G4S has admitted a serious and sustained fraud again the public purse dating back to the early 2000s, in relation to its contract with the MoJ for electronic tagging of offeners. But in July this year, G4S was able to buy off prosecution for fraud, by paying £44m - a process called a Deferred Prosecution Agreement (DPA), which has to be signed off by a court and published. The  judgement on the G4S DPA, here, (as in the similar one with SERCO last year, here,) reveals much not only about the criminality of G4S, but the contributory negligence of the MoJ as customer which enabled the fraud, and the extraordinary slowness and high cost of the Serious Fraud Office (SFO). It also casts doubt on whether the DPA was properly made in this case, and indeed, whether DPAs are even compatible with most peoples’ idea of ‘justice’.

What are DPAs?

DPAs were imported from the American judicial system by the Courts and Crime Act 2013. The background was the abysmal performance of the UK authorities in dealing with economic crime, highlighted by the financial crash of 2008. UK US.  The SFO in particular was under fire, following collapse of yet another major trial (the Tchenguiz brothers), due to a series of very basic failures to follow procedure, and its own governance was questioned after an unauthorised pay off to top staff.

This was the reasoning: prosecuting economic crime is difficult, slow, expensive and cases often collapse embarrassingly. A major obstacle is the legal doctrine of ‘directing mind’ which requires it to be shown that employees of the company committing the crime are in fact acting as the company. Also, detecting such crime in the first place and securing evidence is difficult, given the absence of any incentive for the company itself to own up or cooperate with the investigation.

The idea of the DPA was that instead of prosecuting the company, the prosecuting authority would invite it to do a deal under which the company would recognise wrongdoing, cooperate fully, hand over all evidence, pay a financial penalty and implement under supervision measures to improve corporate governance. (A DPA only avoids prosecution of the company itself - individuals who worked for the company may still be charged and in a number of cases, have been.)

Such arrangements are familiar in the USA, but the murkiness of deals done there behind closed doors worries British jurists. To answer such qualms, the DPA as introduced here has to be signed off by a court, and has to be published, while the rules governing its use are set out in a published Code. DPAs do not apply to individuals, and apply only to economic crime (not for example, environmental crimes).

There has been widespread criticism of DPAs (though mainly by City law firms likely to be batting for the accused eg here). Much of it centres on the tension between avoiding prosecution of the company, while prosecuting individuals who worked for it. In the Rolls Royce, Tesco and Guralp cases, criminal prosecutions against former officers of the companies fell apart.  Indeed, no individuals have ever been convicted of the wrongdoing that prompted the investigations which led to any of the DPAs.

Critics say this leaves a conundrum that a company has publicly acknowledged very grave criminal offences and paid a lot of money by way of reparation, but seemingly no actual person was criminally guilty of any wrong doing. Shareholders ask why, then, so much of their money has been paid over – indeed in both the SRCO and G4S cases, shareholders threatened legal action against the company, in relation to the effect of the fraud on the share price, here and https://www.law360.com/articles/1236163/serco-shareholders-sue-over-stock-dive-after-fraud-probe.   Other critics are concerned that individuals at risk are not properly protected during the company’s internal investigation, or in the disclosure of evidence to the SFO, are excluded from the negotiations with the SFO, and if acquitted, have no way of removing the taint implied in the DPA agreement, since it has alreayd been declared that the conduct was criminal, a case of 'verdict first, trial later'. There is concern that it may suit the SFO and company very well to throw a few individuals who may not have been the prime movers  to the dogs – ‘look, there go the rotten apples, good riddance, problem solved’.

A constant throughout the period is the glacial pace of SFO investigations and the high failure rate of its prosecutions. In fact, in 2017 the Tories made a manifesto commitment to abolish to SFO and hand over its functions to the National Crime Agency, but immediately dropped the idea on returning to power, proposing instead to rethink its whole approach to economic crime, a rethink that has continued ever since, if ‘think’ is the right word for a Government so adrift on every issue. Apparently the MoJ are too busy with Brexit to do much thinking. A recent Lords report again slammed the legendary slowness of the SFO here, while the SFO have quietly dropped a further slew of major investigations that have been underway for years (Rolls Royce, GSK), here.

Successive heads of the SFO, and many commentators, have proposed to tackle the problem of proving a ‘directing mind’ by creating a new offence of ‘failure to prevent’ economic crime, such as already exists for bribery under s.7 of the Bribery Act 2010, which used this formula specifically to make it easier to prosecute without having to prove the ‘directing mind’ was at work. Instead, what would be at issue is whether the company had in place adequate procedures to stop the sort of criminality. In fact, an attempt to introduce the same concept to fraud was mooted during passage on the 2013 Act, but shot down by the Government. And the idea has now disappeared into the black hole that is of the MoJ. In any case some critics have doubted that this is the best solution here . Some argue  that the 19th century legal doctrine of 'directing mind' is antiquated in an era of large, complex company structures and also needs to be undone.

Curiously few have raised the moral question, whether it is actually right for the State to let big, wealthy companies buy off prosecution for very serious crimes, especially crimes against the State and the taxpayer. I return to that issue at the end of this article.

