Budget and Structure of the Ministry of Justice

Lord Beith Excerpts

Tuesday 5th March 2013 Commons Chamber

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Today is an estimates day and the presence of pound signs and a lot of noughts on the Order Paper tends to frighten Members away, when really it ought to draw them in to see what on earth the Government are doing with very large amounts of taxpayers’ money. Repeated attempts by zealous reformers to make Parliament pay more attention to expenditure have still not, I think, achieved the degree of success that many of us would like. I am pleased to have the opportunity to open this debate on the Ministry of Justice’s supplementary estimate for 2012-13, with particular reference to the report published by the Justice Committee on the budget and structure of the Ministry of Justice.

This is the first debate on the Ministry’s estimates since it was established in 2007, and I gather that the Minister who will respond is one of two in the Department who were formerly members of the Justice Committee—well, three if we count the Minister for Policing and Criminal Justice, the right hon. Member for Ashford (Damian Green). We are infiltrating our Committee members into relevant positions, which I hope will lead to almost all our recommendations being carried out.

The Ministry’s resource departmental expenditure limit for this financial year amounted to £8.2 billion. The supplementary estimate that provides the occasion for this debate adds a net £379 million in programme expenditure to that total, but MOJ spending, if not huge, relates to crucial areas of great public concern and interest: prisons, probation and legal aid. Most of the expenditure that the Ministry is responsible for is incurred in programmes administered by agencies and non-departmental public bodies. The broad figures of the budget show that the National Offender Management Service—prisons and probation—receives £3.4 billion, that the Legal Services Commission, which deals with legal aid, receives just under £2 billion, that the Courts Service receives £1.3 billion, that the Youth Justice Board receives £300 million and that the Criminal Injuries Compensation Authority receives £282 million. Between them, they account for the lion’s share of the Ministry’s budget.

I said that the supplementary estimate added a net £379 million to the main estimate resource expenditure limit. I will write on behalf of the Justice Committee to seek some further information on the components of the increase, as well as on increases in resource annually managed expenditure; but, in the meantime, it would be helpful if the Minister responded with some of the reasons for the £159 million increase for NOMS in the resource departmental expenditure limit, which is mysteriously described in the Ministry’s memorandum as due to “emergency cost pressures”. Last year, £51 million was included in the supplementary estimate under exactly the same heading. What are those pressures? Is that money part of the £1.2 billion funding agreed in 2007 for prison capacity, following the Carter review, and, if so, when was it carried over into the current comprehensive spending review period and what will the money be spent on?

The supplementary estimate includes provision for a net extra £750 million in round terms in resource annually managed expenditure, the largest elements of which are impairments on the court estate, £326 million, and impairments on the prison estate, £252 million. I hope that the Minister can explain why those elements are there.

I shall turn to the main conclusions of my Committee’s wide-ranging report. We took evidence in the first half of last year and reported in August 2012, and the Government responded in October. We visited the Department during our inquiry, and we did so in an innovative way that I commend to other Committees. We simply said, “We don’t want a formalised tour. We wish to enter every part of the Department and, on a second day, NOMS, and all we want is someone who has got the keys to every door in the building.” That is what we did, and we just wandered about every part of the Department, talked to staff and got a clear picture from them—interestingly, it was to the Department’s credit—of their commitment to the transforming justice programme. We just landed on anyone and asked, “What are you doing? What is your role in all this?” That gave us a much better feel than formal presentations sometimes do for how the Department was functioning, and it was to the Department’s benefit.

We have regularly taken evidence and reported on the annual reports produced by the Ministry. On the broader relationship between expenditure and policy, our predecessor Committee in early 2010 produced a seminal report on the case for justice reinvestment—a strategy for the transfer of resources away from custody to the prevention of crime and the reduction of reoffending. It remains my firm belief that the blueprint set out in that report is the only sensible way forward for a long-term criminal justice policy. Some elements of that philosophy are present in Government policy today, but quite a lot more could be included.

Our report focused on managerial and operational matters, but it also covered some important questions of policy, particularly on the commissioning of prison and probation services and payment by results. Our inquiry was the first major examination of the activities of the Ministry and its associated public bodies. We looked at the background to the setting up of the Ministry, its internal governance, budgetary provision, financial management, commissioning and procurement, the relationship with other public bodies, Departments and the judiciary and the prospects for achieving the Ministry’s radical long-term policies of transforming justice at a time of severe public expenditure retrenchment.

