Grayling with mouth wide open, foot sure to follow.
Gauke's announcement today of renationalisation of the probation service was the right decision and will be welcomed by everyone (except 'Reform', the PR people for outsourcers, I notice). Indeed, it was inevitable, the Balkanised structure Grayling set up had to be replaced by a unifed service, and that could only be publicy run.
Many questions remain about the new structure, not least cost.
Much has been made of the figure put out by the National Audit Office of £500m, but that was the cost in excess of what the Grayling reforms should have cost Similarly the Public Accounts Committee). But the Grayling structure could never have worked, that is now clear.
The important figure is the cost of the new nationalised service compared to what it would have cost, had Grayling been strangled at birth, and the old public system continued. That, together with set up and transitional costs (which may run into many tens of millions), would give us the true 'cost of Grayling'. We won't know that figure for some time, not least because MoJ is now consulting on the new structure. The calculation is complex, for example Grayling extended probation supervision to short term prisoners, so extra workload, but then total court ordered supervision of offenders has fallen - and Gauke wants to do away with short terms sentences altogether.
What is certain is that the new arrangements will cost a shedload of money more than MoJ has available, since their spending plans were based on Grayling's reforms working, and part of that was to get cost out of the old public sector structure. The discussions with HMT must have been interesting, as MoJ was struggling with a £1bn overspend even before this volte face.
If one adds to this the cost of Grayling's bizarre contracts for ferry services with companies who don't in point of fact run ferries, which were then cancelled at huge expense, the successful claim by Eurotunnel, the forthcoming claim by rival ferry companies, the legal actions by Arriva and Stagecoach relating to Grayling's handling of rail franchise contratcs, to name only the ones we know about, Grayling seems to be one of the most expensive idiots in politics (a closely fought field). It looks like the all up costs of Grayling to the British state could be as much as £500,000 for each day in office.
(I refer only to financial costs. There are then the human costs - staff made redundant, staff public and private sector alike over-worked, offenders not properly supervised, left homeless, self harming and being assaulted in prisons as a result of those cuts....)
What this saga reveals is that the system of accountability on which Parliament relies isn't fit for purpose. Because if you keep moving quickly enough from one Department to another, it's your hapless successors who have to clear up the mess you dumped on them, and answer for it.
The Public Accounts Committee should innovate - they are always demanding that the public setcor innovate, now's their chance to do so. Hold an inquiry into the consequences for public spending of Christopher Stephen Grayling.
In 2013 the Government announced that it had just discovered that G4S and SERCO has been billing excessively for their contracts for electronic monitoring of offenders. The companies were made to pay back some £200m. It has been established that amongst other things, the companies were billing for work they had not done.
The Government referrred them to the Serious Fraud Office. 6 years later, the SFO are still mulling over the case. Granted, it is one of the most complex in the entire history of the SFO, featuring as it does no fewer than one victim, no fewer than 2 companies, no fewer than 2 contracts and no fewer than one jurisdiction. Obviously, that must takes many years to unpick!
Meanwhile, here is an interesting graph. It is interesting because as a general rule, if volumes of work done under contract rise, in this case getting towards doubling, the unit cost - the cost per item - can be expected to fall. This is because fixed costs are spread over more items. This is a basic rule of intelligent contracting.
But in this case, the unit cost actually increased as volumes increased. That would be bizarre whether or not the companies billed for work not done. And suggests that there was something very wrong indeed with the contracts themselves.
Source: National Audit Office, 'The Ministry of Justice's electronic monitoring contracts', 2013
Students of Civil service arcania will be familiar with the procedure for an Accounting Officer's request for ministerial directions. Briefly the Permanent Secretary who heads a Department has a personal, statutory responsibility to Parliament for use of public money, independent of that of ministers, requiring that he be satisfied that it meets the four tests of regularity, propriety, value for money, and feasibility. If ministers require civil servants to act in a way that does not meet those tests, the Accounting Office must write to the minister seeking a formal Direction to proceed, and his letter and the minister’s reply must be published, and the National Audit Office and Treasury must be notified. Responsibility for the decision then rests with the minister giving the direction.
