7 Practical issues in the application
of payment by results to rehabilitation |
245. Although there is undoubtedly scope to create
a vibrant market in probation and rehabilitative services, it
is clear that considerable development will be required to establish
a strong competitive base that is financially stable and facilitates
access to providers from a range of sectors and of a range of
sizes. What it means to "create a level playing field"
differs for, and within, each sector but there are also considerable
cross-sectorial commonalities in what is required, no matter what
level new commissioning arrangements are introduced at. Creating
a market based on payment by results is also time-consuming.
246. Several of our witnesses commented on the
complexity of developing a commissioning model based on payment
by results. Helen Edwards, Director-General for Criminal Justice
at the Ministry of Justice, gave us her views: "Although
there is a good deal of agreement, or certainly we feel there
is, around the payment by results approach and the concept, it
is complicated and getting it right will be quite difficult."
Time is needed to develop market and complexity of devising a
system of payment by results which Peter Neden of G4S believed
would need to evolve: "the answer isn't obvious and immediate.
It might be a simple concept, but delivering it in reality is
quite complex. The second point I would make is that it is not
all or nothing. We haven't gone from a world where people are
just paid money for trying to do things to a world where we are
only going to be paid for outcomes. There is a transition period
that allows us as providers to become more confident about the
payment-by-results system and to build the evidence base that
is in the interests of both our clients and us as providers to
be able to make those steps."
247. John Thornhill described to us a series
of concerns that sentencers would like to see answered as the
Government designs the new commissioning model:
We raised the concerns [with the MoJ] about cherry-picking.
We raised the concerns about how far this will be driven by profit
rather than by effective delivery of the sentence. We raised the
concerns about what would be the consistent approach across the
country. For instance, what about the demographic issue? It will
be attractive to bid for a contract in, say, somewhere like a
large conurbation where there may be a wide range of clients to
deal with. But in the country areas, again, what would be the
difficulties there? How will they deliver across the whole of
a large area? [...] We [subsequently] put a paper to the Ministry
of Justice where we expressed the view that there needed to be
very clear quality assurance and quality control built into the
contracts, with regular appraisals, inspections, and the ability
to withdraw from a contracta whole range of commercial
statements that you would have in a contract.
We discussed many of these matters with our witnesses
and here we draw conclusions about some of the key issues that
the Government will need to resolve as it creates a payment-by-results
based commissioning model.
The creation of a stable market
Immaturity of the current
248. UNISON described the existing market as
We were also told that NOMS has failed to establish an effective
market in probation services and there continue to be shortcomings
with existing national contracts with external providers.
Jane Coyle of Blue Bay Support services was concerned that in
her experience of engaging with the probation service to negotiate
to provide more cost-effective pre-sentence reports and offending
behaviour programmes, there is a lack of will to diversify the
Hill had similar concerns:
What matters is a construct that is based on a belief
that a range of providers is a good thing for the system. I think
the probation service are quite frightened of competition and,
although they may describe a view that is similar to what I have
just said, they don't really mean it. So long as we ask the system
to reform itself, in my view, that reform is unlikely to happen.
However, he further explained why he believed the
market had not developed thus far:
The reason that there isn't a market and there isn't
active competition is because the commissioners are not putting
work to the market. It is providers and, as providers, we can
influence that and we do it on a weekly, sometimes daily, basis.
We are very keen to compete amongst ourselves and with the public
sector. But until the commissioning decision is made, rather like
the example I gave of community paybackand they are difficult
decisions to make; I know they are because I have been on that
side of the fencethere is any number of views as to why
you shouldn't do it or, if you have to do it, why you shouldn't
do it now. Those decisions have to be the first ones. Once you
start to make them and become more confident, and NOMS becomes
more confident as a commissioner, and I think it will under this
new construct, then that market will develop. That is how markets
249. Other witnesses suggested that this may
have as much to do with a lack of central drive to open up the
market as individual probation areas' reluctance to do so.
Martin Narey explained to us that while he was CEO of NOMS there
was a shift to less central enthusiasm for contestability.
On the other hand, the impact of competitive forces and the threat
of transfer can, in themselves, spur improvements within existing
We have also heard that the financial situation that trusts and
their local strategic partners now find themselves in has already
encouraged greater external commissioning, both by individual
trusts, as they have reviewed their core business, and by local
partnerships, as they have been motivated to pool resources.
250. There are differences across the various
sectors that must also be considered. For example, Clinks has
suggested that there was a need to address cultural issues between
the public and voluntary sectors.
Private sector procurement specialists with experience of working
with NOMS, Excalibur, expressed concerns that the differences
between dealing with prison-based and community-based offenders
are not fully appreciated, either within NOMS and the MoJ, or
by potential new providers.
As we noted above, Napo has raised similar concerns about the
cultures of prisons and probation, which would have implications
for the design of a new commissioning model.
251. There is likely to be considerable variation
across England and Wales in the work that will be required to
establish a stable market. In some areas there will be a local
infrastructure of existing organisations but in others this will
need to be developed. For example, some trusts noted that voluntary
sector providers would need to build up their capacity to take
a greater role.
