Prison Competition and Efficiency

Lord Grayling Excerpts

Thursday 8th November 2012 Written Statements

[The Lord Chancellor and Secretary of State for Justice (Chris Grayling)]

In July 2011 the Government announced the start of a new programme of competition for the management of nine prisons: Acklington and Castington (now together known as Northumberland), Coldingley, Durham, Hatfield, Lindholme, Moorland and Onley, all currently managed by the public sector, and Wolds, currently managed by G4S.

I have already signalled that I intend to reform community sentences and that most offenders on court orders and on licence will be managed on a payment by results basis by the end of 2015.

In prisons we must reduce costs further and faster without compromising public safety and I am determined to do so. I can therefore provide an update on this competition programme and outline how I will build on its success to drive down costs quickly across the whole system to improve outcomes and deliver value for money for the taxpayer.

HMP Northumberland and the South Yorkshire group of Moorland, Hatfield and Lindholme prisons will proceed to the next stage with three remaining bidders, Sodexo, Serco and MTC/Amey before contracts are awarded next year. This competition process produced a compelling package of reforms for delivering cost reduction, improvements to regimes and a working prisons model in these prisons.

This was not the case for HMPs Coldingley, Durham and Onley, so the competition for these prisons is not proceeding and they will remain in the public sector. For the Wolds—currently managed by G4S—the benefits of the competition when compared to the option of clustering the Wolds with the nearby prison Everthorpe, did not represent best value to the public. I have therefore decided not to progress with the competition. This means that when the current contract expires in July 2013, the prison will move to public sector management.

This current competition process has identified the means to accelerate cost reductions. It has set a new benchmark for running prisons which we will now apply to all public sector prisons to maximise savings over the next two spending review periods.

In response to the competition, a model was proposed that would retain direct delivery of core custodial functions by the public sector at considerably lower cost, with ancillary and “through-the-gate” resettlement services provided through market competition. When applied to the whole public sector prison estate, this option enables us to utilise the market to drive down costs and provides the potential to rapidly expand the payment-by-results approach to improve rehabilitation outcomes. I have decided that this is the right thing to do.

We estimate an additional £450 million savings will be generated over the next six years by applying this new public sector benchmark and by competing ancillary and through-the-gate resettlement services across all public sector prisons. This is a challenge the public sector must rise to. The approach I am announcing today does not rule out further prison-by-prison competitions in the future.

I am determined that we will provide enough prison places to accommodate all those committed by the courts. However, prisons must cost less and do more to prevent offenders coming back and we will continue to use competition to drive down costs and improve outcomes.

The approach I have set out today provides the most effective and intelligent way to achieve this. It is not an end to competition, but rather sets a very clear challenge to the public sector to respond at pace and deliver the reforms required to reduce unit costs across the whole system whilst utilising the market to transform rehabilitation for offenders.