Recap of the story so far

There has never been - and will never be – any public inquiry, so many facts about the case aren’t known and may never be known. The National Audit Office reported  on the issue in 2013, but because of the SFO investigation, could not take it very far. An internal MoJ investigation was started, but immediately dropped, for the same reason, and has never been proceeded with (see chapter 5 of my book). G4S has submitted a Statement of Facts to the SFO but of course, that will never be published. The sub judice rule is a great friend to those with embarrassing secrets to hide, above all, the MoJ itself. Thus, we are a long way from knowing the full story. We may hope that a deal more comes out when ex-officers of SERCO and G4S come to trial – if they get to court. The SFO’s inglorious history of cracked trials and cases dismissed does not inspire confidence.

Briefly: electronic monitoring of offenders (‘tagging’) was introduced by the Home office (before this work moved to the MoJ) in the 1990s, and was contracted out from the start (it has never been done in-house). SERCO and G4S quickly became dominant players, sharing the tagging market between them. They also ran prisons, prisoner escorting services, youth custody and immigration custody, becoming ever more deeply entwined in our justice system. Between them they earn hundreds of millions a year from MoJ and the Home Office. MoJ has allowed a tri-oploy to develop for running prisons, Serco, G4S and Sodexo. So, the customer is highly dependent on these two companies, indeed the market in detention and correctional services would collapse without them.

In July 2013 the then Justice Secretary, Chris Grayling, told a shocked Commons that in the course of preparing for re-tendering of the contracts, his Department had uncovered serious over-charging by SERCO and G4S going back some years.   The matter was referred to the SFO. Here we are, a mere 7 years later, with a decision not to prosecute the company.

What this  DPA reveals

On 17 July Mr Justice Davis signed off the DPA between the Serious Fraud Office and G4S, under which the SFO agreed not to prosecute G4S for defrauding the Ministry of Justice, in return for G4’s payment of £44m and commitment to various improvements in its corporate governance. The same judge signed off a similar deal with SERCO a year ago.

What this document reveals is extraordinary and deserves wider circulation.

1)    G4S charged millions for work it didn’t do. But this was entirely legal!

At the time the scandal broke, it appeared that it consisted of G4S (and SERCO) submitting invoices to the MoJ and being paid for them, for work which the company knew perfectly well had not been done. Thus the Justice Secretary to the House:

“It included charges for people who were back in prison and had had their tags removed, people who had left the country, and those who had never been tagged in the first place but who had instead been returned to court. There are a small number of cases where charging continued for a period when the subject was known to have died. In some instances, charging continued for a period of many months and indeed years after active monitoring had ceased.”

This was the assumption in the National Audit Office report  in 2013, which detailed some of the ways this was done.  For example, they would continue to charge even if they knew perfectly well the offender had absconded, if there were no order to cease – even though of course they knew they were no longer supplying the service charged for. They would continue to charge even after failing to install the tag successfully, so they knew they were not providing a service. Yet in July, the court declared that this was not fraud. Why not?

First because the MoJ changed the contracts in a way that invited such conduct. As described in my book, there had been a problem that in the case of those tagged on remand, the date for cessation was the date fixed by the court for reappearance. But in practice, that merely lead to another period on remand. In the meantime, the contractors might have removed the tag, thus necessitating another home visit to re-install it. It appears – this is among the murky secrets never now to be divulged – that the MoJ responded by altering the contract, so that no expiry date was set, on the assumption that the court would order cessation when they finally committed the defendant for trial or discharged him.  (The operators inserted their own expiry dates – SERCO set theirs as….the year 3000. Talk about a long-term income stream!) But predictably, courts didn’t bother to cancel orders, not having much interest in that side of things.  Consequently, orders remained in force even though the offender might be at liberty or back in jail or even dead. The operators knew this. But they carried on milking the MoJ. It was an act of appalling dishonesty. But not it seems unlawful.

It appears that such dishonest practices constituted most of the £180m which the companies paid back under duress in 2014 once they’d been found out. (Though just what that £180m comprised is yet another truth that will never be told, but in the case of G4S, some payments relate to other contracts where over-charging had been discovered, here: so this wasn't an isloated case).

2)   Because the companies told the MoJ what they were doing. And the MoJ did nothing.

The NAO report (2013) states: “G4S  has stated to us that…the Ministry should have been aware of the way in which it was billing, and that it provided written explanations to the Ministry in 2009 that reflected its interpretation of the contract…” and “SERCO has stated to us that it charged in line with its genuine interpretation of the contract and that it was open about this to the Ministry throughout…”.
That much was stated by the Justice Secretary in announcing the discovery of the fraud to Parliament in 2013:

 “The audit also reveals that contract managers in the Ministry of Justice discovered some of the issues around billing practices following a routine inspection in 2008. Although it appears that these contract managers had only a limited idea of the scope and scale of the problem, nothing substantive was done at that time to address the issues. None of that, however, justifies the billing practices followed by the suppliers.…..The House will … be surprised and disappointed, as was I, to learn that staff in the Ministry of Justice were aware of a potential problem and yet did not take adequate steps to address it.”
 
That, I believe, is what made charges of fraud impossible, in relation to charges raised for work not done. Because the companies told the customer what it was doing. And the customer, it appears, did nothing whatsoever about it.