In addition, there is a strong likelihood that the economic situation
will have a considerable impact in diminishing the range of providers
whilst there is an increase in demand. We heard that this is a
particularly "big issue" for the voluntary sector. For
example 60% of Clinks members were using free reserves to finance
252. The MoJ must not underestimate
the work required to create a stable market and it must take into
account the existing cultural differences across the different
sectors and the complex nature of probation work. There is also
clearly a possibility of early commissioning failures and, in
order to maintain public confidence in the system, the MoJ must
have clear contingency plans for dealing with any such problems
which may arise. Innovation involves risks and those risks need
to be managed.
TRANSPARENCY AND AN EFFECTIVE DIALOGUE
253. According to the CBI, a prerequisite to
the creation of effective markets is for commissioners to establish
and maintain "open communication" with potential providers,
for example, to ensure that contracts are acceptable to the commissioner
and the market.
Roger Hill explained why he felt communication and consultation
were important: "[Sodexo] would like to see the continuing
competition of public sector prisons and we would like to be part
of constructing how payment by results, locality based commissioning,
place based budgets and all of that develops, because we take
the view that there isn't a straightforward simple answer as to
how to do that. It requires a lot of thought and a lot of discussion
and we would like to be part of it."
Catch22 advocated earlier involvement of the voluntary sector
in the development of new commissioning practices.
There does appear to have been communication between NOMS and
providers from the private sector on the new commissioning strategy.
254. Conversely, the Probation Association expressed
disappointment that NOMS had not consulted them about either the
tenders for community payback or the forthcoming commissioning
Cox, Chair of the Probation Association, explained the implications
of NOMS' lack of consultation with probation trusts with respect
to the community payback tendering process: "The concern
here is that we have been thrust into this particular competition
without any consultation whatsoever. If we had had that, we might
have been able to advise on the best route to take to end up in
a place where we will save money and possibly keep the localism
agenda intact, because lots of work has gone into ensuring that
services on the ground have been properly thought through with
partners and so on".
255. There is a need for open
communication with providers from all sectors to inform the commissioning
strategy as well as in any future competitive processes to ensure
that the best balance can be struck between efficiency and localism.
We are concerned that this does not appear to have been the case
IMPLICATIONS FOR TRAINING
256. Unlike the work of prison officers, which
our predecessor Committee concluded was best informed by "life
experience" rather than extensive formal qualifications,
a thorough supervision and training process for probation work
is necessary to equip professionals with the skills and knowledge
that they need to exercise expert judgment and discretion in managing
offenders safely in the community and to provide a basis for consistent
However, the qualifying framework is not currently easily
accessible to candidates outside the statutory sector, and there
are no equivalent qualifications available to practitioners in
private or voluntary organisations.
The infrastructure for training would also need to be re-considered,
as few regional training consortia now exist and regional training
arrangements rely on support by chief executives of trusts.
There is similarly a need for consistent post-qualification arrangements.
257. The Probation Chiefs' Association stated
that trusts already have the business skills to commission offender
services, although some trusts suggested that additional training
When we asked Robin Wilkinson, Director of NOMS Human Resources,
what training he envisaged would be required to equip trusts under
any new commissioning arrangements he responded: "there has
already been quite an investment in thinking through what commissioning
means, and in training and developing key staff within probation
trusts around those skills, but it is clearly going to be an on-going
part of our world."
258. The success of any new
commissioning model in protecting the public will be predicated
on the existence of strong safeguards to monitor standards of
professional expertise. Staff undertaking offender management
work on behalf of other sectors will require the same high-quality
qualifying training as probation professionals working for trusts.
In order to foster some consistency in the specialist skills required
to work with particular types of offender, and a high-quality
service provided, we would like to see the MoJ working with Skills
for Justice to create a framework for both accredited qualifying
and post-qualifying training that is accessible to all providers.
The complexity of designing a
payment by results commissioning model
259. Helen Edwards described what she foresaw
as the role of the Ministry of Justice under any new commissioning
We will still have responsibility overall for standards.
In the way we put contracts together, we will want to be clear
about the parameters and who is responsible for what. We have
yet to work out the detail of that, but I think, overall, the
broad approach is for more discretion to be exercised by those
who provide services, and with that goes increased responsibility
for what is done.
260. We heard that working through this detail
was likely to be incredibly complex. Witnesses have raised questions
about the implications for the application of payment by results
to criminal justice of: the risks of failure in terms of public
protection; the validity of indicators of reduced re-offending;
the costs to providers of monitoring and the national costs of
commissioning; ownership and commercial confidentiality of information;
and the quality of the evidence base on which to base commissioning
THE FLEXIBILITY OF CONTRACTS
261. There will be a need to strike a balance
between over-prescriptive contracts which may inhibit innovation
and including sufficient safeguards to promote quality services
that are effective at both reducing re-offending and protecting
the public, particularly in the context of fewer national standards.
We heard that in other fields a so called "black box"
approach had been adopted whereby "the commissioning department
defines very clearly the high-level outcomes it wants to achieve...but
they leave it up to a provider to then determine how they are
going to find a solution to that"; the requirements in contracts
generally have been limited to legal requirements to deliver a
minimum service. 