Some of the subjects that we covered, such as the Ministry’s financial management and procurement capacity, may seem technical, but when things go wrong with those functions, as happened recently in the shambolic outsourcing of court interpreting services, excoriated by the Public Accounts Committee and by us, the political fallout and the effect on public confidence in the judicial system can be deeply harmful.

We concluded in our report that the Ministry’s structure and performance had improved since its creation and that progress had been made in integrating the Department, but many of the improvements had been from a low starting point and there had been criticisms and failures. The culture in which the focus was on policy creation previously had changed to an increasing recognition of the importance of programme management. The Department had developed a greater understanding of its cost drivers, although it still did not have sufficient management control of its finances.

We noted that the Ministry had sought to bring its sponsored bodies under closer central control and make them more accountable to Ministers and had streamlined senior management structures and reduced the duplication of functions. We called for further structural change to create an integrated system of offender management, involving the commissioning of both prison and probation services in defined geographical areas. In fact, we look like ending up with roughly the opposite: national commissioning of prisons, which is what we already have, and now of probation, as part of the Government’s probation proposals. The Lord Chancellor defended that on the grounds that, at this stage at any rate, the limited available experience needs to be concentrated to carry out that commissioning function, but that seems to us to be entirely the wrong strategy. The commissioning of ways to deal with offenders really needs to be associated with all the other agencies that are situated in an area. The prisons, police and crime commissioners, local authority social services departments and housing authorities need to work together, as they have done in youth offender teams, for example, to achieve the best results locally.

We expressed doubt about whether the Ministry had sufficient skills capacity to implement the radical change of approach, with the greater outsourcing of the delivery of services, and we pointed to a danger that the way payment by results would be commissioned might undermine the work of voluntary sector organisations, which play, and need to play, a vital role in the justice sector. I think that Ministers have got that message. I am less sure whether they can implement it properly. There is certainly considerable anxiety across the voluntary sector, where so much of the skill and commitment that is required to change offenders’ lives is available. We drew attention to the wide range of public, private and voluntary organisations that need to work together if the wider justice system is to operate more effectively and efficiently when resources are so constrained.

It is difficult to think of any part of the Department’s activities that are not affected by the process of transformation, which has been under way and has gathered pace. In particular, the proposals in transforming rehabilitation document will entirely re-fashion the terrain of probation services. There are welcome plans to extend rehabilitation to prisoners serving sentences of under 12 months who currently receive no such provision. We pitch them back into society with no realistic expectation that they will turn away from a life of crime merely because they have spent a limited time in prison.

More controversially, the plans include contracting out to the private and voluntary sectors of the majority of work with offenders in the community currently overseen by probation trusts. This rehabilitation revolution agenda is in addition to a huge amount of change occurring across other parts of the Ministry’s core business: changes in legal aid entitlement and in the status of the Legal Services Commission, which has moved physically into the headquarters building in Petty France and is becoming an executive agency under closer central control. The Ministry is closing a number of magistrates courts. It has announced plans to transform youth custody by introducing secure colleges. In family justice, Children and Family Court Advisory and Support Service will transfer back to MOJ control effectively from the Department for Education.

On prisons and probation policy, I think we all share the same goal of reducing offending and reoffending, which in turn will free resources currently spent on keeping people in prison, to maintain progress and to have a virtuous circle, rather than the vicious cycle that the system now has. But we remain to be persuaded that the Ministry has at its centre the right people to steer through this monumental transformation process. Most importantly, does it have people with the commercial, technical and legal skills necessary to embark upon a huge range of highly complex and sometimes novel commercial projects?

The transformation agenda coincides with a period when the Ministry, like most Departments, is being tasked with making very large savings. By the end of the spending review period—by the end of the 2014-15 financial year—it needs to make annual real-terms savings of more than £2 billion against its spending review baseline. According to the National Audit Office’s departmental overview, the Ministry still has some way to go to meet its cost reduction target. It aims to make front-line savings of around 10% over the spending review period—it has already saved £244 million—and to reduce back-office costs by around a third, which will contribute about £1 billion towards its target.

The Ministry has projected legal aid savings of about £320 million annually by 2014-15 and sentencing savings of £51 million by the same year, from the changes introduced under the Legal Aid, Sentencing and Punishment of Offenders Act 2012. A further statement from the Minister today gives an accelerated timetable for proposals yet to be spelled out in relation to criminal legal add. Obviously, we will be closely interested in what comes out. We have some indications that things such as cost recovery from offenders will form part of that. Of course, there has been more coverage today in reference to the President of the Supreme Court and anxieties in the judiciary—of course, such anxieties are widespread among lawyers and voluntary organisations—about the effect of the legal changes.