3)   What was illegal was G4S’s falsification of financial reports, over a decade, to conceal excessive profits which it was legally required to share with the taxpayer

When the first-generation of tagging contracts were due for re-tender in 2003, the Home Office (then the customer) was concerned that volumes and thus sending was rising. In an operation of this kind, some costs are more or less fixed whatever the volumes, other costs may rise, but not in direct proportion to rising volumes. Therefore, unit costs should fall. So, the Home Office asked bidders to disclose their true costs, so as to guard again excess profits. Each company was required, by the contract, to state annually its true margin to date, and expected future margin. The contract provided that if excess profits developed with rising volumes, the contractor must disclose these and so that the price could be adjusted. The contract required the companies to ensure these returns were ‘true and accurate’. From the start, before the contract even started, G4S lied its head off, sending in false returns that concealed its true costs and profit. It continued lying until found out. This schedule, from the judgement on the DPA, helpfully sets out the difference between the profit as disclosed to the Ministry, and the true position.

4)     Even so, it was obvious that excess profits were being made, exactly as the MoJ had feared – but again, they did nothing

The customer had started the contractual process by stating its concern that the cost should not rise in direct proportion to rising volumes, but that ‘efficiency gains’ should be declared and shared with the MoJ. It was obvious, year after year, that the costs were rising in proportion to volumes  (see my graph here  https://www.julianlevay.com/articles/a-curious-graph ).But apparently officials did nothing to probe this, nor to ask how it was that G4S’s costs were rising in line with volumes. It is almost as if the MoJ had lost interest in the existing contracts as they prepared to re-compete them (indeed in cross examination later by the Public Accounts Committee, the then Permanent Secretary admitted as much (my book, chapter 5, footnote 13.)

5)     The SFO took seven years and £6m to reach their decision not to prosecute G4S

The scandal broke in 2013. It has taken the SFO 7 years to decide not to prosecute G4S. Granted the SFO is a by-word for sloth and incompetence, this is extraordinary.  A year longer than World War Two. What were these people doing? After all this was not a complex case: only one company; only one customer; only one contract; no foreign jurisdictions involved, no fugitive suspects.

Nor is this so unusual. In July 2018, the SFO disclosed that of cases currently under investigation, half had already been under investigation for more than 4 years (answer to my  FoI request). Last month, 3 G4S executives were charged with fraud, 7 years after the case was referred to them.

Does this extraordinary sloth matter? It does. ‘Justice delayed is justice denied’. Whatever one thinks of them, it is unpardonably oppressive to leave the G4S staff in question, and their families, and maybe others, under threat of serious charges for 7 years – 7 years during which they must have found it near impossible to get work in that sector. Such delay also means that memories will have decayed and that may cause evidential problems in court. It also means that for 7 years, Government has been awarding more contracts to an organisation facing trial for fraud against the Government.

If the charges against individuals proceed to trial, it is unlikely that this saga will conclude before 2023, and if there are then appeals, 2024 or 2025 – more than two decades after the fraud started and a decade or more after the SFO started work. This is ludicrous,  incompetent and oppressive, in such a straightforward case.

6)       In secret, the MoJ lobbied against prosecution

Bear in mind, what follows was all done in secret. The only reason we know about it, is that it was disclosed by the judge.

Mr Justice Davis states the SERCO DPA last year that “the SFO has argued that the public interest would not be served by [SERCO] being debarred from participating in any government procurement exercise…This would be the consequence…were there to be a conviction, whereas it might not follow in the event  of a DPA being approved”. This clearly can only have come from the MoJ. And in the G4S case, Mr Justice Davis quotes a statement by the MoJ’s Chief Commercial Officer’s saying that exclusion of G4S would have a of the ‘detrimental effect’ on the market for justice services. It is difficult to see these interventions other than as an argument against prosecution of the companies. Why else make them?

In practice, the Judge worked out that in reality, exclusion of the companies from procurement following criminal conviction under the Public Contracts Regulations 2015 is not mandatory but discretionary – and Cabinet Office told the court that conviction would not necessarily result in such disbarment. So it is not clear that the MoJ’s intervention was even relevant.

Nevertheless, the fact of MoJ’s intervention is telling. Not least because it is the MoJ itself which is responsible for its high degree of dependency on these 2 companies, so much so that even in the case of sustained and admitted fraud against the public purse, the MoJ cannot sustain competition without them. When I was FD of the Prison Service, we reckoned that to sustain effective competition for prisons we needed 4 established competitors. That was achieved. Then in 2008 a merger redirected that to three. Since then, the MoJ has repeatedly invited other companies – MITIE, MTC and others – to bid, and repeatedly awarded those contracts to the Big Three. The tri-opoly is the MoJ’s own doing.  Result: SERCO and G4S are now  it seems ‘too big to prosecute’. Government and outsourcers have become co-dependent.

7)     This DPA does not fit the criteria laid down, and should never have been made

In this case, the 'identification principle' was satisfied ie the doctrine of a 'directing mind' was not an obstacle to charging the company. There was a choice - to charge or not. So how was the decision made not to charge? 