On the other hand, while part of the potential value of payment
by results is in the transfer of risk and responsibility to the
provider, there is a danger that public protection will be compromised
if contracts are not properly designed. Mr Eccles of Social Finance
identified potential tensions arising in applying such a model
to some areas of probation work as public safety concerns may
increase the extent to which service provision is specified by
the MoJ. However,
in practice it may not be easy to draw such distinctions, as the
risk presented by an individual offender does not remain static
throughout the duration of the order.
It is possible, however, to build a set of principles into the
contracting process, including for example, safeguards around
working with vulnerable individuals, including victims, engagement
with sentencers and treating people with dignity and respect.
262. Contracts also need to be flexible enough
to ensure that providers address offending-related needs as and
when they arise rather than purely on the basis of the sentence
of the court and any assessment of needs at the time of the order.
Probation trusts frequently go above what is required in their
service level agreements with NOMS, by providing a greater volume
of interventions than they are contracted to and by engaging in
partnerships to work with offenders who are not their statutory
263. The Ministry of Justice
will need to ensure that contractual specifications include adequate
safeguards for public protection. The current work of probation
services is not just about meeting the obligations in their contract;
its work is about serving the demands of the courts, which cannot
be easily predicted, and being sufficiently flexible to meet the
offending-related needs of individuals as and when they arise.
The Government must clearly specify in its new commissioning strategy
how it intends to ensure that contracting arrangements with providers
from other sectors will accommodate these needs and respond to
264. The progress that probation trusts have
made towards more equal treatment in the criminal justice system
could be undermined if contractual safeguards are not put in place.
Probation trust performance analysis incorporates diversity criteria
to enable improvement. Avon and Somerset Trust considered that
it will be important for any providers of probation services to
at least meet the current attention paid to diversity and equalities.
Nevertheless, the green paper does not comment on the implications
for addressing diversity of contracting out services and the potential
loss of the public sector equality duty; neither is it clear whose
responsibility it would be to monitor practice in this regard.
265. From April 2011 the public
sector has had a statutory duty to take positive action to eliminate
gender discrimination and promote equality under the Equality
would welcome a clear statement in the commissioning strategy
about how the equality duty will apply to providers outside the
public sector and how the Government intends to ensure that probation
and rehabilitative practice is fair and inclusive, particularly
in the context of increased provider and professional discretion.
DESIGNING APPROPRIATE PAYMENT MECHANISMS
266. The Government's proposed model for the
application of payment by results to community sentences is to
make an initial payment to providers for the delivery of community
orders and a subsequent one for reducing reconviction, yet it
does not intend to provide additional resources up front to finance
local incentive schemes. We had a great deal of discussion with
our witnesses about their views on the key components of effective
payment mechanisms, including the appropriate results, to ensure
that they are attractive to potential providers; are financially
viable; they facilitate the participation of a range of cross-sector
providers; and provide the right incentives to ensure that the
aims of the criminal justice system are met.
Access to working capital
267. Access to working capital was raised as
an issue which could undermine the ability of organisations across
all sectors, particularly small and medium sized organisations,
including probation trusts, to participate under both the models
described above. For example, trusts themselves are not in a position
to bear the financial risk of investing money in services to facilitate
payment by results schemes, either in terms of having the sufficient
funding to invest upfront in new services or to sustain themselves
in the event that they do not get paid, a problem exacerbated
by the fact that they are not allowed to hold reserves.
For example, Clinks identified that "risk appetite will be
very low at the local level where [VCS] organisations have little
or no reserves" and Catch 22 argued that access to capital
from mainstream financial services which, it stated, are "much
more geared towards catering to the private sector".
 Cash flow,
and the level of financial risk, is also an issue for both small
and large private sector organisations, for the latter particularly
where it is difficult to make informed investment decisions as
a result of a lack of evidence.
268. While witnesses welcomed the Government's
proposed model of payment for community sentences, described
by Christine Lawrie as a "core plus" payment system,
we heard that to make payment by results viable for any organisation
it will be important to get the ratios right between upfront "guaranteed"
payment to provide working capital and the element attached to
269. Social finance funding for the Peterborough
project has come from trust funds and the Big Lottery Fund.
However, Andrew Neilson of the Howard League, Clive Martin of
Clinks and A4E were sceptical that there would be sufficient social
investors interested in criminal justice in the short-term.
Andrew Neilson warned that, in his view, payment by results pilots,
and the six year social impact bond project in Peterborough in
particular, will not be able to prove itself in sufficient time
to attract new money into the system; payment by results is not
going to reduce the numbers in the criminal justice system any
time soon. There
may also be difficulties in designing financially viable schemes
as the minimum size for a social impact bond model is dependent
on what is statistically significant in terms of reducing reconviction
for the target population as well as the size of the cashable
benefit of that reduction. Rob Smith of YSS explained that West
Mercia had been trying to develop a similar project for two years
but "the scale you have to get to in order to make the cashable
savings for the Treasury appears so large and is very difficult
to overcome. Agreeing a set of metrics to a more rigorous standard
that had probably been initially worked out for the Peterborough
model is making it impossible to develop anything at present."
