things he could do than perhaps he realises.

As for the Mail, as far back as the 1990s, its editor Paul Dacre said that on crime his paper's role was "to articulate the concern of its readers and thereby harden the response from the Tory administration". Dacre is going soon and his approach to criminal policy should follow him out of the door.



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Here's Frances Crook giving her take on things and writing in the London Evening Standard:- 

New strategy on women in prison would work for men

It is refreshing to see the prisons minister, Rory Stewart, take the lead this week. He told MPs he would like to see fewer short prison sentences, and he’s right. People working in the criminal justice system have long waited to hear a minister say it. Some papers howled, predictably, but behind the outrage there is near-universal support from those who are closest to the system and know it best. The minister must ignore the opprobrium and hold firm.

As should his boss, David Gauke, who deserves praise for unveiling a new strategy for women. The Secretary of State for Justice has scrapped plans for new prisons and decided instead to create more women’s centres.

They can achieve what prisons cannot, working with other organisations to turn lives around and reduce crime. When properly funded, they offer services ranging from help with mental health, addictions and abusive relationships to support with housing, child care, tackling debt and finding a job.

All this looks good on paper, but it is hard to imagine the difference it can make until you actually speak to someone who has had their life turned around. Someone like Emma (not her name), who I met at a women’s centre.

Emma was a woman in her 40s, a rough sleeper for more than a decade, a heavy drug user and an alcoholic. She had been a victim of violence and abuse. She was very expensive in terms of police time — not dangerous but repeatedly arrested.

There are about 3,800 women in prison today — representing less than five per cent of the total number of people behind bars — but this mark hardly begins to measure the impact of women’s imprisonment on families.

Seven in 10 women who go to prison are sent there to serve sentences of six months or less. Last year, one in four was sentenced to 30 days or less. Almost 300 women were given sentences of two weeks or less — a short period of time but potentially so disruptive that a woman can lose her job, her home and contact with her children. More than 8,300 incidents of self-injury were recorded in women’s prisons last year.

None of this ought to surprise readers of the Evening Standard, which has reported on the rising levels of violence and self-injury in London prisons, which are under immense strain. Wandsworth, designed to accommodate 841 men, was struggling to hold 1,384 at the end of April. Thameside and Pentonville, each intended to hold about 900 men, were looking after 1,200.

But more prisons aren’t the answer, and the Government’s decision to build two more for men is bitterly disappointing. It will lead to more prisoners, more drugs, more violence and more crime.

The evidence is clear. Ministers have seen it and are acting on it with a new approach for women. Doing the same for men would make us safer. Who wouldn’t want that?

Frances Crook is chief executive of the Howard League for Penal Reform

Napo at Work in Wales

I notice that Napo have submitted extremely wide-ranging written evidence to the Welsh Affairs Committee:- 

Written evidence submitted by Napo (PPW0027)

BRF05-2018

PROBATION ‘POST-TRANSFORMING REVOLUTION’

A submission to the Parliamentary Welsh Affairs Committee from Napo, the Trade Union and Professional Association for Probation and Family Court Staff – 6th April 2018

The Welsh Affairs Committee has invited evidence from stakeholders and interested parties in relation to the current state of justice provision across Wales, with particular reference to prison and probation services. Our brief is to give relevant comment on:

A. Staff shortages in the prison service (both in prisons and in the probation service) in Wales;

B. The effectiveness of Transforming Rehabilitation, Working Links and Community Rehabilitation Companies in Wales, how these services can be improved and whether there are any alternatives. Additionally, the Committee has said it would be interested to hear whether these support services are currently meeting the needs of offenders from vulnerable groups. For instance, in its last evidence session, the Committee was told that Transforming Rehabilitation has not been meeting the needs of women offenders;

C. The overcrowding of prisons and the potential for new prisons in Wales.

Napo is the recognised trade union and professional association for staff employed at all levels across rehabilitation, probation and the family court services in England, Wales and Northern Ireland. As such, we very much welcome the invitation to comment on the enormous challenges in the probation system since Grayling’s self-proclaimed “Transforming RehabilitationRevolution”.

We also make some observations on points A and C in that they relate to B; however, the bulk of our comments are focussed upon B.

We include some ideas for the Committee to consider about alternative models and how we could transition to these in a safe and sustainable manner that would increase accountability, efficiency and, most importantly, the quality of service to the public.

POINTS A AND C - PRISONS AND PROBATION

Many Napo members work alongside POA and PGA colleagues across the prison estate and have witnessed the deterioration of the service since 2010, specifically since significant budget and staffing cuts. Prisons are without doubt less safe and less effective since these cuts. The changes to probation that happened in parallel to these cuts and which were allegedly part of some integrated strategy from the MoJ, have had little tangible impact on prison numbers and pressures. This is probably largely down to them being as poorly planned, poorly tested and as reactive as the prisons cuts. These habits, alongside a chronic ineptitude for managing contracts, are the MoJ’s ‘hallmarks of chaos’.

A much-lauded part of the TR programme was “Through the Gate” (TTG), aiming to improve integrated and holistic support for clients upon release from prison. HMI Probation has identified the scale of this failure previously, labelling it as making no difference at best. This understates the negative impact on the professional morale of staff; the diversion of scare resource to TTG; and the added complexity of community support to offenders prompted by this failed model being a fundamental design flaw in the CRC contracts. (See more detail below).

One political reaction to the problems in prisons has been to abolish NOMS and launch the HMPPS. To date this has brought no tangible improvement for clients or staff, in prison or probation. It looks smells and sounds like NOMS under a different label, but with added mixed messages about greater integration of the probation and prison services.

Napo is engaged in on-going discussions about the Offender Management in Prisons (OMiC) strategy and we believe that it is too early to draw definitive conclusions. We welcome the principle of integrating rehabilitation and probation principles into the heart and soul of prison philosophy. Prison does not work.

However, wishful thinking isn’t enough when redesigning complex organisational systems. A huge, understated challenge involves the planned integration of more probation staff into prison-based teams. This generates additional practical HR challenges and highlights enormous cultural challenges. The probation and prison services have very different cultures. They are not opposite sides of the same coin but opposing magnets– forcing the positives of each together is physically impossible and merely releases the tension between both elements. Great care and caution are needed, as well as great vision and leadership to achieve cultural shift. Confidence that this is in place is limited when the HMPPS is still being led by TR’s chief engineers.

