Prisons Competition

Sadiq Khan Excerpts

Thursday 31st March 2011 Commons Chamber

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

With permission, Mr Speaker, I should like to make a statement.

The House will be aware that in 2009 my predecessor announced a competition for the management of five prisons: Her Majesty’s prisons at Birmingham, Buckley Hall in Rochdale, Doncaster and Wellingborough, and the new prison, currently called Featherstone 2, near Wolverhampton, which is due to open in 2012. I am now able to announce the results of that competition process.

Let me remind the House that these prisons were selected by the right hon. Member for Blackburn (Mr Straw) for a variety of reasons. Birmingham and Wellingborough are currently managed by the public sector and were chosen after being identified by the National Offender Management Service as performing poorly. Buckley Hall and Doncaster are establishments that have been previously competed for and their contract is due for renewal. Buckley Hall is currently managed by the public sector and Doncaster is currently managed by Serco.

During the preparations for the bid it became apparent that competition could not produce improvements at HMP Wellingborough without significant capital investment to secure its long-term viability. In the current financial climate, this is clearly not a tenable proposition, so I took the decision to remove it from the competition process. HMP Wellingborough will continue to be managed by the public sector, and will need to deliver approximately 10% efficiency savings, in line with other public sector prisons, over the next four years.

I am now able to announce the results of the four remaining prison competitions. HMP Birmingham will be run by G4S plc. HMP Buckley Hall will be run by HM Prison Service. HMP Doncaster will be run by Serco Group plc. Featherstone 2 will be run by G4S plc. The new contracts will be effective from October 2011 for the prisons at Birmingham, Buckley Hall and Doncaster, and from April 2012 for Featherstone 2. I would like to put on record my thanks to all the bidders for contributing to what has been a challenging contest, which will secure significant quality improvements and savings at all the establishments involved.

The Government are committed to delivering reform in our public services. This process shows that competition can deliver innovation, efficiency and better value for money for the taxpayer, but also that it can do so without compromising standards. Before the bids were evaluated for anything else, they needed to demonstrate their fundamental ability to provide safe and secure custodial services. I can confirm that over the spending review period the new contracts will deliver savings of over £21 million for the three existing prisons. In the same period, the new Featherstone 2 prison will be delivered at £31 million less than the costs originally approved by the previous Government. Cumulative savings over the lifetime of the contracts for the three existing prisons are a very impressive £216 million.

But public protection is not just about how we manage prisons in order to punish people. It is also about how we achieve genuine and long-lasting reductions in crime by cutting reoffending. I am therefore particularly pleased to be able to announce that, for the first time, the contract award for HMP Doncaster will include an element of payment by results in reducing reoffending. Payment by results is central to our rehabilitation reform plans, because it means that we can concentrate on paying for what works to reduce reoffending. The current system funds services, but not outcomes. Providers of services face few consequences if what they offer does not succeed in cutting reoffending, and little reward if they do succeed in cutting reoffending. Payment by results looks to change this by rewarding performance against the outcomes specified in a contract. In the Green Paper I outlined plans to develop this policy further and commission at least six new pilots for payment by results. The contract for HMP Doncaster is an important first step towards fulfilling this commitment.

The new contract price for HMP Doncaster will in itself deliver significant annual savings. In addition, however, the introduction of payment by results means that 10% of the contract price will be payable only if the operator reduces the reconviction rates of offenders a year after they are discharged from the prison by five percentage points. If they achieve this, the contract will, of course, have significantly reduced crime, and for a cost of at least £1 million below what we currently pay. I regard this as a win-win approach. It translates to savings for the taxpayer, lower reoffending rates and a return for the service provider that improves their performance.

I know that Members on both sides of the House recognise the benefits of effective competition—at least I hope they still do. Today’s announcement shows it has a significant role to play in delivering value for money, better outcomes and broader reform. I encourage providers from any sector to rise to the challenge. The public are entitled to expect safety and security and better results to go hand in hand with efficiency and innovation. I commend this statement to the House.

[Sadiq Khan (Tooting) (Lab)]

I thank the Secretary of State for advance sight of today’s statement, and I welcome its tenor and how he delivered it. He will be aware that our policy was and is based on what works, rather than dogma. During our time in government, nine new private sector prisons were provided and three new establishments had been opened and run by the public sector, and I recognise that they have played a successful role in our prison system. It is right that we began the market testing that he is reporting on today.

I wish to ask the Justice Secretary a number of questions arising from his statement. First, he refers to the fact that during the bid preparations it became apparent that competition could not produce improvements at HMP Wellingborough without significant capital investment, so may I ask him what plans he has for such investment at Wellingborough prison? How much will be invested, and over what period? Does he understand the frustration of hard-working prison officers and other staff working in public sector prisons that need capital investment when they are compared with prison officers and other staff in newly built or refurbished private prisons? Can he confirm that the decisions on the Birmingham and Doncaster prisons are no reflection on the hard work of prison officers and staff there?