270. Crispin Blunt was more hopeful about the
role that private investors could play in bringing new resources
into the system:
I would sincerely hope that it will not just be Social
Finance coming forward to finance schemes like Peterborough, and
social philanthropists and charitable trusts investing in Social
Finance to deliver Peterborough. I sincerely hope that with our
payment-by-results schemes we will be able to convince the market
that this is a proper investment vehicle, because they should
be sufficiently confident that they are going to add to our capacity
to drive down reoffending and so improve the people in the care
of the state, either in custody or in the community, that we are
going to be able to take the savings that they have invested in
creating the capacity to do it. That has to be the objective.
271. Our predecessor Committee considered the
relative merits of performance incentives versus financial incentives
for driving reductions in re-offending to the extent required
to prevent prison population growth. It concluded that additional
financial incentives had the potential to accelerate progress
at local level; evidence suggested that this would require some
There is considerable scope for partnership approaches to provide
viable alternatives to short-custodial sentences but these can
require high initial investment, and Hertfordshire Probation Trust
questioned whether the local incentives model would facilitate
272. When we questioned the MoJ about the viability
of the local incentives model when no additional resources would
be provided, it recognised the difficulties of organisations getting
working capital to finance start-up costs but was clear that it
did not expect to have to provide the resources to underpin service
Youth Justice Board has taken a different approachmore
akin to our predecessor Committee's recommendationsand
created a small reinvestment fund.
273. We see that there is considerable
potential in social finance, but it will take time to develop.
The Ministry of Justice should learn from the experience of other
Departments including the Department for Work and Pensions and
the Department of Health.
CHOOSING APPROPRIATE OUTCOME MEASURES
274. The complexities of devising appropriate
outcome measures on which to base payments in criminal justice
must not be underestimated; the relationship between intervention
and outcome is less straightforward than in other fields.
It is the Government's intention that the main 'result' that would
attract payment is reduced reconviction. However, reduced re-offending
is by no means the only purpose of a sentence: courts must also
consider appropriate punishment, public protection, general deterrence
and reparation to the victim. This raises the question of whether
it is appropriate to assess an intervention in terms of a single
purpose when it may have been intended to achieve others.
275. There are also questions about the reliability
of the various indicators of reconviction and about which would
be most appropriate for payment by results. Reconviction is used
as a proxy measure for reoffending because it is the best indicator
available, although there are obvious limitations in its use,
not least that recorded crime accounts for between only a quarter
and a tenth of total crime. Levels of reconviction also vary by
offence and by police area, so that variations in rates may reflect
variations in policing performance; and they are dependent on
the efficiency of the courts.
276. As a result of attempts to improve the sophistication
of reconviction as an indicator of re-offending, a number of measures
have been used in recent years. Examples include a measure of
the volume and severity of offences committed, and a local re-offending
snapshot measure, which takes a cross-sectional approach to examine
the reconviction rates of the caseload of each trust on a given
trusts currently use the snapshot measure coupled with a series
of proxy measures, including successful completion of orders or
licences and entering employment or stable accommodation.
The Ministry of Justice has identified three indicators which
could be used as an outcome measure of reduced re-offending: 1)
All proven re-offending, including reconvictions, cautions and
penalty notices for disorder; 2) All proven re-convictions; or
3) Reconvictions leading to a serious disposal i.e. community
order or custodial sentence.
277. Witnesses explained that measuring re-offending
is very complex and that, as a result, there are limitations with
The most robust or accurate measures cannot be provided until
a year or two years after sentence; this time-lag would have important
implications for cash flow in a system of payment by results.
Martin Narey explained why he favoured frequency measures: "What
we need to know when we are looking at what we do with offenders
is whether they offend less, both in terms of quantity and gravity
of offending. If someone leaves a prison after a 10-year sentence
for an armed robbery and is convicted within the next two years
for a petty theft, that is seen as a failure, when actually that
is probably a great success."
Another potential issue is that re-offending is currently measured
against a national baseline which would fail to account for existing
local variations in performance, yet the existing local indicator
used by truststhe snapshot measure described aboveis
not comparable to the national baseline.
Nationally, we were told that the snapshot measure is indicating
a "statistically neutral" impact, i.e. that probation
trust practices are having neither a positive nor negative effect
South Yorkshire is reportedly the only trust where there has been
a statistically significant reduction in re-offending levels since
the introduction of the snapshot measure: over 90% offenders do
The snapshot measure is currently being reviewed by the MoJ. Hazel
Kemshall advocated examining the impact of local probation practice
on re-offending by examining actual reconviction against what
it is predicted those offenders would do based on risk assessment
measures in OASys.
278. The choice of indicator of reconviction
is important so as to ensure that providers are adequately incentivised
to target the right offenders. The Ministry of Justice also noted
that there may be a case for rewarding providers differently for
rehabilitating different types of offender, for example, female
offenders, offenders from minority ethnic groups and young adults.
If this were to be the case it may be necessary to use different
indicators of re-offending for different types of offence and
over different time periods. 
Clive Martin argued that measures would need to vary by type of
offence, for example, sexual offences, would require a binary
measure, but for a persistent drug user, for example, it would
be unrealistic and may require intermediate measures e.g. completion
of a drug treatment programme.
279. We welcome the Ministry
of Justice's review of the local snapshot measure of re-offending.
Once a new, more robust, measure is devised, it would be prudent
for the Ministry of Justice to commission research to examine
practice in the best and least performing trusts so as to strengthen
the evidence base.