Napo has visited HMP Berwyn and have members working throughout the Welsh Prison estate. Clearly, HMP Berwyn is not overcrowded – indeed, difficulty recruiting staff is one of the reasons it remains under capacity. Recent issues there highlight that overcrowding is only part of the prison problem.

Napo’s view is that Wales can do better. Evidence from the Netherlands and Scandinavia show that a different approach is possible and realistic, if the justice system shifts holistically towards one focussed upon prevention and rehabilitation ahead of punishment. It is irrational that since the creation of the MoJ the number of people in prison has grown significantly whilst levels of serious crime have consistently fallen across England and Wales.

Hidden in the big statistics are disproportionate impacts upon some of the already more vulnerable in our society, suggesting prison policy multiplies social divisions instead of addressing them. This is acute amongst women, who are especially likely to be given short sentences, which have a huge and devastating impact on their families, as well as a disproportionate social and economic cost. Serious efforts to address the prison crisis requires breaking this vicious circle that has become entrenched since the creation of the MoJ two decades ago.

To have a serious alternative to prison we need to stabilise and re-enforce community rehabilitation and probation services. This means addressing the consequences of Grayling’s failed TR revolution. TR could have been a huge opportunity to divert investment into prevention and rehabilitation support but the dogma of privatisation combined with political incompetence and a dangerous rush to beat an election timetable meant this opportunity was not only wasted, but adds new short term recovery costs to putting things right before building a new, more sustainable model. However, a longer-term plan of diverting funding into prevention and community rehabilitation would, we believe, more than pay for itself socially and economically.

Core Challenges across Probation

a) Staffing shortages
Both the NPS and the CRC have serious staff shortages. Across England and Wales, there are more unfilled posts in the NPS than across the prison estate, although the HMPPS national recruitment drive has focussed more heavily on prisons (including macho multi-media adverts featuring riot control squads, petrol bombs and the previous Minister, that highlighted the contrasting cultures between the two services, and would not have encouraged many to apply for probation roles in the same organisation).

Stories from members trying to apply for posts in the NPS also shine a light into the Kafka-esque bureaucratic chaos in the NPS. The recruitment process is torturous, with online applications vulnerable to unstable IT. Security clearance processes are not aligned to recruitment processes, and can delay either starting dates or people being paid once they start. Trying to convert temporary staff into permanent contracts is also problematic. It is not unusual to take a year from application to starting, even where DBS checks are already in place.

In the Wales CRC 47% of jobs have been cut since the contract was awarded, many in front line posts. This has had a direct impact on standards and safety of provision. For example, in unpaid work staff shortages are a frequent reason for regular cancellations of workday assignments for clients.

This has a human cost as well as an economic one. For example, to complete their sentence and protect their employment, one client recently cancelled their only contact days with their child for three weeks in a row only to see each supervised session cancelled due to staff shortages.

The reason for the problem is rooted in the MoJ’s failed management of the TR split. The concept was predicated on staff being split roughly 30:70 between the NPS and CRC. This was based on little more than a hunch. Even before the actual share sale, after the CRCs had spent almost 9 months in public ownership, it was evident that the split was nearer 50:50, although we do not believe that contracts were adjusted to recognise this embedding a fundamental flaw into financial modelling. Napo was not allowed to see the budget split between the NPS and the CRCs at the point of the transfer but we believe the cost of nationalising the management of high-risk clients and managing risk allocation was dangerously under-estimated; whilst the flow of money into CRCs for managing clients was seriously over-estimated. This has undermined everything that has followed.

CRCs did not get the workflows and offender numbers required to meet contract projections, so they cut frontline staff. Losses on marginal contracts do not look sustainable. This has also impacted upon morale with, we believe, higher than average staff turnover. It is difficult for us to quantify this as the CRC does not readily have or does not want to share staff data, but we know from our own membership data that there is a clear trend. This is particularly worrying when high levels of consistent monitoring of clients is a core probation requirement.

b) Lack of progress on pay reform
Before TR it was recognised on all sides that the probation pay system was broken. The longer this has gone unaddressed the more obvious potential inequalities and indirect discrimination become to all. The cost could now sink probation unless it is fully recognised and the Treasury allows unions and employers the scope to negotiate.

The pay system assumed annual pay progression through a contractual range at around 3-4% p.a. A minimum 1% progression was contractually built into the system but the assumption from all sides was that it would be at least 3% and often higher. An average 4% would allow a probation support officer or probation officer to reach their rate for the job in around 6 years, progressing through a contractually binding 27% range.

Since 2010, progression has been limited to 1% and those already at the rate for the job have received no consolidated increases. The majority of PSOs and POs are still below the mid-point of their range, many having already been in post for over a decade. This presents evident and obvious age discrimination risks that unions have been pressing employers to resolve amicably. However, since the autumn of 2016 no negotiations have formally taken place, due to the Treasury refusing permission for talks to proceed.

This impacts on the NPS and the CRCs. If pay reform in the NPS drives up the value of PSOs and POs then CRCs fear a rush of staff leaving to work in the NPS, given their number of vacancies. This is currently prevented by the NPS not allowing staff to transfer on their existing salary but instead insisting staff start on their band minima – something that increases their recruitment difficulties.

CRCs have delayed pay reform negotiations because the contract margins do not give them scope to address the scale of the problem and are waiting for progress in the NPS, so that they can argue for further adjustments to the contract price. However, having had responsibility for these contracts now for over 3 years their legal defence is gradually evaporating along with union patience.