Considering how daft, ill-considered, ineffective and wasteful so much Government spending is, the procedure is surprisingly seldom used – some stats collected by the Institute for Government are here . The National Audit Office has commented that officials lack confidence in challenging ministerial decisions, not least because it might damage their career projects. (Information from Martin Stanley’s excellent website www.civilservant.org.uk.)
Such an exchange had just been published between Sir Richard Heaton, Permanent Secretary of the MoJ and David Gauke (here and here). Gauke wanted to pay the debts of subcontractors to Working Links, whose 3 Community Rehabilitation Companies went into administration, due to loss making contracts. Heaton noted that there was no legal obligation to make good losses by subs, and rightly questioned whether using public money in this way would pass the tests of propriety and value for money. After all, if the subs had a beef it was with Working Links as main contractor. Heaton concluded that such payments would create a ‘moral hazard ‘ – i.e. a situation in which a company takes on a risky business, but knows it will in fact always be bailed out – of which there are innumerable examples in outsourcing including as indeed had previously happened the CRCs themselves.
Gauke’s response is interesting. He said the subs had asked MoJ to stump up in view of “the unique circumstances of this first-generation probation outsourcing, the comfort given by my predecessors about how the Government would steward this market, their status as ‘Permitted Subcontractors’ in our contract structure, and the extent to which these organisations were delivering frontline statutory services on behalf of Government.” He added that a partly privatised service could be hard to maintain if subs bore their own losses. So he made the Direction, again quoting ‘unique circumstances’ that meant Government has a ‘moral duty of care’ to the subs.
What was, then, ‘unique’ in these circumstances? After all, Government contracts all the time, passes risks to contractors all the time (that is a main purpose of outsourcing), contractors do the same to their subs all the time, those subs deliver ‘frontline statutory services on behalf of Government’ all the time, and contractors go belly up quite often. Moreover, there is no shortage of other contractors waiting to take over business.
The idea that if contractors or their subs get into difficulties, Government has aa ‘moral duty of are’ always to cover their losses would of course make a total mockery of outsourcing, which would instantly become pointless and a huge waste of funds.
Was the ‘unique’ consideration that created a 'moral duty' to meet subs' losses that the then Minister who implemented probation privatisation, Grayling, acted recklessly and by so doing, mislead the subs, or made perhaps understandings and promises which he should not have done (‘comfort given by my predecessors’)? Considering Grayling’s record of dubious spending decisions and dodgy contracts, those possibilities must be considered. We don’t know.
The only body able to probe this is the National Audit Office. It should do so.
Last August, Rory Stewart said he’d resign if, by August 2019, levels of violence and drug abuse in 10 target jails had not fallen. He said that meant a ‘substantial’ reduction, in the order of 10 or 25%. Here are the results after 4 months (August-December 2018), for assaults and, since this is one of the main concerns, and is after all a form of violence, self-harm, in the 10 targets prisons. We won’t be told the figures for drugs till July, at earliest.
They show a fall of 13% for self-harm, and 19% for assaults – in only 4 months. Remarkable progress! Stewart can likely keep his job.
But…. note a few things, if you will. First, there is nothing exceptional about the fall in the 10 target prisons. Here is the change over August for all prisons, compared to the target prisons.
In fact, the fall in assaults is much the same for the target prisons as for all prisons – and for self-harm, all prisons did better than the target prisons. So it seems that what did the job was not Rory Stewart’s personal focus on the 10 prisons, but the result of management action across the whole estate. Now, who was running prisons during that time….name slips my mind. Whoever it was, he did a good job.
(Although another explanation – one too seldom considered, nowadays, when every tiny change is considered the fault of achievement of those in power – is just that all trends come to an end. It may be that drug consumption for example has reached its natural limits because prisoners simply couldn’t take any more drugs. Or because of the same arcane changes in society that created the problem in the first place.)
The second thing follows from the first. Experienced staff, and £10m, were diverted from other prisons to the 10 targets prisons, robbing Peter to pay Paul. Yet the rest of the prison service, deprived of those resources, actually did slightly better than the prisons to which resources were diverted. Raising the question of whether that diversion was more than a political ploy.
The third thing follows from the second. What, then, can have changed in late 2018 that might account for falling assault and self-harm, across the whole estate? Well, just possibly the same thing which, in the opinion of everyone except Ministers, created the problem in the first place - staffing levels. In 2018, staff numbers picked up again, as the Grayling cuts were partially reversed. In other words, maybe this isn’t so much the triumph of Rory Stewart, as further evidence that the appalling collapse of safety and decency in prisons since 2011 is the work of Tory Ministers.