280. As a result of the limitations of reconviction
measures, several witnesses called for the use of interim or proxy
measures for those factors proven to have a critical role in reducing
re-offending as a sounder basis for payment by results.
For example, Hertfordshire Probation Trust proposed that
payment could be determined by achieving specific measurable results
such as commencement and completion of treatment or intervention
or commencements and completion of qualification with an overall
supplementary payment linked to re-offending.
These measures are useful, particularly in the absence of a strong
evidence base, as there is a relationship between an offender's
compliance with their sentence and behavioural change.
However, the factors known to be associated with offending are
not separate but inter-relatedfor example, being without
employment makes it hard to find settled accommodation and vice
Narey emphasised this point, telling us that
Despite the flaws in the research, what the research
tells us over and over again is that, if you get a prisoner, or
someone on a community penalty, somewhere to live and into employment
or training, they will offend much less, by about a half. There
is lots of analysis to prove that. A valid measure of success
for community penalties or for prisoners would be having somewhere
to live and in a job after release. That would give you a dependable
indication of the likelihood of someone not reoffending.
GRADUATED AND DIFFERENTIATED PAYMENTS
281. There is also the question of how best to
incentivise providers to avoid the risks of "creaming and
parking" of potential clientsi.e. focusing their services
on those who would be most likely to achieve the financial outcomewhich
has been a problem with models in other fields, notably under
This is particularly important in criminal justice as "cherry
picking" offenders would represent a potential threat to
282. Councillor Khan summarised the potential
hazards in using inappropriate measures to determine payment:
"Whatever size of contract is given, if there is the same
tariff for all the individuals, I just think if I had this limited
resource to work with that client group I am going to try and
get the most bang for my buck on that, which is why differential
payment tariffs are really important on that."
It is thus important that the "result" upon which payment
is based is carefully calibrated to ensure that providers cannot
choose to work with the "easiest offenders".
283. Other witnesses similarly suggested that
differentiated payment models should be devised to incentivise
providers to work with those offenders who may be harder to rehabilitate.
For example, under the DWP Work programme initial payments, or
"attachment fees", are made on the basis of eight categories
which relate to the type of customer, including for example, lone
parent, ex-offender, young person, and the duration of a person's
unemployment; there are subsequent weighted payments on a pure
outcome basis that are differentiated again by a customer cohort
basis. The Department
of Health has designed a complex tariff for mental health care
under which payments determined using a set of 21 'care clusters'
that together form 'currencies' or units for contracting; each
cluster defines a group of service users who are relatively similar
in their care needs and therefore in their resource requirements.
It is worth noting that it took considerable time to devise these
284. However, we heard that it can be difficult
to define "who is hard to help or how they are hard to help,
and how much to pay extra for those who are hard to help".
Hertfordshire Probation Trust suggested that a supplementary payment
linked to re-offending levels could be used to incentivise partnership
co-operation, whereby all agencies are working to an overall shared
outcome. It also proposed a banded system of differential payments
to encourage work with range of offenders e.g. first-time, intermediate,
prolific and high risk of harm.
Another option would be to align the bands with the four tiers
of the offender management model, which rank offenders according
to their risks of reconviction. For example, Councillor Khan explained:
One possible solution is that, for those clients
who have the highest risk of reoffending, their payment by result
tariff is larger than for those who are at a low risk of reoffending.
Therefore, within the system, regardless of which client group
you are working with, the input you put into that particular client
and the output that you receive is commensurate. That kind of
system is going to be more difficult and bureaucratic to manage,
but I believe in the longer term it will deliver the best results.
285. There are also examples of graduated payment
for achieving a mixture of activities and outcomes. Chris Wright
drew our attention to Catch 22's INSPIRE youth resettlement programme
under which it receives payment on the basis of: 10% on contract
signing; 15% on starts; 25% on positive activities or skills development;
20%* entry to employment, 30%* on sustainable job outcomes (*or
sustained education or training if under 16).
The Peterborough social impact bond pilot is tasked with reducing
the frequency of offending for a whole cohort of ex-prisoners
which provides a natural incentive to work with those most likely
286. As outcome-based payment
models in other sectors have evolved, differentiated payments
have been introduced to suppress the propensity of providers to
focus on those who are easiest to help. We urge the Ministry of
Justice to ensure that any model of payment by results builds
in incentives for providers to work with all offenders from the
outset, and that interventions are especially targeted at the
riskiest offenders. We favour the development of a graduated payment
system which includes some upfront funding, with additional payments
based on proxy measures and then ultimately on reduced re-offending.
Developing a business case
287. The Government believes there is a strong
economic and social case for investing in rehabilitation and scope
to increase the use of rehabilitative requirements in community
sentences, yet at the time that the green paper was published,
it had yet to develop the business cases for the individual rehabilitative
order to develop a business case an analysis of the costs of existing
services is required, which can be built ononce evidence
on outcomes, and their costs, is availableto generate a
288. Work is underway to improve NOMS' information
on costs to provide a framework for future commissioning. By April
2012, the Specification, Benchmarking and Costs (SBC) programme
will have developed: a directory of over 70 services that NOMS
funds for delivery to offenders, defendants, victims and courts
so that costs and performance can be compared; service specifications
with clear outcomes and outputs, so that any provider can deliver
services under service level agreements or contracts; operating
models to help determine what services should cost and show how
the service could be delivered effectively and efficiently; and
direct service costs to allow NOMS to understand the impact of
commissioning decisions. However, Ms Byrne stated that, despite
having initial costings, it has taken at least 15 years for the
Department for Work and Pensions to be "reasonably confident"
that they have a "fairly accurate" calibration of cost.