I will make a personal comment, which I think is broadly shared by the Committee. It is widely recognised that we cannot go one having the most expensive legal aid system in the common law world with no real prospect of restraining its potential increase. The Government had to do something, and any Government would have had to do something.

Secondly, and this is a view that the Committee expressed strongly in a previous report, the welfare and tribunal systems are part of the problem. The extent of legal advice necessary in much of the tribunal system indicates a weakness in the way services are delivered in the first place, and in the tribunal system. We ought to have a system under which people receive the right benefit to start with, and, if they do not, the tribunal system should obtain directly the information required to judge the matter correctly. Where Departments in particular fail to achieve that objective and generate a lot of failed appeals—failed on the Department’s side—they should contribute to the cost. It should not be the MOJ budget that bears the cost, but the Department that is not doing its job properly. Change is required in this area.

Savings of approximately £50 million per year are expected from changes to criminal injuries compensation criteria, and there will be other, lesser savings from the closure of courts and prisons, and from rationalising the administration of the Ministry itself and its sponsored bodies. Restructuring the NOMS headquarters is expected to save £91 million. At the same time, there are cost implications to changes that the Ministry is making. Is there any costing for the plan to extend rehabilitation to short-sentenced prisoners? That is welcome, but we have not seen any plans for how it will be paid for. How feasible will it be to fund it by introducing competition into probation?

The Ministry has little control of many things that determine its cost, such as the demand for prison places. One has to ask: how would its transformation and cost-cutting agendas be affected by an unforeseen event. Into that category fell the national riots—they are described as national riots, but it may be fairer to describe them as riots in a number of cities—that occurred in 2011 and generated significant expenditure in the court service and in the prison system.

The Ministry is moving forward with its radical plans for transforming rehabilitation. Payment by results, for example, has not yet been tested in the field of criminal justice. There are a number of pilots up and running, but we do not know what their outcome will be. The Secretary of State clearly feels that to wait, probably for many years, for the outcome of the pilots is to wait too long—he is impatient to get on with developing payment by results. One has to ask, however, how can the Ministry know that it is rolling out programmes that will work and not waste money? How can it learn from the programmes that are up and running, even though we are not at the stage to receive final conclusions?

My Committee took evidence from the Secretary of State last week on the transforming rehabilitation proposals, and put some of those questions to him, including the concern that he makes full use of the voluntary sector that has so much to contribute. Since then, there have been some reports in the press of doubts in the Treasury on whether the payments by results programme can achieve its predicted financial outcomes. I think that those reports came out accidentally in a conference or a seminar on related issues, but they indicate that not everybody is confident that the Ministry can achieve that kind of saving from the programme.

Much depends on getting the basics of financial management right, and our report devoted considerable attention to the effectiveness of financial management in the Ministry and its sponsored bodies. The Ministry did not produce its resource accounts for 2009-10 and 2010-11 before the summer recess, and blamed the accounting arrangements of probation trusts. Last year the Department’s accounts were submitted before the recess, but still after the deadline set by the Treasury. The Committee considered that to be unacceptable.

The Committee was also critical of the regular qualification of the Legal Services Commission’s accounts because of error rates in overpayments—£35.7 million in 2011-12—and called for it to establish a clear plan to reduce those rates significantly.

Our final main concern related to the accounts contained in the Her Majesty’s Courts Service trust’s statement. The Comptroller and Auditor General issued a disclaimer of opinion on those accounts, meaning that he could not say whether they gave a true and fair view. Its chief executive explained that the Courts Service’s accounting system was not able to handle the requirement placed on it by the Treasury to produce an auditable report. The Secretary of State said that the £3 million it would cost to put that right would not represent good value for money.

The Committee was highly critical of the lack of financial management competence in the Ministry and its sponsored bodies. We said that there was “unacceptable complacency” and a “defeatist mindset”. That is strong language, but the Committee think it is justified. The Committee thinks that the Ministry is now taking financial management more seriously, including centralisation and standardisation of processes and standardised forms. The LSC is implementing a new IT system. Frankly, we were horrified when the LSC told us that it could not possibly ask all solicitors to submit claims online, in a world where you and I, Mr Deputy Speaker, and most other people have to use online procedures. This is having to change, thank goodness. The Ministry, however, still faces an uphill struggle with IT legacy systems and its estates. In particular, in the courts many IT systems are old and require a great deal of effort and input to work at all. There is a question regarding whether any useful analysis has taken place to determine whether investing in capital projects now would save money in the longer term.