The critical barrier to pay reform seems to be the Treasury’s loss of trust in the NPS/HMPPS senior leadership’s capacity to manage budgets and therefore, pay reform. To a large extent Napo understands the reasons for this as they mirror our own loss of trust in the NPS management – highlighted by the shambolic 2017-18 pay round where a range of excuses were used at different times for giving NPS staff (a majority of whom are female) no increase because they had overspent on the prison pay budget (where the majority of staff are men).

c) Approved premises outsourcing contract failures
Despite high profile contract failures highlighting the importance of strict and close contract management and compliance, the MoJ has authorised hugely dangerous outsourcing contract for double waking night cover staff in approved premises. This contract, split between Sodexo and OCS, was due to start on 1 February 2018. In January, it was recognised that the contractors had not addressed a number of critical staffing issues so the risk of letting the contract was too great. They were given until the 1 March to address these. When unions met with MoJ officials and the contractors in February it was clear that none of these risks had been safely addressed. However, the MoJ allowed the contract to proceed. Risks include a 60-day leeway for staff who have not been vetted or who have not got the security clearance and numerous health and safety risks. These contracts are to manage incredibly difficult, complex and sometimes violent clients – not an area for a casual attitude to people’s personal safety/ It also amplifies the MoJ’s seemingly entrenched inability to learn from past errors in letting contracts before it was operationally safe to do so.

NPS systems failures

a) Shared Service Centre (SSCL) failures – taking the human out of HR
A MoJ pre-requisite for the part-nationalisation of the probation service was that NPS staff would be supported by the Shared Service Centre in Newport. In principle, this should not have been problematic. Unfortunately, fundamental differences between the terms and conditions of probation staff and other civil service staff was not accepted, despite Napo raising serious concerns ahead of the transfer, and we believe these being echoed by staff within SSCL. Essentially, the model works on the premise that everything is the same (i.e. shared) – or at least that differences are clearly identified so computer modelling builds around these differences. This is bit the case in the NPS and nothing works.

A Treasury condition for TR was that government were protected from taking on probation pension liabilities. Probation staff had been, and largely remain, members of the local government pension scheme (LGPS) - except for new starters in the CRCs who are on much cheaper defined contribution schemes. The LGPS is a funded scheme. The civil service scheme is unfunded, meaning there is no pot that is protected and invested to cover the pension costs in retirement. This has allowed governments to manage the civil service scheme on Maxwellian principles – e.g. raiding the notional pot for redundancies. There has also been a bleeding of pension language into wider civil service terms and conditions. The computer has learned these clues and what they mean. When a different set of meanings, based upon different pension scheme rules and consequences is imposed on top, it gets confused and either shuts down or gives the wrong answer.

This extends to wider terms and conditions, which have not been harmonised with MoJ policy including absence management processes, notice periods and aspects of annual leave. Until 2017, this included maternity and paternity provision, with the NPS resisting union efforts to bring a majority female NPS workforce into line with other civil servants, meaning NPS staff regularly found their maternity leave being reduced mid-leave.

In 2017, the system almost entirely collapsed. Over 3000 staff were wrongly paid for over 7 months, as pension contributions were not deducted. Efforts to put this right only made the problem worse.

All staff have utterly lost confidence in the shared service centre – including those working there; who openly tell us they cannot trust the computer’s answers and assume they will need to do manual over-rides.

All line managers are reliant upon the shared service centre company SSCL and their processes for all HR activity. This is something that is soul destroying when it rarely works and you cannot trust what it tells you. It extends to managing absence records, processing ill health early retirement applications, pay adjustments, etc. It is difficult to fully establish the scale of the impact as we also rely on SSCL for statistical information (e.g. on absence patterns) but they have not been contracted to produce these.

In addition, it became clear during the 2017 crisis that SSCL was charging the NPS at premium rates to call them. With many offices having moved to mobile only phone systems due to hot-desking, this means all calls to HR cost up to 88p a minute. One member who started in February 2017 and was not paid at all until almost 3 months later faced a personal phone bill of £88.00 trying to sort out their pay.

If we do get pay reform, the risk that the shared service system will mess it up is self-evident. The human in HR has been conceded to a dyslexic computer system. Monty Python would call it far-fetched.

Napo’s view is the obvious need to free the NPS from this problem is being resisted because of a dishonest politics in the MOJ – senior leaders have bound their reputations to the HMPPS vision and would see releasing the NPS from this contract as conceding that HMPPS is merely NOMS re-badged. Egos and reputations cannot be allowed to get in the way of running a key public service in a systematic and sane manner.

b) Loss of managerial confidence
Possibly the most critical side effect of the SSCL and HR failures is the additional strain this is putting on first line managers in the NPS – a critical group in terms of performance. The NPS refused to accept warnings that Senior Probation Officers in probation trusts did little HR management, focussing upon professional mentoring and support with local HR teams being used to address HR issues. This local HR capacity was removed, and replaced by the computers at SSCL. Because of their limited historical HR role, these managers have a much higher number of staff to manage directly than would be anticipated in similar civil service 1st line manager roles - SPOs having typically 12 to 14 reportees.

On a day to day basis this problem is punched and bruised by the SSCL failures leading to managers becoming disengaged or looking for shortcuts – e.g. we know examples where triggers under an imposed absence management regime are being ignored or SPO’s are not entering absence to avoid having to issue warnings to staff they don’t think are right.

c) Retirement problems
There are currently acute problems with the management of pensions across the NPS. This is especially acute in cases where staff are applying for ill health early retirement. This is now routinely taking so long that staff are inevitably on reduced or no pay before they retire. The subsequent loss of notice pay is an area of on-going dispute and legal challenge from Napo. In several recent cases staff have been dismissed and still been waiting to receive their pension several months later.

This is in addition to the failure to collect pension contributions for over 300 staff for most of 2017. When Carillion went bust, members in CRCs asked if we were sure, their contractors had been honouring the commitments under the LGPS. We were confidently able to reassure them that the only systematic failure in this regard under TR came from the NPS.

If Working Links had a Carillion-like collapse, the NPS have admitted to Napo that they would not be able to make the same guarantee to Working Links staff that they would honour their pay until a new contractor could be found.

Greater clarity about CRC challenges and failures

a) SFO evidence reveals information gaps
Napo has been monitoring the management of Serious Further Offences (SFO) cases since TR. This is difficult as access is limited and investigations are closed. Statistics are also difficult to interpret as increased numbers under probation skew baselines.

