On 22nd January 2014 the House of Commons Justice Committee published its interim report on the Government’s Transforming Rehabilitation Programme. This is the third in a short series of posts examining the report’s findings.
Applying payment by results to probation
One of the distinguishing features of Transforming Rehabilitation is that contracts with new providers will include a payment by results element. We still don’t know the details of how the PbR mechanism will work (latest details here.)
The Committee makes the point that PbR programmes are very sensitive to design in order to get the right balance between cost and quality. Good PbR contracts will drive high performance with a focus on outcomes, bad ones will result in poor quality provision through inadvertently incentivising the wrong outputs and encouraging gaming of the payment system.
A work in progress
Most expert witnesses felt that the MoJ’s initial version of the payment mechanism wasn’t fit for purpose. They expressed concerns around two issues in particular which they hope the MoJ will resolve before deciding on the final details of the new probation contracts.
Binary v Frequency
The MoJ intends to reward providers both for reducing the number of people who re-offend (the binary measure) and the total number of re-offences committed (the frequency measure). Expert witnesses felt that the MoJ had the balance between these two measures wrong with the result that providers would not be incentivised sufficiently to work with more entrenched offenders who would require greater investment of resources to help them change.
There was also concern that there would be insufficient investment in TR to enable providers to reduce reoffending – particularly with the extension of probation to short term prisoners. Ideally, the payment mechanism should incentivise providers to take risks and develop new approaches to reducing reoffending. If these approaches are successful, society (through less crime), the taxpayer (less demand on services) and the new providers (PbR bonus payments) all benefit. The risk is that if there is not sufficient investment, then providers engage in a “race to the bottom” on price, and performance and quality suffer, as is generally agreed was the case with the Work Programme.
A tricky political balancing act
The Committee hints at a difficult political balancing trick that the MoJ must pull off. It must allow new providers to make sufficient profit in the early years of the contract so that they can reinvest and make substantial reductions in reoffending as the new probation systems become embedded locally. The risk is that providers could merely trouser the early profits and then exit the market.
It will be difficult for the MoJ and public opinion to form an accurate picture of provider intentions until the contracts reach the end of their initial 7-10 year lifespan.
For definitions of payment by results terminology such as “binary” and “frequency”, see my PbR jargon demystified infographic.