Dr Phillip Lee is a former Justice Minister, and is MP for Bracknell.
The Government stepping in to take over a failing prison this week is yet another wake-up call about using private finance to deliver vital public services. As a Justice Minister, I saw first-hand how unfit this approach is to deliver justice.
But opaque private finance arrangements are in place not only across the whole our criminal justice system, but all of government – from hospitals to schools, railways, energy generation and immigration centres – and mostly initiated by Labour administrations. We now spend £251 billion each year on outsourcing and contracting without any evidence that this is a good deal for taxpayers. It is time to seek out alternatives.
The convoluted financing and contractual arrangements behind Oakhill Secure Treatment Centre are an example of all that is wrong. These deals are so complex that no one really has a full grip of them, and they are all-but impossible to unpick without incurring big financial penalties. They guarantee a good annual return for investors, while Government – as we have seen at HMP Birmingham – bears all the risk when things go wrong. At Oakhill, the Government pays almost £18 million a year for 80 places, some £225,000 per place. In exchange, the taxpayer is supposed to get a more efficient service.
That, at least, is the theory. But it is nonsense. And it delivers neither value for money nor justice. Violence levels and recidivism rates are high and, last year, a member of staff was left in a coma after an attack by several young offenders.
Last month’s damning Public Accounts Committee report on public sector outsourcing and contracting points out that PFI costs more than conventional procurement, and that there is no evidence for benefits claimed. “It is unacceptable that almost 30 years after the first PFI projects…the Treasury cannot produce an evidence base to support its claims that PFI is worthwhile for any reason apart from the fact that it takes debt off the balance sheet,” the report said.
The right incentives are key. While profit is no bad thing in itself, and companies such as Waitrose, based in my constituency, have shown that this can go hand in hand with strong social values, the driving force should be social benefit
The fact is that, as currently applied to our justice system, we are incentivising the minimum effort possible to deliver a poor service. We are not driving the excellence and innovation we would like to see. Instead, we should aspire to the brilliant results achieved by Diagrama, a Spanish not-for-profit organisation working with young offenders, at a fraction of the cost. Its reoffending rate is a quarter of the UK’s average.
There should be no place in our society to make money out of delivering poor public services. The Government should comprehensively review all current PFI deals before embarking on any others, and make state financing a real option for funding future public services.