Who delivers, and why it matters

Back in January, Tony Blair told a Guardian organised summit on public services that if the Government ceased in its reforms of the public sector 'we cease to have a purpose in Government'. The challenge, he continued, was to break up the 'old monolithic public service bureaucracies'.

Public services in the past, he argued, allowed professionals and their managers to define 'not just the way services were delivered but also the standards to which they were delivered'. In the future, he explained, improved public services would come about through bespoke services to the public who would be able to choose between a range of services in a competitive public service marketplace. The question, Blair said, is how to drive up standards across the board: 'The answer is partly money, partly accountability, partly the spread of best practice, partly Government initiative. But it is also the knowledge that the consumer can go elsewhere.'

Thus, the government as cradle-to-grave provider of public services gives way to a model in which government departments as 'purchasers' procure services from a range of 'providers' from the public, private and voluntary sector through a marketplace based on free competition, or 'contestability'.

NOMS and public service reform

This model of public service provision is part of the background of the Home Office decision to merge the prisons and probation services into the rather unlovely-sounding NOMS, or National Offender Management Service. The Government is committed to the introduction of market forces across the public services and sees no reason why the so-called 'correctional services' should be exempt. Following an earlier survey of the correctional services by the Home Office, rejected by Downing Street because it was not considered radical enough, millionaire businessman Patrick Carter - who made his fortune from founding and selling on the private healthcare provider Westminster Healthcare - was commissioned to conduct a review. When it was finally delivered in December 2003 the Government moved quickly, publishing it and its own proposals for NOMS in January.

Under the new NOMS structure, regional offender managers, responsible to a national offender manager, will purchase 'correctional services' from 'providers', based on the principle of contestability. Initially the prison and probation services will continue to provide the lion's share of this work. But over time this is likely to change as private and voluntary sector providers start winning contracts. The Minister for Correctional Services Paul Goggins told the House of Commons on March 17 that it would take five years from the establishment of NOMS on 1 June this year for the new system to be 'fully operational'.

The criminal justice context

It is important to understand that there is another, correctional services-specific driver to the creation of NOMS: prisons and probation are caught in a pincer. On one side, the prison population is rising at an unsustainable rate and probation caseloads are in danger of 'silting up', to use former Chief Inspector of Probation Rod Morgan's phrase. On the other, the investments made in programmes to tackle reoffending - drug treatment, education, offender behaviour programmes - show little clear evidence of having made an impact. As The Times reported last November, Home Office research has suggested that cognitive behavioural programmes had had no discernible impact on the likelihood of inmates being reconvicted on leaving prison.

This dual problem of an overloaded prisons and probation service deemed to be underperforming in its key function of reducing crime was examined in some detail by Patrick Carter in his report. He proposed greater clarity in sentencing, arguing that custody should be reserved for serious, dangerous and persistent offenders, while community sentences and fines should be used to punish lower risk offenders and less serious offences. He also recommended the establishment of NOMS to tackle the 'silos' of prison and probation and ensure a more joined-up management of offenders. The NOMS framework, he also argued, would ensure better value for money for the taxpayer by ensuring competition (or contestability) over the delivery of services by the public, private and voluntary sectors.

In Carter's review, therefore, the problem - identified as poorly targeted sentencing leading to prison overcrowding and poor performance of the prison and probation staff - suggests to him a solution based around the Government's preferred model for the delivery of public services. NOMS as purchaser will procure correctional services from a range of public, private and voluntary sector providers who will compete with each other.

Making sense of NOMS

Progressive opinion has had a difficult time trying to decide what to make of Carter's report and the NOMS structure it has inspired. Unsurprisingly most have chosen to interpret it against the backdrop of the practical problems of prisons and probation overload rather than against the seemingly abstract debate about internal markets, purchaser-provider splits and contestability.

Many have greeted with approval the renewed commitment to capping prison numbers and investing in community sentences. The Guardian's Home Affairs Editor Alan Travis, writing shortly after the publication of Carter's report, concluded that it marked 'the final Whitehall burial of Michael Howard's 1990s "prison works" orthodoxy and clears the way for a massive expansion in community penalties in Britain'. Carter, he said, 'appears to have delivered the goods'.

Rebalancing the correctional system away from prison will clearly be welcomed by many, although it is worth reminding ourselves that under NOMS, prison numbers are still expected to rise. There is an argument that pooling the prison and probation budgets into one purchasing body will inject greater flexibility into the system and make it easier to redeploy resources currently spent on custody towards probation. But in practice, spending decisions made by NOMS will be constrained by the sentencing decisions of the courts. It is difficult to see how a reorganisation of the prisons and probation bureaucracy will affect this.

Meanwhile, the very flexibility that will be imported into the system with the putative intention of improving the operation of prisons and probation risks undermining the very public service principles on which both services are founded. Think ahead a few years. Regional offender managers will be under instruction to purchase the correctional services that are most cost-effective. What will there be to stop a cost-conscious regional offender manager in, say, London purchasing custodial places for offenders under his management in the North West because the prison places there are cheaper than at Holloway or Wandsworth? There may be good public service reasons why prisoners should be held close to home. But what if these conflict with financial considerations?