However, before TR happened we warned that splitting local delivery of core services was a recipe for disaster, introducing a commercially sensitive barrier to information exchanges and separating the most professionally qualified and experienced staff (predominantly probation officers) from the less trained and less experienced staff (predominantly probation support staff and some specialists in the CRCs). The NPS allocation of a low or medium risk label does not mean all CRC clients are safe to manage without adequately trained, properly supported professional staff. This risk is amplified by the lack of any clear national standards or a license to practice in probation.

We are alarmed by evidence in a number of high profile CRC cases, including the murder of Connor Marshall in Wales, where a failure to track critical information about a client between their release and allocation to the CRC could have led them to a different approach. The difficulties experienced by the Marshall family in accessing the truth behind the circumstances of Connor’s murder also amplify why we support greater independence in the investigation of SFOs, passing them HMI Probation.

The pressure of same day reporting in courts is also being identified as a factor in clients, who may be high risk, wrongly being transferred to the CRCs. We again highlighted this risk before TR but think the evidence now exists for a systematic, independent analysis and recommendations.

b) Working Links – Carillion Mark 2?
Napo is given very limited access to information about contractual performance by either the MoJ or Working Links. However, we do know that the contract was won with very limited competition but against very small financial margins.

We have already covered why the assumptions in the contract have meant Working Links has, like all CRCs, struggled to make any profit on the contracts. Indeed, we believe the contracts have led to significant losses for the company.

Adjustments to the contract pricing in 2017 will not address this challenge fully. The second half of the contract was disproportionately reliant upon Performance by Result (PbR) payments that cannot materialise if the number of clients coming into the system have not arrived. Therefore, the contract adjustments will merely limit the forecast losses. If the NPS collected fines for poor performance these losses would increase, although legal bills may rise if Working Links, along with other CRCs, challenge the MoJ based upon mis-sold contracts.

In addition, there is the on-going, now culturally entrenched, loss of trust between the CRC and NPS at local level. The contract funding mechanism was based upon the NPS buying some services from the CRC using a rate card system. Until last summer, NPS staff report being encouraged not to buy off the rate card due to their own budget constraints, each request needing specific managerial authorisation. Since the contract adjustments, we are told this instruction has turned around. NPS staff are now being actively encouraged to support the CRC and to get specific permission where they do not want to do so. We are told this is not working due to low confidence in CRC delivery linked to CRC staff cuts and a limited menu, as well as on-going local NPS budget pressures.

Working Links has already been restructured and taken over by a German equity firm but if the possibility of profit on the investment continues to look unrealistic then the long-term sustainability of the contract must be questioned.

For as long as the contract goes on Working Links are likely to continue to seek to cut corners and the quality of service delivery. We know that recently, staff shortages in the Torfaen Office saw it closed for two days with staff relocated to Newport. In March, the Caerphilly office was closed for two days after the water was cut off due to an unpaid bill. Bailiffs raided the Cardiff Office, seizing equipment in lieu of unpaid bills, in full view of clients.

c) Commissioning model has broken down
One reason for the loss of confidence in the NPS buying from the CRC is the limited menu of services and interventions offered as a direct result of the commissioning model having broken down.

The TR model expected CRCs to purchase specialist support, such as sex offender treatment or domestic abuse programmes, from second tier providers, especially form the third sector. In practice, this has not happened, due to the shortfall in the contract meaning CRCs are incentivised to do as much as they can themselves and squeeze out potential local competition from the charity sector. The current commissioning model gifts Working Links a commissioning monopoly from Land’s End to Holyhead. This is financially incoherent for the taxpayer but also bad news for service delivery, where previous partner organisations have been forced out and intelligence gathering from this network of local providers is locked out.

STARTING NOW TO FIND A SAFER, BETTER WAY FOR PROBATION

In February this year, Napo held a discussion event at the Welsh Assembly, in the light of the recently launched Wales Justice Review. Invited guests and speakers included academics, practitioners, victims’ services, and the CEOs of national charities with established track records in delivering services for offenders, including specialist services for women offenders. There was broad and emphatic agreement that the CRC privatisation model was hampering (if not actually excluding) effective work achieved in partnership between probation and community organisations. Pre-TR, probation had worked effectively in providing core services, and working in close locally forged partnerships with specialised community organisations.

It is our view that the frameworks and expectation for this to be rekindled must be built into any revised model for delivery of rehabilitative services.

The current system is utterly unsustainable. If it survives to the end of the existing contracts, there is no sustainable way forward under the existing model. It cannot be tweaked. Working Links are amongst the worst of the CRC providers but we have no confidence or evidence that the market is strong enough to produce an alternative, better provider.

Re-tendering would still leave the NPS a struggling bureaucratically straitjacketed systematically dysfunctional organisation that was almost accidentally nationalised because no one thought that they could sell off the management of high-risk offenders. Re-tendering would entrench this artificial professional divide in core service delivery. Re-tendering would entrench the conflicting lines of accountability that undermine public trust and confidence if, and when, something goes wrong.

We need a new and different model. Napo has established four key tests for any possible alternative. These are:

1) A locally accountable commissioning body – which should not necessarily be the provider of services. This would re-open the market to the third sector and new innovators (e.g. possible Mutuals).

2) Strong and accountable local leadership - where there is enough political visibility and credibility to stand up to Ministers and secure adequate funding and enough political risk for them to see danger of being blamed for service failures.

3) Unified local delivery of core services – removing the risk of burn out for staff only managing serious and high risk cases in the NPS; facilitating greater capacity building for new recruits in the community; and removing the information sharing barriers that can increase risk when clients are transferred between the NPS and the CRC, as seen in recent SFOs.

4) Not for Profit – The privatisation experiment has failed. A core principle should be that services exclusively using public funds should be exclusively accountable to and measured against the public interest. Additionally, the probation market has been shown to be too weak to sustain itself. This does not preclude efficiency drivers in any model but any surpluses generated should be reinvested into service/programmes by Commissioners, with those delivering efficiently expecting to be rewarded by additional/continuing commissions.

In Wales, there is an obvious opportunity to devolve the commissioning of probation services to the Welsh Assembly. Potentially, at least, this would meet all of these tests. However, before doing so we would expect there to be careful consideration, including engagement with Napo and other staff unions, to build a consensus around this change – including united support for establishing professional standards and frameworks; ensuring sustainable long-term budgets; and working through the transitional people issues.