The 2013 Act introducing DPAs provided for a Code of Conduct  to be issued governing their use. That Code sets as factors relevant to the choice between a DPA and prosecution:

• Whether there is a history of misconduct
• Whether it is an isolated incident or part of established business practice
• The existence of a corporate compliance programme at the time of offending, or subsequently introduced
• Whether the company had been previously warned, but failed to take remedial action
• Significant harm, including damage to the integrity and confidence of markets and government
• Prompt and full disclosure and cooperation
• Whether the offence was the work of a rogue individual, rather than ranging more widely
• Whether the offending is recent
• Possible disproportionate consequences of prosecution on company
• Collateral consequences e.g. for employees, shareholders.

The Judge listed as factors tending towards prosecution:

• The seriousness of the offences, including the loss of public money, and effect on public confidence in outsourcing
• The falsification of financial returns was part of G4S’s business practice for many years
• G4S - unlike SERCO - did not cooperate fully with the investigation from the outset. Indeed, did not do so until ‘a relatively late stage’.

The Judge then listed factors tending against prosecution and in favour of  a DPA. In almost every case, his reasoning seems questionable, even at times self-contradictory:

• ‘Prompt reporting’: the DPA states that ‘G4S reported the fraudulent conduct once suspicions had been raised’ (my italics). That is, not until the MoJ had written voicing its suspicions. I would not call that ‘early and full self-reporting’. It’s more like being caught with your hand in the till.
• ‘Cooperation with the SFO’. This is truly perverse.  We know that G4S did not cooperate fully with the SFO, because the Justice Secretary said so to the Commons:
• “I am grateful to Serco for its co-operation. Let me now turn to G4S. We put the same proposal for a further detailed forensic audit to G4S last night. It has rejected that proposal. I have given careful consideration to how to respond. …..I am today asking the Serious Fraud Office to consider whether an investigation is appropriate into what happened in G4S and to confirm to me whether any of the actions of anyone in that company represent more than a contractual breach. I am also disappointed that G4S still feels it appropriate to participate in the tendering process for the next generation of electronic monitoring contracts.”
• The DPA itself acknowledges this, indeed amplifies it: “[G4S’s] level of cooperation initially was less than it was after October 2019 at which point the company’s level of cooperation intensified very significantly’. So, for 6 years, G4S’s cooperation was ‘very significantly’ less than full. Bizarrely, the Judge counted this as an argument against prosecution, saying that the less than full cooperation for 6 years didn’t matter, because they coughed up finally – in the seventh year!
• ‘the relative age of the conduct’. The Judge though that G4S should escape prosecution because the conduct dates back to before 2013. But why so long ago? Because it’s taken the SFO 7 years (so far) to investigate. So the inexcusable sloth of the SFO has this result: a-get-out-of-jail free card for the company. Moreover we know (above) that the delay was in part because G4S refused full cooperation! Memo to fraudsters: just stonewall for 6 years, then say oh, it’s such old hat, let bygones  be bygones…The court should have seen the delay as a cause for criticism of the SFO (an issue it did not see fit to raise at all), not as reason for letting the company off.
• ‘G4S has put its house in order’. Now it’s true that the MoJ insisted soon after the scandal broke on a  corporate renewal plan for G4S, which was directly supervised by Cabinet Office, the Justice Secretary declaring:
• “both companies are going to have to go through a process of what I would describe as corporate renewal if they’re going to work with government in the future….I want to see both companies able to demonstrate that they have addressed the internal cultural issues that could enable this [overcharging] to happen in order for me personally to have confidence in future that we can work with them” (FT 20 Aug 2013)
• Maude, the Cabinet office minister, declared in 2014 that the programme of renewal had been sufficiently effective that a temporary ban of further contracts for G4S could now be lifted (FT 9.4.2014). But there is another contradiction here. This prompt corporate cleansing back in 2013-14 is cited by the Judge as a reason against prosecution. But the need to ensure corporate cleansing is also quoted as a reason why there must be a DPA: ‘prosecution …. cannot sensibly achieve this objective’ in the future. Was G4S effectively cleansed by 2014 as Cabinet Office Minsters declared, allowing it to be given more government contracts, or is it still now, in need of real cleansing? It cannot be both!

In short, much of the case against prosecution of G4S seems ill-founded, if not downright perverse.

There is a further and more basic point: the interests of justice.  The Judge concluded that the DPA rather than prosecution was ‘in the interests justice’. Why? Because G4S had admitted criminal behaviour, repented, paid back its gains and undergone ‘cleansing’. He argued that ‘this will protect the public…in a manner more effective than any prosecution…’ He also argued that ‘the absence of a conviction will not affect substantially any damage to the substantially reputation of the company’. That statement is nonsense. The conviction of G4S for fraud against the UK Government would have had a devastating effect on its reputation here and around the world, indeed the ability of governments, including even this one, giving it contracts.

As a sanction, the fine is irrelevant. Half a per cent of turnover. It’s nothing.

And one of the fundamental objections to this DPA is that for the people of this country there is a huge  difference between paying bribes to secure contracts abroad, in countries where bribery may be common, even an accepted way of doing business, even essential if you want to do business, and systematically stealing money from the British taxpayer. All the more so, since these people were trusted to supply vital public services. This should have weighted the decision towards prosecution. In my view, G4S ought to have been prosecuted. That, I am quite sure, would have protected the British public in a manner more effective than this glorified probation order.