May I echo the Justice Secretary’s comments about the importance of delivering efficiency, innovation and better value for money for the taxpayer without compromising standards? Indeed, he has referred to the £216 million that will be saved as a consequence of this process, which was begun by the Labour Government. Does he therefore accept that the savings he is now championing are actually the fruits of the previous Government’s attempts to improve the efficiency of the Prison Service? Can he confirm that he will reinvest that money in the Prison Service?

The Justice Secretary’s announcement on payment by results is interesting and welcome. He will be aware that we began piloting payment by results in Peterborough, where we were trying to reduce reoffending. However, that is a pilot scheme and we recognised that lessons would need to be learnt before any full roll-out. What lessons have already been learnt from the yet to be completed Peterborough pilot? Can he confirm that Doncaster is a pilot and he will wait to see the results before the approach is rolled out further? His statement referred to the criteria for payment by results. He will be aware that 20% of offenders reoffend within three months of leaving prison and that 43% do so within a year, so will he explain further the criteria by which he will judge “if the operator reduces the reconviction rates of offenders a year after they are discharged from the prison by five percentage points”?

Finally, I wish to ask the right hon. and learned Gentleman about the workers in the prisons that he listed. Staff at HMP Birmingham and HMP Doncaster will understandably be worried about their future in these uncertain times. Does he anticipate any redundancies as a result of his decision? Can he confirm to the House that public sector terms and conditions will be protected under Transfer of Undertakings (Protection of Employment) Regulations arrangements? In addition, he will doubtless have seen the newspaper reports of contingency planning by his Department to deal with any industrial action that might result from his announcement. We have read that troops have been put on alert. Will he confirm whether that is the case? May I ask what discussions he or his Prisons Minister have had with the Prison Officers Association and others who represent prison staff? Does he agree that it is crucial that he and/or his Prisons Minister should meet the appropriate representatives today and begin a dialogue to avoid the sort of speculation reported in the media from becoming a reality?

[Mr Clarke]

I am grateful to the right hon. Gentleman, because I was interested to see whether the Labour party was in the position that I thought it was going to be in, and I am reassured by what he said. As he said, putting competition into the system in order to ensure the best standards at the lowest cost to the taxpayer is a continuous policy, and things have moved on an awful long way since I was Home Secretary 20 years ago, when privately managed prisons were a highly controversial subject. We got the first one under way at Wolds, but under Blairism the policy was taken a whole lot further, with all the private finance initiative prisons. As I readily acknowledge, the right hon. Member for Blackburn (Mr Straw) started this tendering process, which we have taken to what I believe to be this successful conclusion. It must be in the public interest and it must be right—I readily acknowledge what the right hon. Member for Tooting (Sadiq Khan) just said—that we leave aside stale ideology and dogma, and instead look at what works and what produces the right solutions for the public.

We have problems with the building at HMP Wellingborough. It is not a terribly old building—as I recall, it is largely a 1960s construction—but we are under notice that something has to be done about it and it cannot just carry on as it is. The building is not going to be adequate for very much longer. We are considering what to do about HMP Wellingborough. Its staff are responding very well to the problems that they face, but I hope to be able to come back soon to announce what will happen at Wellingborough.

The contract for Birmingham prison is now going to G4S. I acknowledge that the staff at Birmingham have made considerable efforts and that they put in a good public sector bid as part of the tendering process, but the fact is that that process is objective and the private sector bid was just better, and somewhat less costly. On the right hon. Gentleman’s later comments, the National Offender Management Service will, of course, have high regard to the interests of the staff at Birmingham. A new prison is opening not far away, which may offer some opportunities, but we will give all the appropriate support and hope to avoid an unnecessary number of redundancies.

Payment by results was indeed initiated at Peterborough by the previous Government, and we strongly support that worthwhile experiment. The only political claim that I would make is that I believe the previous Government responded to the policies suggested by the then Conservative Opposition in advocating payment by results. We suffered the fate that often happens to Opposition parties—I hope that this will happen to the right hon. Gentleman, too—of putting forward good ideas which then get stolen by the Ministers in power. However, at least we are at one on this policy.

The Doncaster scheme is another pilot. For the first time, the prison operator is entering into having a payment by results element in the contract; the operator will get extra reward if it succeeds, but it will share the risk with the Government, and will lose if it does not succeed. Five percentage points is what has been negotiated—a somewhat impenetrable figure. It means five percentage points down from the current percentage, so an 8.3% reduction from the current reoffending rate would be required for the operator to be paid.

It is indeed true that we have undertaken contingency planning in case we get the wrong sort of reaction to today’s announcement, although of course we very much hope that we shall not, because industrial action will be no more in the interests of prison officers than it is in the interests of anyone else. Contingency planning for disorder in prisons has always been done, as it has to be. It has been done for as long as I can remember, although I think the previous Government suspended it when they reintroduced the criminal law making it illegal to strike in prisons. They carried out an experiment when they lifted the legal ban, but they had a very bad strike in 2007, and put it back again. We have been bringing the contingency planning up to date, but we very much hope that that is a mere precaution. In the interests of public order, we have to ensure that we are prepared in case anything goes wrong in a major prison, but we very much hope not to have to put any of this into effect. We have had discussions with the Prison Officers Association and we are open to further such discussions, and we hope to be able to answer its legitimate queries in any way that we can.