Dean Rogers
Assistant General Secretary
6 April 2018

TR A Huge Success!

Yesterday Bob Neill's Justice Committee heard from several CRCs that things were pretty much working ok and they should be given more time to iron out any remaining problems with TR. Today we see a very different picture being painted by this report from the Public Accounts Committee:-

Summary

More than three years into its seven year contracts with Community Rehabilitation Companies (CRCs), the Ministry is a long way from delivering the ‘rehabilitation revolution’ it had promised. In 2017, the Ministry was forced to adjust its contracts with CRCs because it pushed through its reforms too quickly and failed to anticipate foreseeable consequences. The volumes of work paid for under the contracts has dramatically reduced, meaning that CRCs have not invested in probation services. The quality of rehabilitation services has suffered as a result and is undermining the objectives of the reforms.

The Ministry accepts that the CRC contracts were plainly not working as intended and has agreed to pay them up to £342 million more of taxpayers’ money. But the Ministry could not explain what it is getting back for this extra commitment. Despite this bailout, 14 out of 21 CRCs are still forecasting losses. This raises concerns about the potential for contracts, or providers, to fail. One provider, Interserve, has issued two profit warnings. As a company with multiple contracts across government this is particularly worrying in light of the collapse of Carillion.

The future income of CRCs will increasingly depend on their ability to reduce stubbornly high reoffending rates. While there has been a modest decrease in the number of re-offenders since CRCs were introduced, 19 CRCs have not met their targets for reducing the frequency of reoffending. These disappointing results raise questions about whether the current arrangements will be able to deliver the promised benefits before the contracts expire in 2021–22. The Ministry urgently needs to make sure CRCs improve the quality of the services they provide and deliver on their promises of innovation to achieve the improved outcomes that offenders and communities so desperately need.

Introduction

Probation services are designed to protect the public by supervising offenders in the community, overseeing their rehabilitation and ensuring that offenders understand the impact of their crimes on victims. In June 2014 the Ministry of Justice (the Ministry) introduced its Transforming Rehabilitation reforms. It dissolved 35 self-governing probation trusts and created a public sector National Probation Service and 21 Community Rehabilitation Companies (CRCs). CRCs supervise offenders who present a low or medium risk of harm, while the National Probation Service manages offenders who present higher risks. In February 2015, the CRCs were transferred to eight, mainly private sector, suppliers working under contracts managed by HM Prison and Probation Service (HMPPS). But since then activity volumes types of rehabilitation work which CRCs are paid for under the contracts—have been far lower than expected and are forecast to continue to fall.

We examined the Ministry’s progress with its Transforming Rehabilitation programme in July 2016 and concluded that the Ministry’s negotiations to resolve the issue of CRCs’ reduced activity volumes were undermining the objectives of the reforms. We recommended that the Ministry should review and adapt the way CRCs were paid for their work to create stronger incentives for them to provide innovative services that meet the needs of all groups and reduce reoffending. In March 2017, CRCs told the Ministry that they were projecting substantial forecast losses of £443 million across the remaining life of the contracts. The Secretary of State for Justice announced in July 2017 that the Ministry had “adjusted the CRCs’ contracts to reflect more accurately the cost of providing critical frontline services”. The Ministry has agreed to commit additional funding of up to £342 million to CRCs over the remaining life of the contracts.

Conclusions and recommendations

1. The Ministry of Justice (the Ministry) still has a long way to go before it achieves the objectives of its reforms. Despite committing up to £342 million more of taxpayers’ money to stabilise its contracts with Community Rehabilitation Companies (CRCs), the Ministry has not fixed the underlying problem or ensured that its ‘rehabilitation revolution’ will actually be delivered. We are deeply concerned that, following the injection of additional public money into these contracts, 14 out of 21 CRCs are still forecasting losses. The majority of CRCs are therefore not much closer to a sustainable position than they were before the contracts were changed. Despite the additional funding, the Ministry did not persuade us that the CRCs will improve the services they deliver. CRCs will be increasingly dependent on income through payment by results as the contracts progress. Reoffending rates in particular are critical to the future income of CRCs. CRCs are paid for reducing the number of reoffenders and also the number of offences that reoffenders commit. The latest data published by the Ministry show modest declines in the number of reoffenders, but 19 CRCs have not met their targets for reducing the frequency of reoffending. These early results are disappointing and, if not turned around, could further threaten the financial sustainability of CRCs, restricting innovation and promised investment.

Recommendation: The Ministry should update the Committee by the end of April 2018 about the financial stability of providers, particularly following profit warnings issued by one provider, and set out any further changes it intends to make to get its rehabilitation revolution on track to ensure the prime goal of reducing offending is actually achieved.

2. The Ministry’s failure to pilot or properly understand its fundamental changes to the probation system has led to CRCs not investing in probation services, which have suffered as a result. CRCs are paid for the types of activity they undertake rather than the volumes of offenders they supervise, meaning their financial health depends on carrying out types of rehabilitation work which attract payment. The Ministry failed to anticipate the potential for lower than expected volumes of work flowing to CRCs. In 2015–16 the volumes of work CRCs were paid for ranged from 8% to 34% less than anticipated, and are projected to be 16% and 48% lower in 2017–18. Yet the Ministry only modelled changes of up to 2% during the procurement. Lower than expected volumes of work meant that CRCs faced the prospect of significantly reduced income over the life of the contracts. The Ministry also significantly overestimated the ability of CRCs to reduce their costs to match any fall in income when it agreed the contracts. HM Prison and Probation Service (HMPPS) argued that it would not have been possible for them to anticipate lower volumes of activity and that the lower volumes can be explained by differences in the types of criminal cases heard by the courts and changes in the requirements attached to offenders’ sentences. However, it should have been well within the Ministry’s capability to recognise that the composition of criminal cases heard by the courts was changing and to monitor and respond to shifting trends in sentencing decisions. The Ministry did not convince us that it was not possible to foresee or model the impact of factors within its purview. The consequence of this failure is that CRCs have not invested in probation services and offenders are not receiving the right support to help them address their needs.

Recommendation: The Ministry should, by April 2018, write to the Committee to explain how it will ensure any future changes to the contracts of this scope and scale are well thought through and piloted to minimise damaging unintended consequences.