8)     DPAs are a conspiracy of the powerful and rich against the public good

I return now to the nature of DPAs themselves. I have explained why they were introduced. The primary reason is that companies are difficult to prosecute for fraud, and the primary reason for that (apart from the incompetence and dilatoriness of the SFO) seems to be the legal doctrine of ‘directing mind’.  The solution to these problems is not to avoid prosecution, but to make prosecution possible. First, as so many observers have argued, to import the ‘failure to prevent’ device into the law on fraud. Second, to modify or do away with the outdated doctrine on ‘controlling mind’ (which seems to be a British peculiarity and doesn’t exist in the US). Third, to replace the SFO which has failed so many times over decades to do its job promptly or competently.

As I noted, few commentators have asked the most obvious of questions about DPAs: why is it right for huge rich companies to be able to buy off prosecution, while you and I cannot? True, we may be offered a caution, if we admit an offence and make restitution: but with this difference: it’s only available for the most minor offences. Not for stealing millions.

Here’s why I think DPAs are immoral and unjust. It’s from court results in my local paper:

LUKE *****, 34, of Banbury Road, Oxford, admitted stealing alcohol valued at £41 from Sainsbury’s, Oxford, on April 29. He must pay compensation of £41.

Luke has been convicted of a very minor crime indeed, and has paid compensation, but also now has a criminal record. Why haven’t G4S and SERCO, who stole many million times as much? Are they just too big, too rich, too powerful to be prosecuted?
 
9)       There never has been any inquiry into the negligence of the MoJ which enabled this fraud

As I’ve noted, the effect of he unbelievably protracted SFO investigation is that the MoJ terminated its disciplinary inquiry into the seeming malfeasance of its officials who apparently knew the G4S and SERCO were charging for work done but did nothing about it (and did not tell Ministers). Nor any investigation of those charged with monitoring contracts who failed to react to the fact that tagging volumes were soaring but unit costs not falling, exactly what MoJ was concerned to avoid. Nor of those who changed the contract to remove the mechanism which stopped orders continuing indefinitely, yet took no steps to guard against the abuse that they had made possible.

Ah yes: those responsible have ‘moved on’. Tell me, why is that always a defence for officials (and their ministers) but not for those now charged in G4S and SERCO?

10)      We will never know the full facts

The NAO investigation in 2013 was very limited by the sub judice rules (and did not in fact spot the real substance of the fraud at all). It cannot resume because of the cases now coming before the court. By 2022, it will all be forgotten. So, we will never know the full facts. And if those cases fold, we wont even know much about what went on inside G4S and SERCO. Of course, the SFO know, and the MoJ know – it's just you and me (and Parliament) who mustn’t know.


 

Further on the Wellingborough prison contract.

There has indeed been an objection to the proposed award to G4S, that is why MoJ hasn’t formally announced the outcome. There will now be a short interval while MoJ confirm that they did everything right. Indeed, it is rather hard to see how the objection could be framed: it’s not enough to say the decision was daft (of what MoJ procurement is that not true?), they would need to show some serious irregularity of process.

As to where the objection comes from, I feel sure neither of the other tri-oplists would wish to upset the customer (and SERCO’s hands are just as dirty as G4S’s, regarding the fraud case). So, my guess it’s MTC, who would also have been pissed off by handling of probation outsourcing and who (if they are the objectors) might as well be on the next plane back to the States.

As I've said before, I'd advise any company seeking to enter the prison market to look at the history (table 6.1 in my book will serve).  Free advice: don't!

Richard Heaton, Permanent Secretary of the MoJ, appeared before the Public Accounts Committee on 29 June to give account for his Department’s failures on management and expansion of the prison estate, set out in a recent National Audit Office report.  The Chair and a member of the Justice Committee also attended, a useful innovation, since there is so much common interest.

Heaton was accompanied by the Chief Exec of HMPPS and the Deputy Director of Prison Maintenance and Change. He did not bring his FD, Mike Driver, surprisingly, since the talk was largely about money. [But perhaps someone had recalled that at a previous session, Driver told a gobsmacked Justice Committee “I would say that we have a very good financial management regime within the organisation.”  That would not have gone down well on this occasion.]

The hearing was never going to be easy.  Because what the NAO reported was that prisons remain dangerously overcrowded, with a big mismatch between the type and location of available and places needed, that the programme to create 10,000 new places by 2020 had created precisely 206 places, with not one new prison opened, that a ballooning budget deficit of near £1bn a year had meant available capital had to be switched to current,  that plans to close old prisons with poor conditions  had almost entirely failed, that MoJ had failed to keep pace with a rising backlog of essential maintenance, so that an increasing number of places had to be taken out of use while conditions in many prisons were appalling, and that contracting of FM had been an unmitigated disaster ending with the collapse of Carillion, and all this while prisons were less safe, less decent than they had been for many decades.

Now you might think that if that was the wicket you were going in to defend, you’d have sent hours and hours mastering the facts, preparing your response to the inevitable criticism and to shoulder responsibility for this avalanche of failures.

But not Richard Heaton.

In all my years as a civil servant, and my own appearances before the PAC and other Committees, I have never seen anything remotely like it. Heaton had not mastered quite basic facts, did not appear to feel that he personally had anything to answer for, did not seem to think that anything – including the Committee- mattered very much.