Martin Narey admitted that in the early stages of prisons competition
there was not a very sophisticated understanding of public sector
289. Crispin Blunt acknowledged that building
payment by results commissioning model would be a learning process:
In the course of all of this, people will make losses
and some people will make supernormal profits, because people
will make judgments both in writing the contracts in the public
sector and in taking up the contracts in the private sector which
they will get right and get wrong. We are just going to have to
learn as the market develops to make sure we get closer and closer
to what should be a proper rate of return because it does not
suit anybody if a company makes a disastrous decision, loses its
shirt and then finds it is in difficulty delivering its contract.
That does not help us any more than it does if it then becomes
a national scandal that this company appears to be fleecing the
taxpayer by having taken them to the cleaners in writing the contract.
290. Witnesses identified some problems with
basing a new commissioning framework on the costs determined under
the SBC programme. Some trusts, including Wiltshire and Staffordshire,
noted difficulties in achieving increased innovation within the
context of the highly prescribed service specifications which
they are currently subject to.
Furthermore, Durham Tees Valley Probation Trust argued that the
SBC programme has taken little note of the effectiveness of services
and Peterborough Probation Trust therefore expressed a need for
a realistic specification of services to be provided.
The SBC costs were also based on service specifications that were
based on the old national standards. Under the Pathways to Work
scheme the contracting price was determined through a more iterative
competitive tendering process where tenders are submitted and
defined by those who are tendering, and then assessed as part
of the competitive process.
291. The introduction of payment by results into
criminal justice is intended to be cost-neutral.
Nevertheless, while there is the potential for cost savings to
stem from driving out existing inefficiencies, and from 'upstream'
savings by reducing reoffending, there is also the prospect that
costs will increase. For example, UNISON believed that such a
system would require additional bureaucracy for the oversight
of commissioning arrangements, contract management and quality
assurance which would divert resources from the frontline.
Indeed the application of payment by results in health and employment
resulted in increased costs. For example, administrative costs
were estimated to have increased by around £100k-£180k
in hospital trusts and from £90k to £190k in primary
care trusts (PCTs). Most of the additional expenditure was due
to: recruitment of additional staff; higher costs of data collection;
higher monitoring costs; and higher enforcement costs. While there
are lower costs in negotiating prices and volumes, this is offset
by difficulties in managing activity levels.
292. There would undoubtedly be some cost implications
for the application of payment by results to criminal justice.
For example, Tessa Webb, Chief Executive of Hertfordshire Probation
Trust, stated that the probation service does not currently have
access to the police national computer which provides data on
Sonia Crozier, Chief Executive of Sussex and Surrey Probation
Trust has commissioned research to create a costing framework
to assess the impact of local delivery models which would be required
to facilitate the implementation of payment by results.
We were told that other than for the evaluations of the pilots,
the MoJ has not budgeted for an increase in administrative costs;
indeed the administrative costs of the Department are being reduced
by 30% over the spending review period.
293. Nevertheless, it is also important for the
Government to reflect on the potential benefits of greater investment
in generating better outcomes. Mr Eccles raised concerns that
consideration of the merits of any new commissioning model on
cost alone could overlook the need for contracting processes that
deliver higher quality services and better outcomes; it should
focus on value for money.
294. In any new commissioning
model there is a need for a balance to be struck in ensuring that
the administrative costs of any new system do not outweigh the
potential benefits. The Government's pilots should be designed
to enable them to create a business case for a viable model of
justice reinvestment to be implemented over the next spending
THE QUALITY OF THE EVIDENCE BASE
295. For any provider, judgments about the type
of services to commission need to be based on the best available
evidence if they are to have optimum impact on the reduction of
re-offending, and hence on being paid. Although there has been
a major drive to implement effective practice in terms of the
delivery of probation interventions, the evidence of programmes
having a demonstrable impact on reconviction is patchy, and the
emerging importance of desistance theory, which offers an alternative
understanding of how best to stop offending, is largely untapped,
and therefore untested.
Mr Eccles summarised the situation: "while there is a lot
of data available to predict whether people will reoffend or not,
there is less data available on interventions that will work to
Mr Martin identified a risk that commissioning decisions may be
"arbitrary and based on almost historical practice.
There is also a risk that this will undermine the ability of the
MoJ to bring new money into the system.
296. Professors Hedderman and Pease explained
that there are limitations in the methodology that enables comparisons
of the effectiveness of custodial and community sentences, as
reconviction is counted from the day of release for imprisonment
and from the date of sentence for community sentences, yet they
disagreed about whether a uniform measure should be based on the
beginning or end of the sentence.