3.The Ministry has still not delivered on its commitment to ensure that the third sector can help improve rehabilitation services. A cornerstone of the Ministry’s probation reforms was to open up the market to a diverse range of providers of rehabilitation services, including from the third sector. In our previous report on Transforming Rehabilitation, we were concerned that smaller expert providers were being squeezed out and recommended that the Ministry and HMPSS must deliver on their commitment to sustain a diverse market of suppliers. Overall, the extent of involvement of the third sector in delivering probations services has been woeful. HMPPS told us that this is another consequence of CRCs having less funding than anticipated and being unable to invest in more innovative ways of delivering probation services. But we remain concerned that some charitable trusts have withdrawn from providing services for offenders as a consequence of the decision to extend statutory supervision to those sentenced for less than 12 months. This risk could, and should, have been foreseen by the Ministry.

Recommendation: The Ministry should, by April 2018, publish a comprehensive analysis of the gaps in provision of rehabilitation services across all CRCs that could be addressed through greater involvement of the third sector. It should use future negotiations to seek commitments from CRCs to make greater use of the third sector.

4. It is unacceptable that, almost half way through their seven year contracts with the Ministry of Justice, CRCs are not yet able to link their ICT systems to HM Prison and Probation Service. In a service that relies on successful joint working between multiple partners, it is essential that ICT supports, rather than frustrates, effective and efficient collaboration. In our 2016 report, we recommended that the National Offender Management Service (NOMS), the predecessor to HM Prison and Probation Service, should implement a fully functional and reliable link between NOMS and CRC systems by the end of 2016. The Government accepted our recommendation and stated that its target for all CRCs to link their ICT systems was “summer 2017”. It is therefore lamentable that by the start of 2018, and over three years into the contracts, HMPPS has acknowledged that it has made little progress. The Ministry informed us that 14 CRCs expect to link their IT systems into the HMPPS system during the first half of 2018. Six CRCs plan to remain on their current arrangements, while one has yet to decide. The Ministry told us that the delays were largely a result of CRCs failing to invest in IT as a result of lower than expected income, but accepted it had contributed to this its delays in delivering a working link between systems.

Recommendation: HMPPS should, by July 2018, write to the Committee to confirm whether the 14 CRCs have successfully linked with HMPPS’ ICT systems as planned and, if not, explain the reasons for any further delay.

5.The Ministry still does not have complete and robust performance information, creating a risk that CRCs are not being held to account. We previously recommended that the Ministry needed to provide confidence that CRC performance data was reliable and complete. Yet at the time of our evidence session the Ministry had still not published performance information for five of its 24 performance indicators. There was no discernible improvement in the performance of CRC’s between October–December 2015–16 and April–June 2017–18. The performance of CRCs against their contracts has been woeful and, on average, only 8 of 24 targets have been achieved. The Ministry overcomplicated the performance measurement arrangements with too many targets, some of which, such as securing accommodation for offenders, are not actually within the control of CRCs. These weaknesses mean that the Ministry cannot be sure whether poor performance by CRCs is due to their lower than expected income or their incompetence. HMPPS told us that it has changed how it measures the performance of CRCs under the contracts, but both witnesses admitted that performance has not been as good as it should be.

Recommendation: The Ministry should, by April 2018, write to the Committee explaining its rationale for changing how CRCs’ performance is measured and set out when it expects CRCs to be achieving their new targets.

6. It is not yet clear what the Ministry has received from CRCs in return for the contract changes it negotiated with them. In responding to the underinvestment in probation services, a situation of its own making, the Ministry agreed to provide additional funding of up to £342 million for CRCs. The Ministry had also identified service credits—financial penalties for poor performance—with an overall value of £7.7 million, but only imposed £2 million of this. It waived £2.2 million and agreed that £3.3 million could be reinvested by CRCs. The Ministry has also identified that it is owed £9 million of taxpayers’ money by CRCs. It has not yet taken any action to recoup this money. We were disappointed that neither the Ministry nor HMPPS could point to a tangible list of commitments from CRCs as a result of the additional money. In particular, we are not convinced that the additional payments will not be used to prop up parent companies that own the CRCs. The Ministry could not adequately explain the wide variations in the fixed costs claimed by different CRCs, which ranged from 44% to 99.8% of total costs. There are also variations in the administrative costs charged by parent companies to CRCs. We expect the Ministry to vigorously defend taxpayers’ interests in its oversight of CRCs and in any future negotiation.

Recommendation: The Ministry should, by the end of April 2018, write to the Committee with details of what the taxpayer has received for the extra money it has pledged to CRCs. As part of this, the Ministry should clarify what protections it has put in place to ensure that the additional funding is being directed towards frontline rehabilitation services, and take immediate steps to recoup the £9 million owed by CRCs.

1 Transforming Rehabilitation

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Justice (the Ministry) and HM Prison and Probation Service (HMPPS) on progress with its Transforming Rehabilitation reforms, the changes made by the Ministry to its contracts with Community Rehabilitation Companies (CRCs), and the future of the Ministry’s reforms. We also received evidence from two of the companies that own CRCs: Sodexo and Interserve.

2.Probation services are designed to protect the public by supervising offenders in the community, overseeing their rehabilitation and ensuring that they understand the impact of their crimes on victims. In June 2014 the Ministry introduced its Transforming Rehabilitation reforms. It dissolved 35 self-governing probation trusts and created a public sector National Probation Service and 21 CRCs. CRCs supervise offenders who present a low or medium risk of harm to society, while the National Probation Service manages offenders who present higher risks. The Ministry’s reforms also extended a requirement for probation supervision for the first time to approximately 40,000 offenders released from prison sentences of under 12 months; a group with particularly high reoffending rates. In February 2015, the Ministry transferred ownership of CRCs to eight, mainly private sector, suppliers working under contracts managed by HM Prison and Probation Service (HMPPS).