He was not, however, short on explanations for all these disasters. Turns out that it was either all someone else’s fault – impliedly, his immediate predecessor, Ursula Brennan's - or alternatively, the fiscal equivalent of the wrong sort of snow. Here is the complete list of his excuses:

1. The SR 2015 spending settlement was ‘undercooked’.   [What does that even mean? Is he thinking of ‘cooking the books’?] It was a bad settlement that reflected badly on the Department (before he joined it, natch) and HMT equally.
2. He arrived just too late to put it right [“I came in at the end of 2015”. But that’s not quite true, is it? Heaton took over in August 2015, handover starting in July. The SR outcome was announced in late November. ]
3. Forecast of receipts were ‘unrealistic’
4. Projected savings from legal aid budget were ‘unrealistic’
5. Savings from the contracting out of FM also ‘turned out’ to be, guess what, ‘unrealistic’ and someone managed the contract badly
6. FM and probation outsourcing were the first of their kind, so naturally they went wrong [FM has been one of the commonest things to outsource for decades. HMPS had outsourced FM in several prisons earlier in the 2010’s. Also, may I point out, in the early ‘90s,  prisons were among the very  first, and  by far the most tricky PFI contracts: those contracts still stand, 25 years later.]
7. ‘some’ of the MoJ’s big programmes turned out to have ‘over-ambitious and unrealistic spending or savings targets’
8. The prison population didn’t behave exactly as forecast [it never does]

 
“My predecessors landed me with this shit” plus “Fate was unkind to me”. Not me, Guv!
 
Heaton has obviously never heard the maxim that when things have gone really badly wrong, 10 excuses are 10 times less credible than 1. Or that the most powerful defence in the language is, “I’m sorry, I got it wrong”.
 
When Shabana Mahmood rightly pressed him to be a bit more precise about how the Department came to get so many things so wrong, Heaton replied: “Maybe we suffered from group think…maybe we were not rigorous enough, maybe our forecasting was not good enough, but without a historical exegesis…I do not think I can be more precise than that”. The mandarin equivalent of ‘whatev’. But I do believe him. I do accept that he is quite unable to be more precise.
 
For indeed Heaton is not a man for detail. How many places would the 4 new prisons just announced give? How many prisons hold women? Could MoJ do lease back of new prisons? How much had he got for Holloway? Don’t ask me. Why did you underspend on maintenance by £24m? The answer: “..we did not see the figure. We just cannot [inaudible] where the underspend was”. Don’t ask me, I’m only the Accounting Officer. If all his evidence had been inaudible, we might be better informed.
 
His language was striking. Heaton seemingly wishes to appear hip, relaxed, casual, none of that old-world Sir Humphrey stuff. In so doing, he seemed to me to signal a fundamental lack of seriousness and respect. The FM and probation contracts were ‘kind of doomed’. Oh, well, that’s really helpful. The 2019 budget “gave us the money we needed to keep the lights on” and “a good slug of capital” (Heaton the fiscal alcoholic. “Gimme anther slug, willya. And leave the bottle!”)
 
When it comes to the future – which Heaton much prefers talking about than all that dead old history, man – Heaton is as rhapsodic about the wonders to come as he is short on details, such as when, or at what cost, or what risk. The Justice Committee chair, pressing him, says ‘There’s no overarching strategy for dealing with any of these things, is there?’ Heaton replies that the Committee has had ‘the ingredients of a strategy’ and that “I hope you would not observe a lack of strategy if you were to revisit this, I say in 6 months” i.e. after I’ve escaped. Towards the end Heaton became quite the visionary: he hoped MoJ would carry on way beyond the 10,000 new places, building more and more prisons…glorious. (No sense at all of the fiscal, social indeed moral case for not having more and more prisoners. Or of the long experience that if you build more capacity, some politician will fill it up again, and then overfill it.)
 
Heaton has however given us more insight into the extraordinary catalogue of failures in MoJ in recent years than he thinks. An organisation headed by such a man, a man without the least concept of what leadership entails, a man so disdainful of detail, so unable to take personal responsibility, could never flourish. The MoJ rotted from the top down.
 
The story extends to two other serious failures.
 
As ever when someone fails in a job by so wide a margin, questions must be asked about those who appointed him – and who kept him in office when it was clear it was quite beyond him: Cabinet Secretaries Jeremy Heywood and Mark Sedwill. Why did Heywood appoint someone so unsuitable by reason of his experience – Heaton was a Government lawyer of no real management experience – and temperament, to a massively difficult management job, £8bn complex spend and a huge variety of services, employing 70, 000 or so staff right across the UK?
 
This is more than bad judgement in one case. The mandarinate have never really squared two completely different jobs at Permanent Secretary level: giving advice to Ministers (not that they seem to want it much, nowadays) and dealing with Parliament, media etc on the one hand, and managed huge, complex, costly public services under great stress. The Agency concept was an attempted solution: separate the two out. That worked well until MoJ brought all the corporate and support services, including procurement, back to the centre of MoJ, with on the whole, bad results. This matters: insiders tell me of crucial discussions  about funding andmanagement of prisons from which those with operational experience were excluded. And I know from my own time how necessary their input was when the going got tough.
 
