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Is Policy Exchange right to recommend the expansion of payment by results?

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Earlier this week (5 February 2013), the Policy Exchange Think Tank published a briefing paper on PbR in the justice system: “Expanding payment by results – Strategic choices and recommendations”.

The paper was written by Max Chambers, their head of Crime and Justice.

The paper acknowledges G4S, Sodexo and MITIE for their support.

This post gives a very brief summary with some thoughts of my own.


The title of the paper makes it clear that Policy Exchange are strong advocates of PbR. The paper is also predicated on a clear belief that privatisation of public services is a good thing:

“Policy Exchange believes a key goal for PbR should be to reform public sector working practices, culture and performance management.”

The paper is coherent within its own parameters and is strong on some key PbR issues, but, in my opinion, tends to gloss over areas which run counter to its general argument.

Key Points

This is a brief summary of the highlights of the report:

It was right to scrap the pilots

As most readers know, the Justice Secretary has suspended most of the criminal justice PbR pilots.

Policy Exchange state that there was considerable learning from the pilots but support the decision to suspend them on the basis that any national roll out of PbR must be done out of existing budgets – therefore the pilots models were inappropriate. They also advocate that the momentum for PbR needs to be maintained.

The Probation service should be privatised

The Policy Exchange argument is clear:

  • PbR demands that the risk of failure is transferred to the private sector.
  • Joint public-Private ventures are “proven” not to work.
  • Current privatisation plans don’t go far enough – only high risk cases which require Multi-Agency Public Protection Arrangements (MAPPA) should be retained by the probation service.
  • The supervision of long-term prisoners should also be put out to tender.
  • Probation trust back office functions should also be tendered as part of the proposed PbR lots.
  • “Reoffending rates for those sentenced in the community have remained relatively static over the last decade”.

This view is contested by many other commentators who regard re-offending rates for this group as more than acceptable by international standards and to have improved steadily over recent years.

The savings from privatisation will fund the PbR experiment

Much of Policy Exchange’s argument is based on the fact that the private contractor now delivering Community Payback in London is doing so at “about 60%” of the previous cost when it was delivered by London Probation.

We will, of course, have to wait and see whether quality and re-offending rates are better or worse under the new approach.

Short-term prisoners

Policy Exchange make the bold (and, in my view, reasonable) recommendation that the PbR funded provision for this group (described by Justice Minister Chris Grayling as essentially a mentoring service delivered by ex-prisoners) should be provided on a voluntary basis – i.e. there should be no new legislation requiring statutory supervision by the probation service on release.

It argues that a compulsory approach may restrict providers’ freedom to innovate and that if offenders who don’t comply are returned to prison, this will increase, rather than reduce, costs to the justice system.


Px PbR


The PbR structure

The paper recommends that a maximum of 20% of contracts are paid on a PbR basis with the proportion of outcome based payments starting low and increasing over the length of the contract.

Payments for success should be designed more to reflect cost savings, rather than just statistical significance.

The paper spends a lot of time criticising the “cliff edge” whereby if the provider misses the re-offending target rate by 0.1%, they receive no payment at all; arguing, quite fairly, that this is not a viable financial model.

The paper introduces the concept of a “Perspex box” by which it means that providers should retain full control over the design of provision (the” Black Box” approach) but that the MoJ should develop a culture of learning which means that best practice can be shared although Intellectual Property rights should be protected at the same time. (See my recent post on CBI PbR conference for further discussion of these issues.)

Policy Exchange recommend a differential pricing approach which retains a binary measure in part. This involves splitting the cohort into three groups based on their risk of reoffending (low, medium and high), with these levels assessed on OGRS3 basis.

For me, the discussion of different measurement and pricing approaches was the most interesting and thought-provoking component of the paper.

Involving prisons

All prisons should be given a reducing reoffending target as part of their contract and the paper spends some time considering how prison- and community-based reoffending work could be jointly tendered under PbR.

My thoughts

Essentially, the Policy Exchange report sees PbR as a key driver of privatisation of the public sector and would like to see it go as fast and far as possible.

Their detailed critique of pricing approaches is worthy of discussion within this overall framework.

My main criticism of the paper is that it is so much in favour of  the wholesale outsourcing of the justice system via PbR, that it does not apply the same careful consideration to key obstacles as it does to pricing mechanisms and market development.

In particular, I think the paper only does lip service to what remain for me the key challenges:
  1. The design of the interface between the probation service’s risk management role and the interventions delivered by new contractors.
  2. The mismatch between preserving  best local practice under the leadership of the recently democratically elected Police and Crime Commissioners with a national commissioning system of 16 regional lots?

And finally, and most importantly, shouldn’t we have some sort of evidence on which to base the driving assumption that the private sector will outperform the public sector in reducing reoffending?


I hope readers find the time to read the Policy Exchange report and contribute to an exchange of views via the comments section below.



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