The changing volumes of work for Community Rehabilitation Companies

3.CRCs are paid according to the types of rehabilitation services they provide—or volumes of activity—rather than the number of offenders that they supervise. They are paid different amounts for different types of rehabilitation services. But the volume of activities undertaken by CRCs has been far lower than expected, meaning CRCs faced the prospect of far less money than they expected. The actual volumes of activity undertaken by CRCs ranged from 8% to 34% less than anticipated in 2015–16 and are projected to be 16% and 48% less than anticipated in 2017–18. One of the aims of the CRC contracts had been to encourage CRCs to invest in innovation to improve services and reduce reoffending. As a result of the lower volumes of activity and projected lower incomes, however, most CRCs struggled financially and have not invested in services. In March 2017, CRCs told the Ministry that they were projecting substantial forecast losses of £443 million across the remaining life of the contracts.

4.In July 2017, the then Secretary of State for Justice announced that the probation system had “encountered unforeseen challenges” that led to the Ministry adjusting its contracts with CRCs. The Ministry explained that there were three reasons why it had adjusted the contracts.

• Firstly, the number of offenders being referred to the National Probation Service was higher than expected, while the numbers being referred to CRCs was lower. The Ministry told us that this is the result of changes in the nature of crime, with many more serious offences coming before the courts.
• Secondly, courts tended to impose fewer accredited programmes to non-custodial sentences, for which CRCs receive greater payments. The Ministry admitted that courts appear to have lost confidence in some of the services delivered by CRCs.
• Finally, the Ministry assumed that CRCs could be more flexible in reducing their costs than turned out to be the case. The payment mechanism in the contracts assumed that 20% of CRCs’ costs were fixed. In fact, the Ministry’s later analysis showed that fixed costs were on average 77% of total CRC costs. Sodexo, which, in partnership with Nacro, owns 6 CRCs, told us that the Ministry’s allocation of costs during the procurement process was incorrect. It told us that that its CRCs could have managed their costs for limited changes in volume, but the changes were far greater than this.

5.Both HMPPS and the Ministry recognised that they had failed to properly anticipate the possibility and impact of lower than expected volumes of work flowing to CRCs. They told us that in letting the contracts their approach had been to share historical data with potential providers and explain to them how the contracts would be run. The Ministry did not pilot the fundamental changes to the probation system that CRCs represented before rolling them out. During the procurement, it only modelled the effect of a 2% change in CRCs’ activity volumes.The Ministry has the capacity and capability to monitor the changing composition of criminal cases heard by the courts, and monitor and respond to shifting trends in sentencing decisions. As part of its reforms, the Ministry extended monitoring and supervision to prisoners who have served 12 months or less—a group of offenders with complex needs—amounting to approximately 40,000 offenders each year. HMPPS told us that CRCs are paid the lowest rates for supervising this group on the basis that they will be compensated under payment by results for reducing high reoffending rates. Although the Ministry claimed these challenges were unforeseen their causes were all within its purview.

Third sector involvement in rehabilitation services

6.One of the aims of the Transforming Rehabilitation reforms was to open up the probation market to a more diverse range of providers of rehabilitation services, including the third sector. In our 2016 report, we were concerned that the full potential of the third sector was not being realised and that smaller expert providers, local, and voluntary organisations were being squeezed out of the probation system. We recommended that the Ministry and HMPPS must deliver on their commitment to sustain a diverse market of suppliers.

7.The Ministry and HMPPS told us that some CRCs had a good relationship with the third sector and already included third sector and not-for-profit organisations. One CRC is a joint venture with a third sector organisation. They acknowledged, however, that this varies nationally. They also acknowledged that smaller third sector providers feel that they have not been able to participate in rehabilitation work to the extent that they had hoped. HMPPS told us that one of the consequences of CRCs’ lower than expected incomes was that CRCs had used smaller providers much less than they had anticipated.

8.Some third sector providers have also withdrawn from providing rehabilitation services due to the Ministry extending its requirement for probation supervision to prisoners who have served under 12 months. This expanded probation supervision to 40,000 prisoners who are serving short sentences and did not previously receive government support on their release, although a large proportion received support from charities and other third sector organisations. HMPPs told us that this has meant that many third sector organisations are withdrawing from probation services because the support they provided is now part of government probation supervision. It told us that it was concerned by the loss of some long-standing third-sector charitable providers, and that services being provided were not as rich as they had been previously.

Ensuring joint working and information sharing

9.Effective probation services rely on collaboration and efficient, appropriate information sharing between multiple partners, which should be enabled by Information Technology (IT). In 2016, we recommended that the National Offender Management Service should implement a fully functional and reliable link between its and CRCs’ systems by the end of 2016. The Government accepted our recommendation and stated that its target for all CRCs to link their ICT systems was “summer 2017”. The Ministry and HMPPS told us they had expected their ‘strategic partner gateway’, which would allow CRCs access to data held by the Ministry of Justice, to be available by June 2015, but that this had been delayed and was introduced only in September 2016. HMPPS told us that part of the delay was attributable to the lack of investment in IT by CRCs as a result of lower than expected income. Both HMPPS and the Ministry of Justice accepted, however, that part of the delay was also the result of it taking them a year longer to open up the gateway to CRCs.

10.At the start of 2018, HMPPS still did not have a system linking HMPPS’s and CRCs’ IT systems. The Ministry told us that it had now lent CRCs a digital and project management team to work with CRCs and ensure that the two IT systems can link together. So far no CRCs had moved onto the HMPPS system, with the first CRC planning to so do only in April 2018. The Ministry subsequently wrote to us to explain that 14 CRCs expect to link their IT systems into the HMPPS system during the first half of 2018. Six CRCs plan to remain on the current arrangements, and one CRC has yet to decide. CRCs are not obliged to link directly to HMPPS’ IT system and are free to use their own IT systems as long as it is compatible with HMPPS. The lack of progress in securing IT links between CRCs and HMPPS has had an adverse impact on the extent to which CRCs are working efficiently and effectively and their plans to invest in their services. Sodexo, parent organisation to six CRCs, told us that the delays meant that it has not done some of its planned innovation work, and that these delays, issues surrounding the payment mechanism and reduced income were a “distraction from core delivery”.

Community Rehabilitation Companies’ performance

11.When they were set up in 2015, the Ministry’s original contracts with CRC specified 17 performance metrics and seven assurance metrics for reporting performance in offender management from the start of the sentence, through resettlement into the community, to completion of offenders’ sentences. The Ministry publishes quarterly data on CRCs’ performance against these metrics where it is available. The Ministry expected CRCs to have met targets for 11 of the metrics from the start of the contracts, with the remaining metrics to be met from the end of February 2017.