On European-related issues, the Committee said that the maintenance of separate teams in the MOJ and the Home Office to deal with European, international justice and home affairs issues was a duplication of effort, and that they should be merged. The Ministry has not accepted this recommendation, which seems so obvious to us.

The Government, with some fanfare, announced that they would exercise their right, under protocol 36 of the Lisbon treaty, to opt-out en bloc from justice and home affairs measures, and would consult parliamentary Committees, my Committee included, on their proposals regarding which ones they would opt back into. Up until now, negligible information has been forthcoming from the Government on their plans. The Committee, and other Committees, have had nothing on which to carry out any work. I emphasise strongly that my Committee expects to be provided with the time it requires to scrutinise the Government’s opt-out proposals. The same applies to the other affected Committees too, and we have written jointly on that.

The Ministry of Justice has not yet shown itself able to achieve the full savings to which it has committed, despite some tough decisions and some welcome improvements. The Department is trying to achieve major change, a process that always involves front-end costs with the hope of later savings. We should not be wasting taxpayers’ money on ineffective use of the prison system, where half of those released from prison reoffend within a year—for those on short sentences the figure is 60%. We should not lose sight of the long-term objective, which is to cut crime and reduce reoffending to such an extent that much less money has to be spent on the consequences of crime, whether in the criminal justice system or beyond. For that to happen, we need to spend money to ensure that people are not drawn into crime in the first place. The troubled families programme and early-years education are examples of what the Government are doing and need to build on if we are to cut not only the costs of crime, but the misery it brings to those of our constituents who are victims of crime. We are spending their taxes on trying to keep them safe from crime. That money needs to be spent wisely and that is why it is important that we debate it today.

--- Later in debate ---

[Jeremy Wright]

The hon. Lady knows that we are carefully considering the design of the system, so we will need to determine the appropriate percentage. She will also recognise that it is not going to be 100%, because anyone taking on this work will need to implement the orders of the court and to fulfil licence requirements. The fact that it will not be 100% may have some bearing on the discussion we have been having about the accessibility of this new landscape to smaller organisations, particularly those in the voluntary sector. We will settle on the precise figure having listened to those who may be involved in this landscape, and others, to make sure that we get it right.

Let me deal with some of the points made by the Chairman of the Select Committee. He raised the concern that he and his Committee have about having national as opposed to local commissioning, and I appreciate that that represents a change. It is explained simply by the need to ensure that the necessary expertise and abilities to commission on a payment-by-results basis are held by those doing the commissioning. We think it is difficult to see how that can be done on a local basis, but we think it is important, just as he does, that there are local elements in the commissioning process and that local intelligence is included in deciding what needs to be commissioned. We want to design a system—I hope he will see this coming through the process—that enables us to include that local understanding as well as greater expertise on payment by results. He is also right to say that we must design a system that allows voluntary sector organisations to participate actively.

[Sir Alan Beith]

I am grateful to the Minister for seeking to clarify this point. Let us analyse it a bit further. If the local partnerships that know the local situation best can design what the contract should be about, it is perfectly proper that they should turn to a national body that has expertise in how to include the measurements of results and so on. I would be worried, however, if the national commissioning body was also the body that said, “What you need in Blackburn is this.” That decision should be taken locally, even if the expertise must be drawn on from a central body.

[Jeremy Wright]

Yes, I understand that entirely. I am saying that it will be important under the system that we are trying to design for local requirements to find their way through the system so that they can be clearly understood. We will try very hard to ensure that that can be done.

Let me return to the voluntary sector organisations, on which we have rightly spent a bit of time in the debate. There are probably two areas in which we need to be careful to ensure that the design of the system is right. The first is in the assessment of the bids that are made for the rehabilitative work that we are discussing. When we consider the bids, we will want to be satisfied not just about their quality and price but about the sustainability of the relationships brought forward as part of the bids. We anticipate that a large number of bids will include more than one organisation and will often include smaller voluntary and community sector organisations. We will want to be persuaded when assessing those bids that the smaller voluntary and community sector organisations will have a sustainable future in the course of the contract. We will want to ensure that the design is right and that we keep our eyes on what is happening in contract management. It is partly about assessing the bids when they come in and partly about assessing how they are implemented over the lifetime of the contract.