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Making a quick escape from prisons contracting?

Justice Secretary Chris Grayling’s decision to halt what would have been the largest prisons privatisation programme in UK history seems to be at odds with the Coalition’s efforts to speed up the use of competition across public services. But is it?

In May 1992, HMP Wolds, the UK’s first privately run prison was opened. Today, 14 out of 141 prisons in England and Wales are private or ‘contracted out’. Last year, then Justice Secretary Ken Clarke announced plans to contract out the management of a further eight prisons, and, in April 2012, his department oversaw the first ever full-scale privatisation of a UK prison, HMP Birmingham. This trend seemed set to continue – or even accelerate - under the new justice secretary, Chris Grayling. He recently declared his intention to use more competition and ‘roll out’ payment by results across prisons and probation services.

But now, Grayling has unexpectedly outlined ‘a new approach’ that appears to be slowing the pace of privatisation and scaling it back. Last week, G4S, a household name after its involvement in the Olympics security fiasco, lost the contract to manage HMP Wolds. It will be returned to the public sector in July 2013 when the contract expires. The government also suspended the competition for HMPs Coldingley, Durham and Onley, all of which will remain in the public sector. Competition for the management of four other prisons will continue, although it is not clear whether they will be tendered out to the private sector or not.

The official line is that the competition process had failed to produce a ‘compelling package of reforms’ that would cut costs, improve prison regimes and provide enough work for prisoners. But many have been quick to interpret the announcements as a completely unexpected U-turn that amounts to the end of competition in the prisons sector. The think tank Reform have called it the ‘biggest retreat in public service reform’, while the Telegraph has referred to it as ‘another type of porridge’.

But we shouldn’t rush to conclusions - there are other possible explanations. Some argue that G4S is being punished for its Olympics failure, a claim the Ministry of Justice firmly denies. And others, perhaps more plausibly, argue that the changes, far from signalling a halt to competition are a prelude to much more radical reform. The government may intend to re-specify the services that are put out to tender either with the aim of designing much more ambitious outcomes-based contracts that cut across the prisons and probation services, or splitting the services further and contracting them out separately.

The fact that we can only speculate as to why the government has made this unexpected policy turn is itself a problem. As is clear from our work on the history of competition in the prisons sector, published this week, that constantly changing policy sends mixed messages to the market and public. This increases the risks and costs of the bidding process, which providers will want to recover from the government somehow, raising value for money concerns over the long-term. It also adds to the public perception that procurement processes are opaque, shady and subject to political whim rather than sound policy and commercial decision-making.

At a time when Whitehall’s commercial skills are being questioned following the West Coast Mainline franchise fiasco, it is critical for the government to be more transparent about the way it manages and evaluates major public service contracts. This policy announcement is hot off the press – and it is important that the reasons for the shift are clarified, and clarified swiftly.

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