12.We previously recommended that the Ministry needed to provide confidence that CRC performance data were reliable and complete. Yet in the first quarter of 2017–18, the Ministry had still not published performance information for five of its metrics. From October–December 2015 to January–March 2017, CRCs had, on average, achieved their performance targets in one quarter. For April–June 2017—the most recent available data at the time of our evidence session—performance across the CRCs was variable. On average, just one third of performance targets were being met. Performance against HMPPS’ targets has therefore not improved.

13.HMPPS told us that while CRCs were, on average, missing nine metrics, they were close to achieving these and therefore did not require formal improvement plans to address this. It told us it was using such improvement plans to hold CRCs to account in some areas. It acknowledged that there were significant issues with the quality of probation work, as assessed both against its targets and by HM Chief Inspector of Probation. It had instigated 67 improvement plans since the contracts were awarded, 38 of which had been discharged owing to improved performance and 29 of which were still live.

14.The Ministry accepted that its contracts were too complicated with too many targets, not all of which were controllable by CRCs. One of the targets relating to securing housing for offenders had not been met by any of the CRCs. HMPPS recognised that achieving the housing target was beyond the gift of CRCs as it relied on CRCs working with other local partners. Both witnesses admitted that performance of CRCs had been variable, and has not been as good as it should be, but argued that it was improving.

2 Making Community Rehabilitation Companies’ contracts work

15.The Ministry projects that it will pay an additional £278 million to CRCs under as a result of the changes to its contracts it agreed in August 2017. The Ministry had already paid an additional £64 million to CRCs over and above its contractual commitments. In total it has therefore agreed to additional funding of up to £342 million to CRCs over the life of the contracts. The Ministry and HMPPS could not tell us specifically what they are getting in return from CRCs for the contract changes negotiated with them. The Ministry told us that “[w]e will require them to deliver exactly what they were delivering before, but we will pay them slightly more for the lower-costed items”. The Ministry argued however, that it was still spending less than it had originally budgeted for. Following the session the Ministry clarified its position and stated that its payments to CRCs were increased for all activities, not just those which attract lower payments.

16.In changing the contracts the Ministry altered its assumptions of the level of CRCs’ costs that are fixed, meaning they cannot be reduced in less than 12 months. CRCs identified that, on average, 77% of their costs were fixed, compared to 20% assumed by the Ministry in the original contracts. The level of fixed costs claimed by CRCs range from 44% to 99.8% of their total costs. We were not convinced that fixed costs of nearly 100% were justifiable for service companies in this sector. HMPPS and the Ministry told us that these fixed costs included the people providing probation services, and that these could not be reduced in less than 12 months. They also told us that the large variation across CRCs reflected, for example, differences between urban and rural geography. We were sceptical that this adequately explained such wide variations.

17.In the context of the recent liquidation of Carillion, we were concerned that insolvency on the part of any of the parent companies which own CRCs could result in significant costs to the taxpayer. In particular, we were concerned that the additional payments to CRCs could be used to help support parent companies rather than improve rehabilitation services. The Ministry told us it has an open book relationship with the suppliers and can see all their figures. In its subsequent written evidence, the Ministry told us that it was not paying CRCs to carry out administrative functions on behalf of the parent organisation. Interserve, which owns five CRCs, told us that the administrative costs of £16.5 million paid by Cheshire and Greater Manchester CRC included £5.2 million for services provided by Interserve to the CRC including central IT, centralised staff, procurement support and insurance.

18.The Ministry pays CRCs on the basis of predicted volumes of activity. At the end of each year, the Ministry determines whether CRCs have been under or over-paid. In 2016–17, the Ministry identified that it was owed £9 million by CRCs from over-payments. It had not decided whether or not to collect all or part of this money due to “wider commercial considerations”. HMPPS told us it was still considering whether to recoup this money or require CRCs to invest it and improve services. The Ministry told us that taking money out of the CRCs now could lead to further deterioration of services. The Ministry can also penalise CRCs through service credits where they fail to deliver services to the standard expected. Between July 2015 and June 2017, the Ministry identified service credits with an overall value of £7.7 million, but only deducted £2 million from CRCs. It waived £2.2 million and agreed with CRCs that they could reinvest £3.3 million back into services. We were therefore not convinced the Ministry was using this mechanism effectively, despite findings from HM Chief Inspector of Probation that CRCs are not generally producing good quality work.

The financial sustainability of CRCs

19.Despite the injection of additional public money into the Ministry’s contracts with CRCs, 14 CRCs are still forecast to make a loss, two in excess of £40 million over the remaining life of the contracts. We were sceptical that the additional funding committed by the Ministry improved the viability of some of the CRCs. One provider, Interserve, has issued two profit warnings, in September and October 2017. HMPPS told us that the extent to which CRCs make a profit or loss over the life of the contracts would depend on what outcomes they achieved through payment by results under the contracts.

20.CRCs will increasingly depend on income through payment by results as the contracts progress. The overall income available to CRCs declines over the life of the contracts. Yet as part of this, the proportion of income available under payment by results increases, from 6% (£32 million) to 28% (£112 million). Under payment by results, CRCs are paid according to the number offenders who stop reoffending, and the frequency of reoffences that reoffenders commit. The latest data published by the Ministry in January 2018 show modest declines in the number of reoffenders, but only two CRCs—Merseyside and Northumbria—have met their targets for reducing the frequency of reoffending. The other 19 CRCs have not met these targets. The Ministry and HMPPS told us that they will be returning to discussions with CRCs to examine the implications of the reoffending results.

21.The Ministry told us that the overall profitability of CRCs is not its concern, and that it would not simply pour money into CRCs because they were loss making. We asked how it could be sure that the quality of the services CRCs provide is good enough given that many are making losses. The Ministry assured us that it would consider this as part of any changes to its contract with CRCs in future. The Ministry did not convince us, however, that it is exerting its authority sufficiently to make sure the contracts deliver improvements in services, innovation, and reductions in reoffending.