Second, there is another failure here: the failure of the PAC and Justice Committees to do their jobs. As an interrogation of the chief of Department where financial control has broken down, where public services had been badly damaged, where contract after contract has gone bad, their sessions were laughably shallow. As I have noted before (1), this is partly this is the inevitable result of rushing through so many inquiries in a Session, and of interrogation by a Committee of members, each with their own personal interests and issues. It is also the case that so long as Committees only call those currently in post, and absolve their predecessors, it will be to easy to maintain, as Heaton did, that it was all the fault of those who came before, and that all he did was try to clear up the appalling mess they left, disgusting, isn’t it, some people! Committees should have power to call predecessors in post (but then they’d have to call Grayling, wouldn’t they?). It would have been interesting, for example, to hear Ursula Brennan's response.
 
And that exposes a delicate cultural issue too. The PAC has the reputation for being fearsomely tough and critical. And appearing before it is quite a challenge. But I’ve noticed again and again, how Committee members, especially chairs, seem to want to avoid too direct a challenge. I noted that in my book, regarding the misappropriation of £200m by SERCO/G4S (1). I note it again here. Here’s the chair to Heaton: “glad to hear you are so upbeat” and offering him “muted congratulations from the PAC” (for what!?). And then cutting off Mahmood, who seems one of the sharper minds on the Committee, in mid-sentence as she told Heaton that MoJ’s litany of failures were ‘inexplicable’: “I think, Ms Mahmood, this is also about, once a mistake is made, how long it takes to unpick it, which is a salutary lessons for Whitehall and Westminster indeed”.
 
“Whitehall and Westminster indeed”. Indeed. As I have often noted, for all the conflict that their can be between Ministers and top civil servants, there is also a profound and (for the laity) sinister congruence of interests. Neither are keen for awkward truths to get out, or to spend too much time analysing the fruits of their actions and decisions. That was surely the real burden of ‘Yes Minister’. It is the price we pay for not separating out Executive and Legislature. Not much less than afifth of MPs are the Government payroll - and maybe another fifth hope to be soon. The watchdog is self-neutering.
 
In talking of Heaton’s and the MoJ’s failure, I do not - of course - suggest that failing is in itself morally blameworthy. I am not Michael Howard. Anyone who thinks they’ve never failed is a dangerous fool. In my book, and since, I’ve made it clear that I made mistakes in my time. The question is, do you scrutinise your own record, do you own your failure, do you show remorse, do you put it right, do you learn. I don’t think, on this showing, that any of those things can really be said of Heaton.
 
Heaton will shortly, leaving almost every part of the justice system in a worse state than it has been in living memory. Likely he will be replaced by some creature of Cummings choosing. MoJ must be dreading his or her arrival. But then, could they really do any worse?

NOTE

(1) My book, ch. 5

Robert Buckland is going to build another 4 prisons. Unfortunately, he has forgotten quite why.

A degree of amnesia is perhaps understandable. A succession of Tory Ministers has been announcing plans to build 10, 000 new prison places for such a long time, it’s almost become a ritual divorced from reality, like Harvest Supper.

Let’s help restore that memory!

Nearly 5 years ago, Michael Gove announced plans to build 10, 000 new places in 9 new prisons. That would have allowed old prisons with poor conditions and facilities, and high running costs, to be closed, demolished and those sites used to build 3, 000 new homes, the sale receipts partly paying for the prisons. In the process, the estate would be configured to better match demand and supply. New gizmos would make new prisons whizzier. It really was a most cunning plan.  A few months later, his successor, Liz Truss, confirmed the plans, promising 5 new prisons would be open by 2020. That is to say, today.  The number actually open today is…none. Just two are being built. They will open in 2021.

Why did the plan fail so spectacularly? After all, in my day we built and opened new prisons within 40 months of going to tender. Though we were never quite so stupid as to plan to open 5 prisons in one year, knowing how difficult it is to open a new prison (none more so than the last publicly built and run prison, Berwyn, which remained troubled and half empty for years after opening). But back then, HMPS was headed by people who knew all about prisons, as opposed Jo Farrar, who knows all about  running Bath Council, and prison building was handled by HMPS itself, not the incompetents who inhabit the centre of MoJ nowadays.

The reason for the failure was MoJ’s almost unbelievable incompetence. As the NAO helpfully documents (they’ll have to go, won’t they, Dominic?), two full years was spent shuffling paper back and forth between MoJ and Treasury. MoJ’s disastrous loss of financial control (see here) meant that capital had to be switched into current to plug the £1bn deficit in the budget. MoJ therefore had to look to private finance, not because it was better value, but because the cost could be spread over 25 years (prisons on the never-never). But (as I explained in my book!) PFI was never going to look as good as it had in the ‘90s, now that the public sector had got much improved its ability to build faster and cheaper, while the cost of public borrowing had plummeted. So HMT rejected their proposal. And then pulled the rug out from under MoJ by abolishing private finance altogether. So, back to the drawing board….

Last August, Buckland,  Truss’s successor but two (do keep up!) announced (again) a programme to build 10,000 new prison places. No, not those 10,000. Another quite new 10,000. No dates promised this time – someone had learnt a lesson, indeed they only have one site as yet. And the reason for building them had changed. Not to close intolerably inefficient and unsuitable old prisons – what an idea! But to accommodate Johnson’s plan to lock prisoners up for longer. Although no estimate of how many places would be needed has ever been produced.