The fourth thing follows from the third. It is, simply, this horrendous graph.
Seen in this light, Rory Stewarts’ ‘achievement’ is to stabilise the system, so that prisons are now ‘only’ twice as violent as when the Tories came in. Not much of a boast, one would think, for a Tory minister to make.
The fifth thing follows from the fourth. Rory Stewart presents himself as a man of integrity. But he avoids ever saying what he believes caused the deterioration of safety in prisons, and specifically, whether the Grayling cuts are to blame, yes or no. At any rate, I haven’t found a clear statement from him on the matter. And of course, he can’t say that the staffing cuts are to blame, because he would be blaming a senior colleague, and because he’ll never get Treasury to fund MoJ to restore staff staffing levels. Likewise, he has said that the system can’t be run properly without cutting the courts’ use of custody, but he and Gauke have avoided doing anything about it. Finally, I note again the nauseating deceit of presenting the partial reversal of the Grayling cuts as a staff increase. Likewise it takes some nerve to trumpet a reduction in violence, when what the rest of us see is an appalling increase.
So while this is undoubtedly good news, I will hold off the champagne for the time being.
We're all aware of funding pressure on public services - prisons, probation, courts, legal aid, NHS, social care, schools, universities, roads, defence, you name it - none of them now able to offer acceptable services. The bill to restore something like what we used to think acceptable, maybe £100bn a year? Here, to make you really depressed, is the long term picture: the trend line shows the very slow but seemingly unstoppable decline of the rate of growth in the UK economy over 60 years. And that's before taking account of the post Brexit slow down, the ageing population, climate change....No, I dont know what to do about it either, except to say, the future has to be different. We don't know yet how different.
The refusal to see this is one of the reasons I am not a enthusast for Corbynism. The great Aneurin Bevan famously declared that "the language of priorities is the religion of socialism" (though the great Peter Simple pointed out that you can change the order of the nouns any way you like and it still sounds profound). Corbyn and Co, with their assumption that everything can be afforded if we just chuck out the Tories and switch the printing preses to over-drive, clearly do not know that language.
Research by Katherine Auty and Alison Liebling, just published (behind paywall – how can that be right, with research done with public money? – but message me if interested) confirms that unsafe prisons don’t reduce reoffending. It takes measures for the quality of prison life (generated through anonymised surveys of prisoners’ and staff) developed years ago by Alison, and relates them to variations in reconvictions rates for those prisons, by excluding other variables.
As a result, we can now say definitively, what common sense surely told us previously, that a safe, stable, decent prison is likely to reduce reoffending and a violent and chaotic one is not. It is the measures of safety and security that are most strongly associated with reduced reoffending, especially ‘prisoner adaption’ (the prisoners perceived need to trade or make alliances within the prison, presumably relating to drugs and so on): “for every one-unit increase in the prisons mean score for prisoner adaptation there would be a 10.67 decrease in rates of proven reoffending”. An astonishingly high figure, larger I recall than most offender programmes (of course, they are linked: if a prisoner feels safe, he/she will benefit more from such programmes). Other strong correlations were with measures of prisoner safety, policing and security, and drugs and exploitation.
The message for MoJ is that if prisons remain violent, chaotic places full of drugs, as is the case in many now, you won’t reduce reoffending. Indeed, I wonder if one could use this work to estimate how many more hundreds of thousands of crimes have been caused Grayling’s cuts? If anyone can manage this in a statistically convincing way, I am happy to raise funds to put up posters around his constituency!
Fig 1: an intelligent Grayling
Impressive journalism by the FT has uncovered the scandal of Berwyn Prison, costing £220m (say, a thousand homes unbuilt) - but still half empty two years after opening, because of multiple cock ups. It has the dubious claim of being the first prison actually designed to be overcrowded, thus ignoring all the lessons of the Mubarek Inquiry (a teenager horribly murdered by a racist with whom he was forced to share a cell), just to undercut the private sector and so avoid open competition. It is more violent, yet more costly, than other such prisons.