They also had different interpretations of the evidence that was
available to compare these sentences. Professor Hedderman cited
Ministry of Justice evidence that "seems to show" that
the impact on reconviction of probation and suspended sentence
supervision is greater than a short prison sentence. On the other
hand, Professor Pease's interpretation of other available evidence
from the MoJ was that it "appear[ed]" that community
sentences make no difference to reconviction as "one can
predict the probability of reconviction on the day of sentence
as well as one can at the end of sentence"; he also cited
similar international evidence from the limited number of randomised
controlled trials comparing short prison sentences and community
payback that have been conducted in this field.
Professor Hedderman was sceptical of the value of randomised controlled
trials in evaluating the effectiveness of sentencing because sentencing
is not random, i.e. the particular circumstances of the individual
form an important part of the sentencing process.
While there are some cost-effectiveness evaluations, notably by
Matrix, that indicate that community supervision is more cost-beneficial
than prison, the methodological issues described above have implications
for the ability of providers to understand the relative cost-effectiveness
of particular interventions.
The Ministry of Justice needs
to develop a measure that enables the effectiveness of prison
and community sentences to be compared more robustly.
Potential to strengthen the evidence base
297. The Secretary of State believed that payment
by results provides an opportunity to strengthen the evidence
base: "If people start making claims and we contract for
it, one minor side effect might be that we get improved information
about what actually is happening in terms of re-offending and
different types of treatment."
However, Mr Eccles of Social Finance believed that while payment
by results offers the potential quickly to build a large set of
evidence, realising the benefits of the data is dependent on ensuring
that providers are willing to, or contracted to, make the information
Mr Ledger, General Secretary of Napo, explained that "[the
probation service] is very much based on altruism and the belief
in co-operation, and the sharing of ideas and views", thus
where academics or probation practitioners have developed work
it has been shared: "it has not been something to sell or
to keep to yourself in order to compete over it".
According to Helen Edwards, the Ministry of Justice is currently
adopting a collaborative approach to information sharing within
pilot projects but acknowledged that "once you go into a
competitive process it gets more difficult."
The Ministry of Justice is funding the evaluations of the payment
by results pilots and will in future have responsibility for disseminating
good practice. It is not clear whether national or local commissioners
will be expected to evaluate the outcomes of payment by results
contracts once they are rolled out.
298. It could be argued that the idea of payment
by results is predicated on a notion of cause and effect that
does not fit well with what is known about the nature of desistance
i.e. stopping offending. Interventions do not 'cause' people not
to offend. What is known about the processes of change is that
desistance is not a linear path, it is characterised by lapse
and relapse and a results framework could struggle to comprehend
that. Tessa Webb explained: "you have to weigh up outcomes
in a variety of ways. That is one of the challenges that the probation
service really struggles with [
] we see achievement with
offenders, but it is two steps forward and one step back [
it is about how you measure progress. Desistance is the ultimate
Professor Pease believed that incentivising probation services
and other providers potentially offered a means of strengthening
the evidence base on the interaction between the qualities of
staff and behavioural change leading to reduced reconviction.
299. Nevertheless, while it is difficult to establish
firm causal links, several trusts gave us examples of reductions
in re-offending, and resulting cost savings to the public purse,
as well as to individuals and households, that seemed to be strongly
associated with changes in practice, including prolific and priority
offender schemes, intensive offender management schemes and transition
to adulthood programmes.
It is harder to translate these into cashable savings from
the prison budget, although this had been achieved by the Youth
300. It is important that data
and information sharing is not inhibited by the rules governing
commissioning and competition.
301. The MoJ noted that "[a] particular
challenge in developing [payment by results] is ensuring that
the results delivered are attributable to the work of the provider
and do not generate any adverse outcomes."
Witnesses agreed, particularly in the context of a range of payment
by results programmes being introduced across Government.
Professor Chalkley explained how this challenge had manifested
itself in health: "There has been big literature in health
care about the practicality of paying according to genuine outcome,
as in whether the treatment is successful. That literature emphasises
the difficulties that would be involved in doing that: the difficulties
in establishing whether it is the actions of the hospital or the
actions of health carers that have given rise to the outcome rather
than just chance and good or bad luck."
However, the Secretary of State told us that "You have to
put up with the fact that if you pay people because someone does
not re-offend, in some cases they will be just lucky because nothing
they do has contributed but the man will not offend again."
302. Mr Blunt displayed a similar lack of concern
about the potential for Government to be making duplicated payments
for work with an individual offender across several different
payment by results schemes:
If there is overlapsomeone takes a drug-addicted
prisoner and turns him into a tax-paying employee, and they get
the bonus for getting someone into work; they get paid for getting
a drug addict clinically independent of drugs; and they get paid
for stopping an offender reoffending, so they manage to score
under three different schemesI suspect that is probably
a perfectly satisfactory state of affairs [...] It is our job
to make sure that one of the schemes isn't paying for all three
of them up front and they are getting paid double underneath.
303. Effective application of payment by results
measures must be sensitive to what is and what is not within the
control of the provider, otherwise there is a risk of: perverse
incentives to manipulate results to meet a payment measure, for
example, not to arrest or not to breach; or inaccurate conclusions,
if the positive results are not related to the intervention.