The latest announcement is still with the 10,000 figure: but the rationale has largely disappeared. It’s not to relieve overcrowding (surely no-one would build prisons just for that remnant of liberal hand-wringing! Overcrowding is nothing to worry about, bar the occasional lethal pandemic, of course), not to close old prisons, not to accommodate Johnson’s extravaganza – which is no longer so much as mentioned. (Why not, I wonder? Cummings was so proud of it only last year. Caution stirring in HMT at last?)

The ‘reasons’ now advanced are…well, absurd.

First, to reduce reconvictions. The idea is that shiny new prisons with shiny new gizmos in them (politicians, like children, are irresistibly attracted to shiny new gizmos that whirr and buzz) will be ever so much better at preventing reoffending. (Not, however, so much better than we can ever stop building new prisons – oh, dear no). The evidence for this is, well, nil.

In fact, we know perfectly well that this rationale is nonsense:

1. We know – bugger it, this is MoJ’s own research! – that for offenders who are suitable for either prison or community punishment, the latter do better at reducing reoffending. So we know that the money would be better spent boosting community punishments, and preparation for release amongst shorter term prisoners. And shifting offenders from short prison sentence to community disposal. Thus creating space within the existing prison system. As Buckland staunchly believed when Gauke proposed this, but was happy to instantly unbelieve, as the price of getting Gauke’s job.  Now, you will recall MoJ promised the privatisation of probation would focus on preparing shorter term prisoners for release. As we know, MoJ screwed all that up so completely the contracts had to be cancelled and the probation service reorganised yet another time. Meanwhile Inspection report after report documented the catastrophic degradation of the quality of probation work across the country. If MoJ wants to burn money, that then is where to spend it.
   
2. We know – not MoJ’s research, as they’ve never othered to inquire (why evaluate what you’ve already done, when you might not like the results? Better to drone on about the bright new future), but my own calculations, that the biggest, most sustained, most costly attempt ever to reduce reoffending through prisons ‘saved’ maybe 80 ,000  recorded crimes a year – out of 5, 000, 000.  That was for the entire population, 70, 000 odd. So, building new prisons for 4,000 prisoners might, if they were very much better at rehabilitation, save at best 3,000 crimes a year. At fantastic cost.
   
3. We know – through Katherine Auty and Alison Liebling’s ground breaking research - that what distinguishes those prisons with lower reconviction rates is NOT shiny new buzzy gizmos, rather that prisons are safe and felt to be so by prisoners. And what MoJ has done this past 10 years is, of course, precisely the opposite: MoJ has made prisons much more unsafe and prisoners much more fearful, by irresponsibly cutting staff numbers and pay.
   
4. And let us avert our eyes from the last publicly built and run prison, Berywn, boosted in almost exactly the same terms before it was built, and a disaster ever since it opened – especially in the area of activity for prisoners and preparation for release (1).
   

The second reason advanced by Buckland and the wretched crew at MoJ, is so ludicrous as to be frankly embarrassing. It is to boost the local economy by creating jobs. This is obscene. If we want to justify  loading more debt onto your grandchildren to boost the economy now, let’s build something that enhances life and produces more wealth, or saves the environment – green energy, railways, schools, or what about the 500,000 homes needed in this country, anything but prisons, which will do no good at all to anyone. What community anywhere wants a prison built, if it could have something more positive and less threatening? Certainly not the people of Full Sutton, who fought the new prison there tooth and nail.

And it can’t boost local economies  quite so much as they boast. Because as Treasury claim, a tad unfortunately, in the same press release, the prisons will in fact be prefabricated and transported to the site to be assembled (“Components, such as concrete walls, and pipework for water and electricity are built by companies around the country using modern, standardised processes and assembled on site.”). So, not locally. (Treasury, in that blissful state of near total ignorance of what Government’ have done previously which characterises Government today, clearly do not know that the first PFI prisons did that a quarter of a century ago. Prefabrication off-site is as exciting an innovation as cardboard.)

The wilful ignorance, serial incompetence and cynicism of the MoJ is unforgivable. Particularly since this programme, like everything else done by Government nowadays, will be paid for by forced borrowing from future generations. Johnson plans to lock up more of the younger generation and for longer, then force them and their children to pay for it. Government Debt, which the Tories made such a fuss about when it was only  80% of GDP, and used to justify destructive cuts in prisons, the police, legal aid, has in recent months reached 100%, a level last seen in the early ‘60s when we were still paying off war debt. And as Johnson builds, and the economy slumps, and millions are unemployed the debt will rise much higher. War debt was finally extinguished only by the rapidly rising growth rates of the late 50s and 60s. Does anyone seriously expect to see such growth again – post COVID, post Brexit, post global warming? This debt may even outlast the prisons we are now building.

This plan disgraces everyone involved.

Note

From latest Inspection report on Berwyn, HMPS' flagship  brand new state of the art rehabilitative prison, opened just 3 years ago

"One of the greatest challenges...was the lack of activity places. It is difficult to understand why and how the procurement of work and training places for a new prison could be so delayed...some [places] were of inadequate quality...Even those that were available were not fully used. Many prisoners were unemployed...staff did too little to support a sound work ethic. The prison was struggling to develop its approach to offender management and resettlement.....There had been no assessment of current need.....Too few offending behaviour programmes to meet need." Etc.,  etc.