Since the prison opened, 338 ambulances have been sent there, the police have been called 135 times and the fire service 27 times, the FT’s FOIs show. Use of force, supposedly a last resort, is running at an exceptionally high level. “The partner of the prisoner seeking a transfer said she thought some young staff had “got a bit of power and it’s gone to their heads” says the FT.
The healthcare unit is a disaster. The health team’s report described a “lack of compliance with infection prevention and control standards……and unsuitable design of facilities ”, which made treating patients “unsafe” and “required a complete rebuild of some areas”. Further, the FT reports that prisoners have been taken off prescription anti-depressants, anti-psychotics and painkillers without their consent, which some inmates say has driven them to self-medicate with illegal drugs.
An independent report lambasts the design of the prison generally, including no proper ventilation in the house blocks and problematic noise levels.
The workshops are another disaster. “They were not ready when the prison opened, and lacked basics like electrical work, fixtures and fittings. “The lack of work spaces has probably been the greatest challenge for everyone who lives and works at Berwyn,” the then Governor wrote in his anniversary message to staff a year after the prison opened. “The procurement process has not yet gone as we would have hoped or planned [and], consequently, there are too many men left on the communities during the day.” Today, two full years after the prison opened, the workshop buildings are still not ready. “There were just so many delays, it was ridiculous,” said Mark Gilbert of recycling company Emerald Trading, one of the original subcontractors, who became fed up of waiting and pulled out.
Imagine how the Guardian, Labour, unions would be frothing over this if G4S ran it! Obviously, they would say, the private sector is incompetent, wasteful, even wicked! But it’s public sector - so they keep quiet. If there is one thing I utterly despise, it is keeping quiet about wrong-doing because done by ‘your’ side. The National Audit Office and Justice Committee ought to look into this.
Probation privatisation: MoJ's incompetence exposed, yet top official becomes chief inspector of probation
Earlier this month one of the most damning National Audit Office reports I have ever seen detailed the disastrous damage done to a previously reasonably well performing public probation service by a privatisation botched from the start, every which way, predicted by everyone to fail, and which has now utterly failed, with contracts ended early, wasting stupendous amounts of public money. But there is still more to this scandal:
The Government has published its ‘Outsourcing playbook’, an effort to stop cocking up major contracts. ‘Playbook’ – isn’t that so, well, ‘hip’? (‘Outsourcing’ here is used much more widely than I would, to apply to any service that Government contracts for, including those that have never been done in house, and which it is utterly inconceivable that they should ever be done in house, such as construction of prisons, tempting though it is to envisage mandarins laying brick upon brick, like Ivan Denisovich.)
It’s all good stuff, based discussion with contractors (Rupert Soames of SERCO has been bravely saying this sort of thing for some years) and on learning from what has gone wrong with so many major contracts in recent years: electronic tagging (3 times), Carillion, probation, Birmingham prison (and that’s just the MoJ).
The text is supplemented by voluminous ‘toolkits’ (sometimes mere ‘tools’), templates, scorecards, guidance notes, Green and indeed Orange Books, Codes of Conduct.
The document sets 11 key principles, which I will translate into English:
It’s is basic common sense. Indeed, some of it is quite banal. We need measures of performance – are we really stating that, as a new insight, fully a third of a century after Thatcher’s Financial Management Initiative made that its central theme? Risk allocation, payment mechanism and pricing are to be ‘subject to greater consideration’? Verging on bathos. ‘We screwed up a lot, but in future we will give everything greater consideration’. So there!
Still, if actually followed, it would have prevented many previous disasters. It’s useful to test the document against that walking, talking procurement disaster, Chris Grayling. Principle 6 would have forced him to pilot probation outsourcing (as we did indeed pilot prison outsourcing, in the early ‘90s). Principle 4 would have forced him to justify his belief that companies with no experience of running probation services, indeed that were only formed to bid for these contracts, could nevertheless be assumed to do much better than the public sector (the reverse has since been proved by repeated audit and inspection). Principle 11 would have required him to explain how services would be maintained if the contracts proved impossible and/or contractors went bust (as has indeed happened). Principle 2 would have stopped dead successive attempts to procure tagging services using a technology which did not then exist and using a delivery structure that was a nonsense in techincal and oepraional terms. Might also have stopped him to contract for ferry services with a company that has not got, and never has had, any ferries. And so on.
