JTU 01-18
3rd January 2018
National Audit Office (NAO) Report on CRC Bail Out
In August last year, UNISON, Napo and GMB/SCOOP wrote to the National Audit Office to draw attention to the lack of transparency in the MOJ’s multi-million pound bail out of the CRC contracts which had taken place at the end of July 2017.
As a result of the joint union letter, the NAO undertook a detailed investigation into the bail out. The NAO report of the findings of the investigation can be found here: https://www.nao.org.uk/report/investigation-into-changes-to-community-rehabilitation-company-contracts/
The report is detailed, but in summary reveals that:
- CRCs are paid for the volume of rehabilitation activity which they provide, not the number of clients supervised
- The MOJ claimed originally that it would transfer the commercial risk of future volumes of rehabilitation activity going down, as well as up, to the CRCs
- The MOJ obtained parent company guarantees that financial protection would be provided for the taxpayer should the CRCs seriously underperform
- The volume of rehabilitation activity actually went down, but the commercial risk attached to this was not transferred as promised to the CRCs, but was handed back to the taxpayer
- The MOJ ended up paying the CRCs more in 2016/17 than was contractually required in order to keep them afloat
- The CRCs under-estimated their fixed costs when bidding for the contracts, but the MOJ agreed that the taxpayer, not the private companies, should shoulder these costs as well
- So far this has all cost the taxpayer an additional £342 million
- By the end of June 2017, CRCs had, on average, met just 8 of the 24 targets set for them under their contracts. The worst performing CRC, met only 4 of its 24 targets.
- Although it is entitled to fine the CRCs for poor performance, the MOJ has either waived, or allowed CRCs to ‘re-invest, 71% of the total of the fines which were due to the taxpayer
- One of the options which the MOJ considered in respect of the poor performance of the CRCs was to terminate some, or all, of the CRC contracts, but decided instead to let the taxpayer take the strain of the failing contracts by amending the contract payment mechanisms to give the CRCs more money.
UNISON, Napo and GMB/SCOOP call upon the government to take the failing CRC contracts back into public ownership to protect the UK taxpayer from further expense in propping up unsustainable private companies.
The Parliamentary Public Accounts Committee is due to hold a session on the NAO Report on 17 January.
Ian Lawrence Ben Priestley George Georgiou
General Secretary National Officer National Officer
Napo UNISON GMB/SCOOP
APPENDIX JTU16-17—BELOW
JTU 16-17
Lord Michael Bichard KCB, Chairman
National Audit Office
157-197 Buckingham Palace Road
Victoria
London SW1W 9SP
9 August 2017
Dear Lord Bichard,
Transforming Rehabilitation: announcement of additional tax-payer spending
We are writing as the three recognised trade unions in the National Probation Service (NPS) and the 21 Community Rehabilitation Companies (CRCs). We wish to draw your Committee’s attention to our concerns about the recent announcement by the Secretary of State for Justice of new spending on the MOJ’s Community Rehabilitation Company contracts.
When you published your report into the government’s Transforming Rehabilitation Reforms in April 2016 you concluded by saying:
‘While NOMS’ oversight of CRCs is robust, significantly lower levels of business than the Ministry projected will affect some CRCs’ ability to deliver the level of innovation they proposed in their bids. Furthermore, the NPS is not yet operating as a truly national, sustainable service. Achieving value for money from the new probation system will require resolving these fundamental issues, and ensuring the right incentives for all participants in the system.’
You also indicated in the report that:
‘The Ministry put prudent protections in place to help mitigate the risks to the taxpayer and to critical services where providers seriously underperform or fail outright.’
Whatever promises the MOJ made to your Committee last year in relation to its ‘prudent protections’, on the last day of Parliament on 19 July, the Justice Secretary issued a low key statement to staff in the NPS and the CRCs to the effect that the government had bailed out the failing CRC contracts with an unspecified amount.
In his written ministerial statement of the same date, Sam Gyimah, the Prisons and Probation Minister, referred confusingly to ‘…additional investment…’ in the contracts, but cryptically placed a caveat over the issue by stating that this additional money will see ‘…projected payments to CRCs still being no higher than originally budgeted for at the time of the reforms…’ Given the implications for the public purse of these apparently contradictory statements and the seeming lack of scrutiny that has occurred we consider the matter should be investigated by your committee the NAO in order to ensure taxpayers’ money has been well used and parliament has not been circumvented.
We are not alone in our criticism of the timing of these two announcements, nor are we alone in extolling the view that the government is so ideologically committed to probation privatisation that it will do all it can to hide that it has failed at the expense of the taxpayer.
We are also concerned as to why the Secretary of State has not yet answered why he had not published the outcome of his department’s Probation System Review which was initiated, at least in part, to ‘…address the observations and recommendations within the National Audit Office report on TR.’
We have written to the Secretary of State to ask him why the Probation System Review findings were not made public and to ask him to explain exactly what he meant when he told staff that he had ‘…adjusted the CRCs’ contracts to reflect more accurately the cost of providing critical front line services..’ We did so as we are very keen, and we consider you ought to be, to find out whether additional tax-payers money has been given to the CRCs over and above what they are entitled to under their contracts. There seems to be no transparency on this which is obviously totally unacceptable.
We enclose a copy of our letter to the Justice Secretary and would be grateful if you could bring this correspondence to the attention of your Committee with a view to the Committee calling in the MOJ to account for the justification for the apparent additional spend on the failing private probation contracts.
Yours sincerely,
Ian Lawrence Ben Priestley George Georgiou
General Secretary National Officer National Officer
Napo UNISON GMB/SCOOP
CC Oliver Lodge, Director Justice VFM
