Another fine mess at the Ministry of Justice as private probation contracts end early

Today’s announcement that the government is terminating outsourced contracts for probation services two years early shows just what a mess ministers have made of the system for rehabilitating offenders in England and Wales.

Despite handing over an additional £342m to the outsourced Community Rehabilitation Companies (CRCs) to help them manage low-risk offenders just a year ago, the Ministry of Justice (MoJ) waited until Parliament rose for the summer to announce it was ending their contracts in 2020 rather than 2022.

Yet instead of giving up on the idea altogether, ministers are now consulting on plans for a new restructured, but still outsourced, service for England, with something altogether more sensible in the pipeline for Wales.

This sorry tale will be familiar to anyone with a passing interest in public service outsourcing – from Carillion to GP support services to passenger rail services, each has ended in disaster.

Some background

Back in 2015, the then justice secretary Chris Grayling unveiled the Transforming Rehabilitation programme in an attempt to reform offender management and rehabilitation.

He then launched a top-down restructuring of probation services with the aim of extending rehabilitation services to all offenders in a drive to reduce re-offending rates.

As a result, the 35 local probation trusts that used to provide unified and locally-focused services under the direction of the National Offender Management Services (NOMS) were abolished.

In their place, a single National Probation Service (NPS) was set up to deal with serious and high-risk offenders, while all other offenders would be catered for under contracts outsourced to 21 new Community Rehabilitation Companies (CRCs).

Opening probation services up to competitive tender was supposed to create a diverse market of providers, with community and voluntary organisations playing a key role in developing innovative new ways of turning offenders’ lives around.

So much faith was placed in their ability to do this that a ‘black box’ approach was taken, with CRC providers granted the freedom to do whatever they saw fit to bring re-offending rates down.

Complex payment by results (PRB) mechanisms were also set up to incentivise providers and allow MoJ commissioners to evaluate their performance.

Pay outs to CRCs would be weighted differently depending on the type of offender – with higher payments for supervising community service offenders than for those who only needed supervision.

This was all well and good for the heroically optimistic free market fundamentalists running the show, whose wishful thinking led them to press ahead with the reforms before seeing the (decidedly mixed) results of two pilot schemes in Doncaster and Peterborough.

So what happened?

Seasoned observers of what happens when the government outsources public services will be able to guess the rest, but last year’s Justice Select Committee report into the mess tells you all you need to know.

Here are 5 key findings from the report that just about sum it up:

1. The diverse provider market ended up in the hands of just 8 parent companies – all bar one of which came from the private sector.

And while most of these providers trumpeted the role that voluntary organisations would play in their plans, so few cases came down the supply chain that engagement with the voluntary sector actually fell in the wake of the Transforming Rehabilitation reforms.

2. Companies submitted highly optimistic tenders based on scant intelligence about future caseloads.

MoJ commissioners, facing 40 per cent cuts in their own departmental budgets, gleefully accepted bids that would offload so much risk at such a low cost.

But when caseloads turned out to be very different from what had been expected due to higher numbers of the ‘wrong’ type of offenders (that is, the less lucrative ones), the CRCs found themselves operating at a massive loss.

They then invested even less in their services, so quality and workforce morale plummeted even further.

Eventually, last year’s bail out was the only way out.

3. The fragmentation of the NPS from the CRCs led to chaos and confusion.

Poor communication, duplication and dysfunctional relationships prevented exactly the kind of collaboration and integration that is needed to join up services for offenders with complex and changing needs.

4. The ‘black box’ innovation promised by the CRC providers turned out to be underwhelming.

The “Through the Gate” service set up to cater for all offenders who were coming out of custodial sentences often amounted to little more than a leaflet with some helpful links and phone numbers.

Probation officers reported dealing with up to 100 offenders by telephone rather than in person.

The situation got so bad that the contracts had to be changed again, with national service standards inserted to make it clear that telephone supervision was only acceptable in exceptional services.

5. In the words of the Select Committee, “CRC performance in reducing reoffending, particularly the number of times an offender reoffends, has been disappointing”.

In response to a report from the Chief Inspector of Probation in February this year, justice minister Rory Stewart MP declared in parliament that CRC performance was “simply not good enough” and that he wanted “to be judged on driving the CRCs back to the very basics of their task”.

In evidence to the Select Committee, the minister described these very basics as:

“having a very clear idea of where those offenders are; secondly, making sure that you have regular face-to-face contact for those offenders; thirdly, making sure that a good assessment process is taking place of the individual needs of the offender; and, finally, making sure that a good plan is put in place that has a logical relationship to that assessment”

By implication, the outsourced CRCs were not even reaching this standard.

What’s changing?

So it’s no wonder that the Ministry of Justice are now keen on an overhaul. Unfortunately, it seems we’re due more of the same.

In England, the number of CRC contracts is to be reduced to 11 in order to make them co-terminus with the NPS, making less confusing interfaces between the two.

But the contracts will be put out for tender again and the essential fragmentation between CRCs and NPS will persist.

Larger contracts also mean a market that will be even more tied up with the large outsourcing conglomerates, with even less voluntary sector participation and much less of a local focus than the 35 probation trusts that preceded this mess.

Wales at least is different.

Here the main body of work by the CRCs is to be unified with the NPS in a publicly owned service – with some community service and rehabilitation work out for contract.

This is a huge step in the right direction for both public ownership and Welsh devolution, but if it works in Wales then why not in England?

And while a positive step, the Welsh model is not a panacea.

The NPS itself is beset with problems arising from the damaging impact of the 40 per cent cuts to MoJ budgets.

It will be interesting to see how the Welsh NPS copes with absorbing the CRCs without significant additional investment.

Missed opportunity

Today’s announcement amounts to a huge missed opportunity. All the evidence points to the failure of a market approach to probation services.

As we set out in our report on the lessons learned from Carillion, it’s our view that, in principle, the public services delivered through the public sector are best able to promote the public interest, particularly in sensitive areas like probation.

Public provision should be the default setting unless public interest criteria make a compelling case for the benefit of outsourcing – and no such case has been made for probation.

As well as a point of principle, there are also a set of practical considerations that apply to the outsourcing of public services.

First, it’s harder to monitor and measure performance with these models. Second, the more complex the service being provided, the less well a commissioner–contractor relationship performs compared with an integrated service.

The Institute for Government has set out ten considerations that “those introducing, adapting or overseeing contractual mechanisms in public services should ask to gain a better understanding of their costs and benefits”.

These include examples where added value is hard to measure, where there is high demand uncertainty, or where outcomes depend on the performance of other government services.

All three are relevant to the case of probation services and are a classic case of when not to outsource.

Conclusion

In their submissions to the Public Administration and Constitutional Affairs Select Committee inquiry on the collapse of Carillion, companies like Serco and Mitie complained that outsourcing public services lands those companies with too much risk.

They asked how they could be expected to manage such uncertainties as the flow of clients and services that are subject to a complex array of factors. CRC companies like Sodexo echoed these points in their evidence to the Justice Select Committee.

We agree. It’s unacceptable to expect companies to anticipate and bid appropriately for a market in probation services.

The only bodies capable of efficiently and effectively managing the service are public bodies, which have the ability to integrate and unify services while coping with the long-term uncertainties.

If ever was there a case for taking a service back in house, this would be it.

Unfortunately, ministers are still asleep at the wheel.