Why, then, am I less than optimistic that the future of outsourcing is rosier in the light of this document?
Mainly because we have been here before. This exact same spot. Instructions, guidance, bought in expertise, training, independent external checks at different stages, you name it. Take, for example, the Office of Government Commerce, established with much trumpeting in 2000, with its elaborate structures to ensure distinct roles and responsibilities for major projects, its detailed guidance notes, its hierarchy of independent expert Gateway Reviews. Or the Major Projects Authority, set up in 2011, to provide independent assurance at different stages of major projects.
And yet the disasters have gone on. You see, it’s not that people didn’t know they were doing the wrong things, and not doing the right things. They did know. They just didn’t take necessary action.
Examples from MoJ, where people knew what they should do, then didn’t do it:
The question Government ought to be asking is, why, when we keep doing the same things to ensure things are done right, do they keep going wrong? That’s tricky to answer.
Part of the problem is how far you can idiot-proof projects when you have idiots like Grayling in charge. Arrogant, bullying ministers who think it weakness to listen to advice. (As we all know, bullies are fundamentally weak people: strong ministers, like Straw, listen courteously to advice because they didn’t feel their manhood threatened by conceding the possibility that they don’t know everything. And if they are wrong, they want to know that now, not later.) Who exactly is going to face down the sublime arrogance of a Grayling (and don’t suppose there isn’t a limitless supply of them on both sides of the House)? The centre of Government i.e. Cabinet Office and Treasury, simply isn’t strong enough, at official level, to say ‘no’ to such people? And at Ministerial level PM’s are more likely to listen to their loyal or at least essential political allies than to worried officials. Just look how May stands by Grayling now, even after the ferry contract fiasco, the railway fiasco, the probation fisaco...
Another way into this is to ask is, what actually happens when projects go badly wrong? Well, usually the National Audit Office produce a report saying what went wrong (but never naming officials); the Public Accounts Committee have an enjoyable morning roasting the officials; a critical report is published: Government says ‘we are busy learning the lessons’; and those concerned sail on through their careers and into well paid retirement. And of course, if those responsible have moved jobs, or retired, when the auditors have finished their work years later, they aren’t even hauled before the Committee, they are never asked to explain themselves, as they have ‘moved on’. I am not a fan of management by scapegoating, having seen that practised close up by Michael Howard. We all make mistakes, and hopefully, learn from them, certainly I did, and anyone who says otherwise is a danger to himself and others. But surely there is something wrong, if in terms of pay, promotion, career trajectory and retirement, there is no difference in the career path of those who hashed things up badly and wasted public money, and of those who did the job well and achieved benefits for the public?
Then there are problems of expertise, and culture. Is there, even now, enough procurement expertise in Government, and of the right calibre? Earlier this decade, inquiries into MoJ management of the tagging contracts, which involved officials paying out £200m over many years or work which was never done, noted that this occurred against the background of severe cuts in procurement staff, difficulties in recruiting and retaining such staff – in 2009, MoJ did not even have a central procurement department (1). Maybe it’s better now but somehow, with the cuts in administration spending in Departments, I doubt it.
Then there is the Civil Service culture, which traditionally has found ‘policy’ more attractive and career-friendly than the ungentlemanly tasks of running things, or buying things. Thus, the risk is that the bought-in expert is always positioned slightly to one side, rather than inserted into the heart of the business, as they surely should be in a Department like MoJ, spending over half its entire budget on contracts (2).
Looking to the future, there are four reasons why I don’t see a bright future for outsourcing, even if Corby never graces No.10.
First, the boom is over. Around one third of Government expenditure is on outsourced service – a fantastic amount. Plainly, there can be only a marginal further increase in outsourcing volumes in future. (And all those contracts, however imperfect, are out there now. How does the new ‘Playbook’ help with that?)
Second, related to that, Government has learned so little from this vast experiment. To give a couple of examples: DH told me that they have no research to point to, in house or external, that compares public and private healthcare providers. They simply do not know; and it hasn’t occurred to them that they should know. Likewise, on prisons, there has been no substantive study by Government comparing public and private operators since 2000 (3). There is a vast amount of experience in Government, and local Government, about making, shaping, and managing the many utterly different types of outsourcing market – from the single customer/3 supplier model of prisons to social care, with hundreds of suppliers, hundreds of customers and millions of users. But what has Government learned from all that experience? Practically nothing. The Institute of Government, and NAO, have done some good work examining different sorts of outsourcing and different kinds of quasi-markets, but it never seems to have occurred to Government itself to reflect on such matters.
