Buying Quality Performance

Chris Grayling, the UK’s Secretary of State for Justice and “Tory attack dog”, is about to do what Thatcher and successive Prime Ministers (of all persuasions) were unable to achieve – throw the public sector open to total privatisation.

Grayling’s so-called ‘rehabilitation revolution’ entails taking the existing probation service, currently sitting within relatively independent local trusts, and cutting it in two. Around 30% of services  (mainly assessment of the risk posed by offenders and then management of the high risk ones) will be retained within a new, public sector, National Probation Service (NPS). The remaining 70% is hived off into wholly separate Community Rehabilitation Companies (CRCs). This split was due to take place this April, but has been delayed slightly and will come into operation around June 2014.

Meanwhile, the services delivered by those CRCs are being packaged up and contracted out. The complex competition for these contracts is ongoing, with tenders to be submitted sometime around Easter and contracts going ‘live’ towards the end of the year. Basically, on contract award, the CRC in each area will transfer to an incoming contractor; along with its staff, systems, premises, and any subcontracts with local/specialist providers. In some cases, the incoming contractor may be the CRC itself, having turned itself into a new ‘mutual’ company, raised investment and then successfully bid to take itself over. In most cases, the contract will be secured by an incoming bidder, probably from the private sector, possibly in some form of ‘partnership’ with one or more third sector organisations.

This is evidently and undeniably the transfer of the service from one business to another. As the Ministry of Justice stated in their original brief on this ‘rehabilitation revolution’:

“We expect that the majority of staff currently performing probation roles will transfer to new providers. These transfers will occur under statute, and in their new roles staff will have the opportunity and flexibility to work on rehabilitating offenders. We will take a sensible and managed approach to making this transition.”

As such, the employees who are shifted from an existing probation trust to a new CRC and onwards to a successful bidder might reasonably expect to be protected by TUPE, the Transfer of Undertakings and Protection of Employment (TUPE).

When a local council, for example, outsources refuse collection, looking for cost saving, TUPE is legislation that protects the outgoing employees, preventing the incoming contractor from realising savings by simply slashing the terms and conditions of the staff. They can, and invariably will, redesign the service and this will lead to redundancies. They will employ any new staff on different, cheaper terms and conditions. But those original transferring employees retain their salary levels, their right to redundancy payments and, crucially, their pension rights.

It is this last element, not political conviction or union determination, that has stood in the way of wide scale privatisation of public services. The size of the pension liability has meant there has been no market for much that could theoretically be outsourced. There has been no one – not Serco nor G4S and certainly no smaller or third sector organisation – willing or able to shoulder the risk.

Of the 139 prisons in the UK, only 14 are privately run. Of these, all but one are new build (PFI financed). If a prison is built from new, there is no transfer of existing service and therefore no staff to transfer with their public pension liability.

Grayling, however, has waved his magic wand and made this problem go away for his ‘rehabilitation revolution’. The new CRCs are not being transferred to incoming contractors – they are being sold for £1. Because this is simply, therefore, a change of the shareholder, TUPE does not apply.

Additionally, all historic pension liability is to remain with the Ministry of Justice. The ongoing cost of pension contributions becomes the responsibility of the new shareholder/owner, but at a reduced rate. Some redundancies will be made prior to the sale of the CRC and then, in the first year, the cost of further redundancies will, at least in part, be covered by the Ministry.

The outsourcing of probation may result in reduced cost and a decrease in reoffending. Virtually everyone I talk to in probation acknowledges there is considerable waste and inefficiency in the system. The professionals within the industry, and in many of the impressive charities in the sector, point at well-evidenced service revisions/extensions that could reduce recidivism.

The point is, however, that under cover of this procurement there is a secret revolution of a different sort. If this model of shareholder switch can be applied to probation, thereby creating a market where one could not exist before, then why not apply it to everything else? How soon before prisons are turned into Incarceration and Rehabilitation Companies and ‘sold’ to incoming contractors?

When coupled with price competition, it is highly likely that the organisations winning some of these probation contracts will be those that offer the worst terms and conditions for their staff. As discussed previously on this blog, this was not the case in welfare-to-work contracts such as the Employment Zones, when fixed outcome payments incentivised investment in frontline services in order to earn higher rewards from higher performance. It is always the case when cost becomes the overriding consideration – when the procurement of a service like offender rehabilitation is treated like the procurement of paperclips.

Incoming contractors should be required to:

• Accept nationally set terms and conditions for staff, including the living wage as a minimum (crucial in London);
• Demonstrate a resourcing strategy that recruits positively (including from disadvantaged groups), grows skills, develops people;
• Evidence their active participation in development and promotion of professional standards in the sector/industry;
• Demonstrate proactive, positive partnership with local communities, including recruitment and development of local people.

Failure to take proper account of the people and communities caught up in public contracting means:

• Erosion of employment quality, with a loss of motivation and increased turnover;
• The draining away of experience and skills;
• More services delivered by staff on lower grades;
• Reduced investment in staff development;
• A service that de-professionalises;
• Disconnection of services from local needs;
• Deepening of disadvantage in the labour market, such as that experienced by people with disabilities.

These all in turn mean an erosion of service impact. With a reduction in impact of something like probation, the real value of the service is eroded, so that what seems cheap in the short-term represents a long-term cost.