Hertfordshire Probation Trust explained that there was potential
for the police not to arrest in order to meet a payment by results
measure, for example. Inaccurate conclusions could be drawn about
effectiveness if positive results are not related to the intervention.
Perverse incentives might also hinder effective approaches. For
example, Hertfordshire's 'Choices and Consequences' programme
requires offenders to take responsibility by admitting to the
full extent of their crimes, which would adversely affect the
304. The Department needs to
address the risk that providers may receive multiple payments
under a range of payment by results programmes, for example, for
employment, drugs misuse and reducing re-offending.
390 Q 258 Back
Q 617 Back
Q 575 Back
Ev 184 Back
See e.g. Q 423 [Mr Wright]; Ev w134 Back
Q 596; see also Ev 223 Back
Q 604 Back
Q 611 Back
See e.g. Ev 196 Back
Q 463 [Mr Narey] Back
Ev 200, citing Julian LeGrand; see also Q 478 [Mr Narey] Back
Clinks, Response to Breaking the Cycle consultation, March
Ev 219 Back
See e.g. Ev w95 Back
Qq 444, Q 452 [Mr Martin] Back
Ev w9 Back
Q 616 Back
PB 44 Back
Qq 614-5 Back
Q 343; Q 351 Back
Q 350 Back
Ev w95; w103; see also Q 464 [Mr Narey] Back
Ev w38 Back
Q 186 Back
Ev 156; see e.g. w44, w48, w103, w122 Back
Q 208 Back
Q 262 Back
See e.g. Q 445 [Mr Wright]; Q 236 [Professor Chalkley] Ev 224;
Q 224 [Ms Byrne] Back
Q 224; Q 236 Back
Q 245 Back
Q 374 [Mr Ledger] Back
Q 252 [Mr Eccles]; Q 645 [Mr Hill] Back
Ev w103 Back
Q 356; Q 517 [Mr Steele] Back
Ev 200; Clinks, Payment by results: what does it mean for voluntary
organisations working with offenders, October 2010. In cases
where existing probation services become provided by other sectors
there are also TUPE-issues related to the employment conditions
of public sector staff, including their pension arrangements,
which could be prohibitive. See e.g. Ev 194, w95, w85, w150 Back
Q 634 Back
Q 443 [Mr Smith]; Q 356 [Ms Lawrie] Q 441 [Mr Wright] Back
Q 453 [Mr Martin] Back
Q 444 [Mr Neilson]; Q 453 [Mr Neilson, Mr Martin]; PB66 Back
Q 453 Back
Q 739 Back
Justice Committee, Cutting crime: the case for justice reinvestment,
para 352 Back
Ev w139 Back
Q 265 Back
See e.g. Ev w149 Back
See e.g. Q 486 [Mr Narey]; Q 660-661; Q 704 [Mr Chantler] Back
The baseline indicator of effectiveness currently used by the
Ministry of Justice relates to the volume of re-offending (number
of offences) per 100 offenders rather than an absolute measure
i.e. the percentage of offenders who have or have not reoffended. Back
Q 501 [Ms Crozier] Back
Ev 171 Back
See e.g. Qq 331-332 [Ms Hall]; Q 503 [Ms Crozier]; Qq 660-661
[Professor Pease; Professor Hedderman] Back
Q 517; Q 660 Back
Q 485 Back
Q 517; Q 662 [Professor Hedderman]; Ev w134 Back
Q 503 [Ms Crozier] Back
Q 657; Ev 227; see also Ev w122 Back
Ev 171 Back
Q 449 Back
Q 447; see also Q 491 [Mr Narey] Back
See e.g. Qq 486, 488 [Mr Narey], Ev w143 Back
Ev w139 Back
Q 501 [Ms Crozier] Back
Ev w139 Back
Q 486 Back
Q 222 Back
Q 574 Back
Q 219; Q 221 Back
Q 252 Back
Ev w139 Back
Q 573 Back
Q 443 Back
Q 252; Q 289 Back
Ministry of Justice, Breaking the Cycle consultation, p
Q 230 Back
Q 482 Back
Q 739 Back
Ev w26, w6 Back
Ev w80 Back
Ev w93 Back
Q 218 Back
Q 264 Back
Unison, Response to Breaking the Cycle consultation, March
Centre for Health Economics, The administrative costs of payment
by results, July 2006 Back
Q 332 Back
Qq 512-516 Back
Q 264 Back
Qq 239-240 Back
Q 430 [Mr Martin] Back
Q 253 Back
Q 430 Back
Q 445; Ev 230 Back
See Qq 648-650; 660-661 Back
Qq 650, 654, 655 Back
Q 657 Back
Qq 669-671 Back
Oral evidence taken before the Justice Committee on 21 July 2010,
HC 371-i, Q 52 Back
Q 228 Back
Q 291 Back
Q 263 Back
Q 332 Back
Q 659 Back
Q 705 [Mr Chantler]; Ev w131; Q 503; Q 505; Q 539 [Sussex and
Surrey Probation Trust] Back
Q 699, Q 705 [Mr Chantler] Q 706 [Mr Long] Back
Ev 171 Back
See e.g. Q 450; Ev 227 Back
Q 215 Back
Q 725 Back
Q 250; Qq 547-548 Back
Ev w139 Back
Ev w18 Back