It is incredible that there simply does not exist a body of evidence to tell us where and how outsourcing has brought benefits, and where it has not, in what sectors or environments it appears to work and where not, what sorts of market work and how are markets best reregulated, and so on. It is willed ignorance on a colossal scale, and surely the root reason is that the advocates of outsourcing fear that impartial assessment would show, in many cases, that it has not brought any public benefit at all, indeed has done real damage. The consequence of this willed ignorance is that the case for outsourcing is not made, and that the practice of outsourcing does not improve.
Third, it is unclear how outsourcing can work well in an age of austerity. If there simply isn’t enough money to run services to an adequate standard, how can outsourcing help? In prisons, we showed in the 1990s and 2000s that private companies could run decent prisons at lower costs because the existing public service was so wasteful – we didn’t use staff efficiently, overpaid many of them, dint have the slightest grip on procurement, and so on. There is no reason to think that the problems of the NHS or schools are down to too many doctors and teachers, paid too much, not working hard enough. And there is unbelievably, almost no evidence that the private sector can run services better. In which case, what is the case for outsourcing?
Fourth, the game is completely lost politically. Poll after poll (4) shows remarkably high levels of public opposition to many forms of outsourcing, and remarkably high levels of support for Labour’s promises to re-establish public sector monopolies. The argument that outsourcing can work better for the public than state monopoly has been lost. And that has been entirely an own goal. It has been lost because Government has simply asserted private sector good, public sector bad, without ever bothering to produce evidence. It has never explained to the public what benefits they are enjoying because of outsourcing. Yet at the same time the public see endless stories of corporate greed and incompetence, of Government botching contracts and contract management and then failing to do anything about it, of failing contractors bailed out by government.
To me, as someone who believes that competition, properly targetted, intelligently and responsibly run, can in some cases do more for us than monopoly, this is sad. Because it means that we will then go around the track again. Labour state as a self-evident truth the surely equally daft mantra, public good, private bad. A generation who never knew British Rail at is worst, never waited for months for the Post Office to put a phone in, never knew the scandal of the publicly run prison service of the 1980s, or the horrendous NHS waiting lists of the early 1980s, will have to learn again that monopoly power tends to be high cost, tends to be self-serving, is often resistant to new ways of doing things, and is often in reality barely more accountable than G4S or SERCO. Which is where Mrs Thatcher came in.
(1) Details in my book
(2) ‘Government procurement: the scale and nature of contracting in the UK’. Institute of Government, December 2018
(3) The excellent comparative study of service quality by Alison Liebling and others was not conducted for Governmen. There have been no comparisons of cost since 2000
(4) Populus 2012, YouGov 2017. Actually the polls show the public to be much more discriminating than one might suppose. They think it OK for buses and airlines to be run privately but not trains, phone services but not mail, banks but not the Post Office.
Rory Stewart on BBC News, 17 August 2018
“I will quit if I haven’t succeeded in 12 months in reducing the level of drugs and violence in those  prisons.”
Asked how much of a reduction he would consider a success – 25 per cent or 10 per cent – Mr Stewart said it would be “something of that sort”.
Rory Stewart before Justice Committee 11 December 2018
“The graph on violence is very worrying; it is rising. As you know, I have promised to resign unless we turn that graph around on violence in those 10 key prisons. At the moment, the graph is going in the wrong direction for me. In fact, over the last 12 months—in fact, if you take it from 2012—the graph is almost going straight up at the moment. If you were to project it forward, unless we manage to grip this, it will continue to rise…..I believe that we will turn it around…”
Will he resign if he doesn’t reduce violence and drugs by August 2019 below what it was in August 2018?
Will he resign only if the graph, by August 2019, hasn’t started to move downwards - however much it has risen since August 2018?
All 10 prisons? Or just some? Or just one?
Violence and drugs? Or just one?
I was formerly Finance Director of the Prison Service and then Director of the National Offender Management Service responsible for competition. I also worked in the NHS and an IT company. I later worked for two outsourcing companies.
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