Under the NOMS framework, it is also possible that probation services in a whole region could be 'won' by the private sector. When I quizzed Eithne Wallis, the Director of the NOMS Change Programme, about this possibility at a recent meeting, she said that she did not foresee this happening. But nor did she rule it out. Given the Government's commitment to free competition, it seems unlikely that there will be an express provision preventing such a development.

In practice, and because of the economies of scale involved, private providers will generally be much more keen to bid for large blocks of work rather than for one-off or small scale contracts. Accommodating this requirement may indeed be one of the main drivers for the 'rationalisation' of the 40-plus probation areas - themselves helpfully coterminous with current police boundaries - into the nine government regions in England and one region for the whole of Wales. Certainly such large regions make little sense for a probation service keen to maintain and develop close ties with the local community.

Reports earlier this year claimed that Martin Narey, the NOMS Chief Executive, was considering market testing a cluster of prisons rather than a single prison to help the private sector reduce its overheads. As Narey told the Guardian, 'It is difficult for the private sector to manage the overheads when they have a small number of operations while it is relatively easy for the public sector prisons to manage overheads because they can spread them over a large organisation.' The same report also revealed that Narey visited the United States to encourage American private prison contractors not currently operating in England and Wales to bid to run prisons.

It would be ironic if a major boost to privatised provision in corrections came as a result of Labour Government policy. But this is precisely what is likely to happen under NOMS as prison and probation services are reorganised to make them more private sector-friendly. The official reason for this is that a 'level playing field', which favours neither public, private nor voluntary providers, but rather allows them all to compete equally with each other in a free and open marketplace, must operate.

Level playing fields might sound fine in theory. In practice they can work to the detriment of both public and voluntary sector organisations. In orthodox economic terms a playing field is only level if all possible participants have equal chances of success and none has an unfair competitive advantage. On this basis the Prison Service currently has an unfair advantage because its 'monopoly' market position allows it to spread its cost overheads in a way the private sector cannot. The proposal to allow bids for prison clusters is an attempt to remedy this. Likewise, the voluntary sector could be said to have an unfair advantage because of the more favourable tax environment in which charities operate. (This has already been an issue in the health service, with some private health providers complaining that Nuffield Hospitals is using its charitable status to undercut them.)

But in a key sense, level playing fields favour private contractors because they can always decide not to participate, whereas voluntary and public sector operators do not have the same option. If Group 4 Securicor or Reliance fail to win a bid, they have very diversified, often international, operations to fall back upon. The newly merged Group 4 Securicor operates in more than 108 countries, and has more than a third of a million staff. Its turnover of £3.8 billion is more than the total planned NOMS budget. If, on the other hand, the Prison Service loses bids, or organisations like Nacro and SOVA fail to win contracts, the implications are far more serious. Running prisons or providing resettlement support is, after all, what they are all about. Unlike businesses, they do not have the alternative of providing private security services or, for that matter, building factories to produce widgets.

The idea that a level playing field can be constructed for such different organisations to operate upon is pure fantasy. And it is one of the main reasons why the Government's assumption that providing resettlement services or custodial provision is rather like selling soap powder or running a hotel is simply wrong. Nonetheless, the notion that the discipline of the marketplace will squeeze out cost inefficiencies and reward innovation and effectiveness in public services is at the heart of the concept of contestability.

What kind of 'efficiency' and 'effectiveness' might we expect? These are tricky concepts in the context of public services. Double a probation officer's caseload and he/she will become twice as efficient, but almost certainly less effective. Private prisons tend to achieve efficiency gains over their public sector equivalents through the simple expedient of paying their staff less. Starting salaries in a private prison can be one third less than in a public prison. The implications for creating and maintaining a wellmotivated, well-qualified and effective staff complement are obvious.

'Efficiency' gains can also be made, for instance, by replacing small prisons with large ones holding 1,500 inmates or more. In a little-known report Patrick Carter wrote for the Prison Service a few years ago he suggested doing precisely that. Reports in The Times last October suggested that the Home Office was considering such an approach. While 'super jails' might benefit from the same kind of economies of scale that the supermarket achieves over the corner shop, they may be less able to offer the individualised care and support packages than any modern prison should offer to its inmates.

Contestability encourages such 'innovations' because it gives providers financial incentives to find imaginative ways to cut costs. And while tender documents and contracts can be drafted with the intention of ensuring quality, there will be a strong motivation on the part of providers to find creative ways around contract language. A few years back, a contractual requirement for the new Kidderminster court building was that it should provide facilities for visitors to get hot and cold food. The public sector commissioners had a cafeteria in mind. What they got from the private contractor was vending machines in the foyer selling soup and sandwiches.

There are all sorts of legitimate concerns about the current operations of both the prisons and probation services, and those working in partnership with them. Clarifying their role in the future and ensuring the best quality of care and support for offenders is as important now as it ever has been. But importing the logic of the marketplace into these services offers the wrong solution to the wrong problem. Such a competitive environment might make sense in the high street. But it is no way to run vital public services.